Why Your Customer Health Score May Be Quite Useless: Your Framework to Calculate CMI

The Customer Health Score (CHS) has become a prominent metric for CS executives and Customer Success Managers (CSMs). Every CS team measures it and every CSM platform solution presents it at the top of their dashboard. It is positioned as the ultimate representation of customer success and the best predictor for future customer engagement (churn/retention) with you, the vendor.

In research that Ralf Wittgen and I conducted, we found that most companies define CHS based on both the level of usage of the vendor’s solutions and the level of interaction and relationship between the two companies. Many companies also include customer satisfaction ratings, NPS scores and commercial relationships in that calculation. Sophisticated companies further analyze their CHS within a segmentation framework based on such criteria as Size (enterprise, Mid-Market, SMB, etc.), Stage (On-Boarding versus On-Going), Geography (EMEA, APAC, Americas, etc.) and more.

However, while Customer Health Score (CHS) is a helpful metric, it is insufficient in-and-of-itself to address opportunities and challenges with your customers. Instead, implementing an additional metric, that we’ll call Customer Maturity Index (CMI), is essential to enabling a much richer and crisper picture of your customer and what is needed to ensure their and your success.

So what differentiates the two?

• Customer Health Score measures the relationship between the vendor and the customer. It is aimed at assessing the health of those relationships and predicting their future direction: churn, renewal, expansion.

• Customer Maturity Index measures the sophistication of the customer in running their function and consequently their ability to utilize and derive value from the vendor’s solution. It is aimed at identifying the actions the vendor should take to address the customer needs.

This post will explain how to calculate a CMI, how to design a comprehensive framework to combine the insights from CHS and CMI, and how to develop playbooks to address customers’ needs based on them. At the end, we include a templated framework to get you started on a path toward successfully measuring customer maturity. You can access that template here (but we strongly recommend reading the post first).

A Framework to Calculate CMI

Defining CMI is a business-specific endeavor. For example, the factors you need to assess to understand the maturity of a sales team (if those are your customers) are different from those of a development team, which are different from those of a Customer Success team, architects and so on. So, you will need to develop your own CMI assessment, just like you develop your own CHS.

The good news is that drawing on the experience from other maturity models, we identified a few best practices. Building on those, we have developed a framework, providing you with the blue-print that you will only need to slightly tweak to build your own CMI.

You should follow 4 steps to get there:

Step 1: Establish Your CMI Characteristics

Your CMI structure should strike a golden-path between comprehensiveness, simplicity and flexibility to adjust to business changes. To that end, we suggest defining the maturity of a function by four core characteristics. Regardless of how sophisticated your measurement of these characteristics is, we strongly recommend sticking to these broader ones as they are well established in other maturity models like PEMM or CMMI.

When it comes to assessing each of the characteristics, multiple potential dimensions may be relevant. Below is a suggested 3-question structure, which we believe is a golden-path effort-to-quality for most teams. In each of the characteristics there is one question about “what” is the function about, one addressing “how well” is the function implemented and one referring to the relations between the function and other influencers. This way, there is a fair level of comprehensiveness, while keeping the number of questions to a minimum.

Step 2: Define Maturity Levels for Each Characteristic

We suggest assessing the maturity of each of your CMI characteristics on a scale of 1 through 5, where 1 is “very low” and 5 is “very high”. The table below provides an example of one such definition to understand when to select which level.

The structure of your CMI collection template should look something like the example below with characteristics, factors, explanation/question and ranking.

The third-from-the-left column shows which maturity ranking was chosen for each characteristic in this example. Again, you can access our free template to get started on your own here.

Step 3: Calculate the Customer Maturity Index

Now, you are ready to calculate the CMI. The process we follow:

1. Group factors by characteristic (Charter, People, Process, technology)
2. Determine maturity level for each factor (i.e. driver)
3. Calculate the mean value for each CMI characteristic
4. Add weights to the maturity levels for each CMI characteristic
5. Calculate the value for CMI

Step 4: Create Playbooks based on your CMI Value

You may recall that we wanted to develop the CMI to provide additional insight into CHS. Following that logic, we should develop a system of combining insights from the two metrics towards a plan of action. The structure below will help you determine for which scenarios you want to create which playbooks and by what priority!

Adding CMI, provides the insights that allow you to define your playbooks!

Low CHS and Low CMI (Bottom-Left: Red)

These are tough customers that may not be worth saving. Not only that your relationship with them is weak, but also, they are not mature in their business. To turn them into good customers, you need to invest in both their relationship with you AND their business.

• Decision: PROACTIVELY CHURN OR LET CHURN: Do you want to invest on dual fronts? How much effort do you need to put in? Maybe you want to proactively churn them or let them churn on their own.

• Your playbooks: a) Proactively terminate the relationship with the customer or b) Minimize effort on customer to let them churn.

Low CHS, but High CMI (Bottom-Right: Yellow):

Those are customers worth saving! Investment in the relationship with you (people and/or product) will increase your (the vendor’s) ability to expand the relationship and since the customer is mature, they are ready to utilize your solutions and derive value from them.

• Decision: FOCUS ON CHS DRIVERS: What can we do to increase their CHS?

• Your playbooks: a) Define means to increase usage of product, b) Deliver tailored product training, or c) Develop personal relations with executives or working-level customer contacts.

High CHS, but Low CMI (Top-Left: Light Green):

Those are probably your steady-state customers, the “cash-cows”. The relationships with them are good, so they are not likely to churn. But, since their CMI is low, they are not likely to expand and grow much either – at least not without investment in them via consulting services.

• Decision: RETAIN: if you had consulting services resources available and were interested in investing in those, these are the top customers to do it with. Note, that the investment here is not in educating your customer on your product (standard training material), but rather management consulting to enhance how they run their business. If you were not interested in investing in services, you should keep engagement with these customers to the minimum needed to retain them, but avoid wasting resources trying to expand the business with them.

• Your playbooks: a) Engage the customer to deliver consulting services to them, or b) Engage partners to do the same.

High CHS, High CMI (Top-Right: Dark Green):

These are your star customers, the advocates, the ones that can provide you with the best feedback on your product and push you to the next level. These are the customers you love – and they love you!

• Decision: EXPAND AND LEVERAGE: They are mature and they like you – focus on expanding the business with them while at the same time leverage them for Customer Advocacy.

• Your playbooks: a) Identify new use cases, teams or geographies, b) Develop case studies c) Invite to your conference d) Build an Advocacy campaign with, etc.

You now have a practical methodology to calculate CMI and a framework for a set of playbooks to address the resulting scenarios.

Implement CMI in your own business by accessing our free template here.

Want to delve deeper into this topic? You can read more here and here.