Your Customers Are Constantly Sending You Vital Signs on the Health of Your Business. Are You Listening?
There’s a truism in business: your prospects are waiting to tell you how to sell them—all you have to do is ask. Well, the same is true with customers. While they want to be right about their choice to do business with you—after all, it’s about ego—you should be aware of how they really feel deep down. In this way you can cultivate them and even receive referrals from their good will. So how do you do it? They are laying down clues and there is a methodology to measuring the health of your business by taking stock of some key aspects of your relationship with customers.
FROM INC MAGAZINE / BY SYDNEY SLADOVNIK
How to make the most of what you put in your customer health index.
If you were a merchant in ancient Greece—or at least before the dawn of the internet—you had a fairly easy way of knowing how well your business was doing. Do your customers keep coming back? Are your sales higher than your expenses? Do customers tell their friends about you? If the answer to these questions was ‘yes’ then you were probably doing fine.
As a modern-day business owner, those simple metrics are still pretty core to having healthy relationships with your customers. But now, with the sheer amount of customer data that it’s possible to collect, there have never been more ways to quantify your brand’s relationship with its customers. So it’s hard to know what to focus on.
That’s why businesses of all sizes should have some form of a Customer Health Index (CHI), which is essentially a report card for the relationship between customers and a brand, explains Martin Ihrig, associate dean and clinical professor at NYU’s School of Professional Studies.
As Inc. 5000 CEO and business coach Bruce Eckfeldt writes for Inc.com in 8 Key Metrics for Growth-Minded CEOs to Track, “CHI is a composite score that evaluates customer engagement through metrics like feature adoption, support ticket volume, and usage frequency.”
Other numbers that can go into a Customer Health Index include things like customer reviews, purchase frequency, and even Net Promoter Score (NPS)—a formal term for how likely customers are to recommend your product to others—satisfaction scores, and the likelihood that customers will renew subscriptions or make repeat purchases.
But there is really no limit—and no minimum—when it comes to the metrics that can be averaged together to form a Customer Health Index. What’s key is to focus on what matters to your customer specifically, and to watch for deviations from the norm.
We talked to several business owners and experts to get their advice on which metrics across the customer journey might go into a Customer Health Index, how to bring all of those metrics together, and how to use the data to improve brand performance.
Data Points to Include
Spot & Tango cofounders Dylan Munro and Russell Breuer launched their healthy dog food brand in New York City in 2018. After a few years in business, the co-founders learned that their customers really cared about delivery time.
“We found out that if it took more than three days to ship out our door, [customers] would be 70 percent more likely to cancel,” Munro says.
As a result of this early learning, Spot & Tango began to focus on three key metrics: recency (how recently a customer has made a purchase), frequency (how often they buy), and monetary value (how much they spend).
As the business evolved, Spot & Tango began to track other metrics. NPS became useful to pay attention to because it measures how likely a customer is to recommend the product. The company also tracks CSAT (customer satisfaction) using a survey after they order. Both of these metrics, in combination with recency, frequency, and monetary value, have proven to be long-term predictors of customer health, Munro says.
But it cannot be said enough: The metrics you choose to include in a Customer Health Index should be specific to your business and the stage that it is in.
For Los Gatos, California-based baby lotion and skincare product company Noodle & Boo, a Customer Health Index is a pulse check of how healthy and engaged customers are, according to founder Christine Burger. In her brand’s earliest days, Burger looked at customer conversations, reviews, and complaints to form a Customer Health Index.
Now, Burger explains, the brand also tracks repeat purchase cadence, subscription retention, new and returning customers, review volume and sentiment, return rates and reasons, and support ticket themes and volume. She also analyzes email, SMS, and social engagement trends, as well as sell-through velocity by SKU—how fast products sell once they become available for purchase.
To leverage her business’s Customer Health Score, Burger segments data points and looks for shifts in patterns. “A strong customer health signal is steady review velocity and consistently high ratings, while a risk signal is a sudden cluster of reviews tied to the same complaint theme. With written sentiment, repeated keywords like ‘leaking,’ ‘confusing,’ or ‘too watery’ become an early warning sign,” she says.
Jake Miller, founder of coffee pot and kettle company Fellow, also tracks anomalies across an array of metrics.
When the San Francisco-based company opened its first retail store in 2013, Miller’s team rotated working the register and gleaned real-time feedback directly from customers. From those interactions the team learned what customers thought of the products and if they were returning to purchase for loved ones (referral intent). This helped indicate which products were customer favorites.
Now, he still garners data from verbal and written customer feedback, but also tracks behavioral, financial, and sentiment-based trends, including repeat orders, return rates, support ticket volume, purchase frequency, and cart size.
Miller is also particularly interested in tracking product adoption across Fellow’s lineup. “Success to us is more than selling hardware, we want to play a big part in how our customers buy coffee,” he says. To that end, Fellow also tracks a form of cross-selling that it calls coffee-attach rate—how much coffee (its secondary item) is purchased in addition to hardware (its primary item)—because it considers this a sign of customer loyalty and engagement, Miller says.
“We’ve learned that metrics like ecosystem growth—when customers add new Fellow products to their setup—are stronger predictors of long-term customer health than isolated metrics,” he says. “What we’re really measuring is the strength and stability of the customer relationship overall. It’s less about hitting a specific number and more about identifying patterns.”
Once a customer is building their own world of Fellow products—be that hardware, coffee beans, repeat purchases, or expanding into new product categories—that’s when Miller knows he has a healthy customer. “It’s certainly part art and science,” he says.
How to Create a Customer Health Index
To track all the metrics that go into a Customer Health Index, Fellow uses a custom-built internal dashboard.
Noodle & Boo, meanwhile, tracks its Customer Health Index through Shopify. Combining the anecdotal, qualitative data received from reviews and returns with Shopify’s display of strong core purchases and customer behavior data, Burger gets a “practical customer health snapshot,” she says.
Miller also recommends a bird’s eye view; while looking at independent metrics in the early days can be a good starting point, he does not recommend isolating metrics on a regular basis. “It’s easy to focus on ticket volume without the context behind those numbers. But it’s critical to understand how important it is to tie engagement metrics to brand advocacy,” he says.
In Spot & Tango’s case, customers are being graded daily on their likelihood of churning—ending their relationship with the brand. The brand’s data engineers have created an analytics dashboard using business intelligence tool DBT. They also track customer behavior with Omni, and purchasing patterns with Google BigQuery.
This setup helps Spot & Tango tailor its data analytics specifically to its business needs, but also allows the brand to segment customers in more specific ways. Its broader Customer Health Index system evaluates over 45 various inputs. To name a few: Did a customer delay their order? Did they change recipes? Did they change the amount of food they’re getting? Did they add a snack?
But really, your Customer Health Index should be treated as a clue, rather than as evidence.
“Use your Customer Health Index as a helpful early signal, but don’t stop at the score,” says Ihrig. “In other words, CHI is most powerful when it guides improvement to the customer experience, not when it becomes the goal itself.”
How to Improve Customer Health Index
Burger has found that continuously improving her Customer Health Index means simplifying the customer journey and reducing DTC friction: “Don’t overcomplicate early models,” she says. Paying close attention to social sentiment and customer questions, as well as strengthening product education through websites, social media, or packaging, can help customers better understand the value of a product. “Don’t focus only on acquisition or only on retention. Both matter,” she adds.
Spot & Tango’s Munro says: “We have regular delivery cadences. If [the customer is on a monthly plan and] it’s been 30 days and they haven’t placed another order, we know they’re in an overdue group, which sort of could be a red flag, or an early sign that they might be looking to cancel.” Munro says the model is able to predict aggregate month-over-month churn with about 80 percent accuracy, allowing the company to intervene and figure out why the customer is unhappy.
To that end, he advises other companies to “overinvest in your customer experience teams and the whole journey for your customers early, because that also sort of builds a reputation as a trusted brand. It may be painful in the early days because it feels like you’re investing a lot, but from my experience, it pays dividends in the long run,” he says.
Spot & Tango keeps its agents in-house, unlike competitors that might offshore customer service or depend on AI tools. Occasionally Munro and his cofounder will play agent, too—he says the two of them will still pick up the phone and talk with customers to glean feedback. He’s changed feeding instructions, the color of food pellets, the shape of scoops, and bag space as a result, he adds.
Reaping the Rewards
When there’s hard metrics and tactical knowledge to rely on, customer engagement and sustainable growth will happen naturally, Ihrig advises. “Healthy customers renew, expand their usage, and often recommend your offering to others, which makes customer health one of the strongest predictors of long-term profitability,” Ihrig says.
Along with reducing churn, a Customer Health Index also informs new products, Munro says. Oftentimes, loyal customers like Spot & Tango’s VIP members can be segmented to try samples or for new product testing, which supports growth and ultimately revenue.
The value of a Customer Health Index translates to real returns, Fellow’s Miller says. “Tracking customer health enables [business owners] to intervene early and retain customers who might otherwise churn, directly improving recurring revenue,” he says. Retaining customers can also translate to expansion opportunities, because engaged, loyal customers that value the brand are prime candidates to upsell or target new feature adoptions to, he says.
“What I’ve found is that CHI gives me a clear, actionable picture of my customer relationships. Instead of relying on gut feeling, I can see patterns in how customers are using Fellow, how often they’re engaging with us, and their perceived value of the products,” Miller adds.
For Noodle & Boo, tracking its Customer Health Index has saved a handful of product lines, such as the Super Soft Lotion. The hypoallergenic baby lotion averages 4.9 out of 5 stars, but four reviews early on consistently mentioned that the product felt too thin. While that was just a handful of negativity, Noodle & Boo still felt it was meaningful feedback worth investigating, since the majority of reviews were five stars.
As a result, the brand increased the lotion’s viscosity and reviews improved. Similarly, products as simple as its Body Wash and Shampoo received negative feedback from parents that claimed the bottles looked too similar, which made bathtime confusing. The company added icons—hearts for shampoo, ducks for bodywash—and effectively eliminated the confusion.