CHS: Customer Health Indicator

What is CHS

Customer Health Score (CHS) is a metric used by companies to measure customer satisfaction and engagement with their product or service. CHS can be calculated based on customer responses to a range of questions about their experience, including satisfaction, likelihood of repurchase, likelihood to recommend, and more.

To calculate CHS, companies typically use survey results such as NPS (Net Promoter Score), CSAT (Customer Satisfaction Score), and other customer feedback metrics.

By combining data, companies form a comprehensive Customer Health Score that helps determine satisfaction levels and potential loyalty. Based on this score, companies can make decisions to improve products, services, and customer interactions, identify at-risk customers, and take actions to retain them.

What is CHS used for

CHS is used for several key purposes aimed at improving customer engagement and overall business strategy:

1. Predicting customer churn. CHS helps identify customers who may be dissatisfied and likely to leave, enabling early retention efforts.
2. Increasing customer satisfaction. By analyzing CHS drivers, companies can uncover and address issues causing dissatisfaction, improving overall customer experience.
3. Optimizing customer interactions. CHS can signal the need to adjust communication strategies, personalize outreach, offer special conditions, or respond more actively to customer needs.
4. Enhancing products and services. CHS analysis reveals trends and preferences, helping focus improvements on specific product or service aspects.
5. Customer segmentation. CHS allows dividing customers into segments based on their “health,” enabling targeted strategies such as re-engagement campaigns for “unhealthy” customers or loyalty programs for “healthy” ones.
6. Prioritizing support. Customers with low CHS may require faster, more attentive service to prevent churn.
7. Strategic planning. CHS provides valuable data for product development, marketing campaigns, and market expansion planning.

Overall, CHS is a powerful tool for customer relationship management, helping companies react to current issues and forecast future behavioral changes, fostering sustainable growth.

How is CHS calculated

The formula for CHS varies depending on chosen indicators and their business relevance.

Example:

Suppose you select three indicators: NPS, product usage frequency, and customer revenue, assigning weights as follows:

• NPS: 30% (0.3)
• Usage frequency: 40% (0.4)
• Customer revenue: 30% (0.3)

If these normalized values (scaled 0 to 1) for a customer are:

• NPS: 0.8
• Usage frequency: 0.6
• Customer revenue: 0.7

Then CHS for this customer is calculated as:

CHS = (0.3 × 0.8) + (0.4 × 0.6) + (0.3 × 0.7) = 0.24 + 0.24 + 0.21 = 0.69

This score (0.69) can be interpreted using a predefined health scale, e.g., customers with CHS above 0.8 are “healthy,” 0.5 to 0.8 need attention, and below 0.5 are at risk of churn.

This is a simplified example; in practice, more sophisticated normalization, weighting, and interpretation methods may be used.

General methodology for CHS metric

The general approach to gathering data for CHS involves:

1. Defining what information to collect and how it will inform CHS calculation, focusing on satisfaction, loyalty, engagement, and usage.
2. Selecting specific indicators such as NPS, CSAT, CES, and usage or value metrics.
3. Designing clear, unbiased questions using varied formats (closed, open, rating scales) to collect quality data.
4. Determining target customer segments for surveying (e.g., new vs. returning, revenue tiers) for granular analysis.
5. Selecting effective distribution channels like email, in-product messages, social media, or interviews.
6. Collecting and analyzing data to identify key trends, issues, and opportunities, combining quantitative and qualitative analysis.
7. Integrating results into the CHS formula, applying normalization and weighting as needed.
8. Using CHS insights to drive improvements in products, service, and personalized engagement.
9. Conducting regular surveys to monitor shifts in customer health and effectiveness of interventions.

What is a normal CHS value

“Normal” CHS depends greatly on industry, product, and company-specific definitions and measurement methods. There is no universal standard, as companies vary in metrics and weighting.

Generally, companies aim for high CHS, indicating satisfied, loyal customers and reduced churn risk. For example, in some systems CHS is on a 0–100 scale, where above 70 is good and above 80 is excellent.

How to improve CHS metric

Improving CHS requires a holistic approach to increase satisfaction and loyalty. Key strategies include:

1. Address known issues and implement features based on customer feedback.
2. Optimize support processes for efficiency and convenience.
3. Provide educational resources and engagement events.
4. Use surveys and research to identify improvement areas and act on findings.
5. Create personalized offers and communications from customer data.
6. Respond quickly to problems and complaints, preventing recurrence.
7. Develop retention programs to reduce churn and encourage repeat purchases.
8. Ensure leadership support and active involvement in customer experience initiatives.

Each strategy targets different facets of customer experience and offering quality, collectively boosting CHS.