How to Build Customer Health Scoring for Churn Prevention

# How to Build Customer Health Scoring for Churn Prevention

In the Australian business landscape, acquiring a new customer can cost up to five times more than retaining an existing one. Customer health scoring allows you to move from reactive 'firefighting' to proactive retention by identifying exactly which clients are drifting away before they actually cancel.

By quantifying customer behaviour into a single score, your team can prioritise outreach, improve service delivery, and protect your recurring revenue. Here is how to build a robust health scoring system from scratch.

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Before You Begin: Prerequisites

To build an effective model, you will need:

• A Centralised CRM: Access to data in a system like HubSpot, Salesforce, or Pipedrive.
• Historical Data: At least 3–6 months of customer interaction and billing data.
• Defined Success Milestones: A clear understanding of what a 'successful' customer looks like for your specific business.
• Internal Alignment: Buy-in from both your sales and account management teams.

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Step 1: Define Your Health Categories

Don't try to track everything at once. Effective health scores are usually built on three to four key pillars. For most Australian SMEs, these are:

• Product/Service Usage: How often and how deeply are they using what you sold them?
• Breadth of Relationship: Are they using multiple features or services?
• Customer Sentiment: What is their feedback (NPS) or 'vibe' during meetings?
• Financial Health: Are they paying their invoices on time?

Step 2: Identify Your Key Predictors (The Metrics)

Under each category, list 2-3 specific metrics that correlate with retention.

• Example (Usage): Number of logins per week or hours spent in the platform.
• Example (Sentiment): Number of support tickets raised (too many is bad, but zero is often worse).
• Example (Financial): Average days overdue on invoices.

Step 3: Assign Weights to Each Metric

Not all metrics are created equal. You need to decide which behaviours are most indicative of health.

Create a simple spreadsheet. Total your weights to 100%. For example:

• Product Usage: 40%
• Customer Sentiment (NPS): 30%
• Financial/Payment History: 20%
• Marketing Engagement (Email opens/Webinar attendance): 10%

Step 4: Define the Scoring Scale (0 - 10)

For each metric, define what a '10' looks like and what a '0' looks like.

• Usage: 5+ logins per week = 10 points. 1-2 logins = 5 points. 0 logins = 0 points.
• Invoices: Paid on time = 10 points. 1-14 days late = 5 points. 30+ days late = 0 points.

Step 5: Calculate the Weighted Score

Now, apply the weights from Step 3 to the scores from Step 4.

If a customer scores a 10 on Usage (40% weight) and a 5 on Financial (20% weight), their partial score is (10 x 0.4) + (5 x 0.2) = 5 out of a possible 6.

Step 6: Define Your Health Zones (Red, Amber, Green)

Categorise your total scores into actionable buckets. In the Australian market, we recommend the 'Traffic Light' system:

• Green (80-100): Healthy. Focus on upselling or asking for referrals/case studies.
• Amber (50-79): At Risk. Schedule a 'Check-in' or 'Strategy Session'.
• Red (0-49): High Churn Risk. Immediate intervention required by a senior manager.

Step 7: Automate Data Collection

Manually updating a spreadsheet is a recipe for failure. Use your CRM's 'Calculated Fields' or a tool like Zapier to pull data automatically.

• HubSpot Users: Use 'Calculation Properties' to sum up engagement scores.
• Salesforce Users: Use 'Formula Fields' to weight your account data.

Step 8: Set Up Automated Alerts

Timing is everything. Set up an automation that notifies the Account Manager the moment a customer drops from 'Green' to 'Amber'.

Step 9: Design the Intervention Playbook

Knowing a customer is in the 'Red' is useless if you don't know what to do about it. Create a 'Churn Prevention Playbook' for your team:

• Amber Play: Send a personalised 'How-to' video or a 'New Feature' update.
• Red Play: A phone call from the Director to ask: "How can we better support your business goals this quarter?"

Step 10: Review and Refine Quarterly

Your first health score will not be perfect. Every quarter, compare your 'Red' list against actual churn. If customers are churning while still in the 'Green' zone, your metrics are wrong. Adjust the weights and try again.

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Common Mistakes to Avoid

• Tracking Too Many Metrics: Start with 3-5. If you track 20 things, the 'signal' gets lost in the 'noise'.
• Ignoring 'Quiet' Customers: Many businesses think a customer who never calls is happy. Often, they have simply stopped using the service and are waiting for the contract to end.
• Static Scoring: Not account for seasonality. If your Australian clients go quiet in January (school holidays), don't let it trigger a false 'Red' alert.

Troubleshooting Common Issues

Next Steps

• Audit your data: See what information you currently track in your CRM.
• Draft your pillars: Choose your 3-4 categories today.
• Need help with the tech? Building these automations can be complex. If you want a professional Revenue Operations setup for your Brisbane business, contact the team at Local Marketing Group to help you build a custom retention dashboard.

• How to Set Up HubSpot CRM for Australian SMEs
• Measuring Customer Lifetime Value (CLV) in 5 Steps