How to Build An Early Customer Warning System

how-to-build-an-early-customer-warning-system

Many of the companies we talk to today all have the same challenge: they are sick and tired of firefighting their customer accounts. Firefighting happens when you don’t have visibility into what is going on in your customer portfolio so you are constantly putting out fires, especially around renewal time.

To move away from this pattern, we suggest organizations put in place an early customer warning system that enables their customer success team focus on proactive customer retention. With this system, alerts are automatically generated about any customer who requires attention – be it a customer with deteriorating health or an upsell opportunity that is set to renew soon. This allows you to move away from a reactive firefighting approach to a digital-first customer success strategy which takes full advantage of automation to pre-empt problems and resolve them promptly as soon as they begin to emerge. We find this solution works best for teams operating in a high- to medium-touch engagement model.

How to Build An Early Customer Warning System

To start building an early customer warning system, follow these three steps:

1. Define Customer Health Score

First, you need to create a consistent and comprehensive system to track customer health score, which is a metric measuring whether customers are satisfied with your product or at risk of churn. To use customer health score effectively, create scoring systems and profiles specific to each phase of your customer’s journey and each type of customer. For example, you might have a health-rank scoring system for customers in the free trial, onboarding, and adoption phases, subdivided for SMB and enterprise customers. Each profile should have a health score based on the expected behavior for that customer segment.

Health scores are complied from two types of indicators: proactive and reactive. We recommend using two or three proactive indicators and up to two reactive indicators.


Proactive indicators alert you to changes to customer accounts prior to human interactions. They provide the best way to notify your Customer Success Team of the need for action. Positive and negative changes they can act on include:

  • Product Usage: How often are users logging in and using key product features?
  • Business Outcomes: Is the customer getting the end result they purchased the product for?
  • Service Utilization: Is the customer fully utilizing their subscription?

Reactive indicators are data collection points from customer-facing teams and surveys such as NPA and CSAT, which provide qualitative information about customer accounts. This data can provide useful action items for your Customer Success Teams, but often after it’s too late to do anything about it. It can include:

  • Customer Feedback: What anecdotal feedback has been collected by the extended customer team and surveys such as NPS and CSAT?
  • Support and operations: Does the customer have outstanding support, SLA or invoicing issues?

Once you have a health score system in place, it allows you to prioritize and plan engagements as needed for your entire customer base. As you continue to collect data, your scoring system can adapt to become even more accurate over time.

2. Create Customer Success Management Plans

In addition to monitoring health scores, your team should actively monitor customer portfolios and identify customers who reach important milestones or obstacles. These might include drops in engagement, adoption of a key feature or the arrival of the due date for a periodic business review.

Monitoring such key actions allows you to create lists that Customer Success Managers can review each week. There are two types of check-ins your Customer Success Team should monitor: event-based engagements and periodic check-ins.


Event-based engagements involve proactively reaching out to customers when usage pattern changes indicate something requiring attention. These changes can be positive, such as using a new module, or negative, such as a decline in product usage. Each such event should be associated with a default action to be followed, following your digital-first customer success strategy.

Here are some examples of events and possible actions to be taken:

10 new users joined the account: Schedule training for new users.

Started using new feature: Send best practices and power tips documentation. Schedule an adoption review in 30 days.

Low engagement with reporting functionality: Invite executive sponsor to a complimentary review session.

20% decline in active users: Add this account to a watch list to monitor for further decline. Escalate internally to create a win-back plan. Invite all users to training webinars.

Periodic check-ins are time-based milestones that prompt reaching out to clients on a regular basis and conducting a periodic business review. This creates an opportunity for the Customer Success Manager to assess customer health, explore opportunities for promoting greater adoption or develop a plan to get the customer back on track.

3. Build an Executive Dashboard

One of the key tasks of a customer success team is reporting on key customer success and health metrics. We recommend a simple reporting system to summarize the current status and trends in your customer base.

Key items to track include:

  • What is the current breakdown of customers with good, average, and poor health?
  • Are cancellations trending up or down?
  • Are your overall health scores trending up or down?
  • Do we have health-related challenges with customers in a particular plan, life cycle stage or product?
  • Are some of my Customer Success Managers overloaded with poor health customers requiring attention?

As you move along your customer journey process, you can find more in-depth resources here at: http://www.totango.com/resources/

The Benefits of An Early Customer Warning System

By successfully implementing an early customer warning system you are able to:

Become more proactive and data-driven: By creating a system that alerts you to customers who need your attention automatically, your team becomes more effective in preventing churn and creating upsell opportunities. By using data straight from your product, it allows you to be more proactive versus reactive when it comes to managing your customer base as opposed to relying on anecdotal feedback from your customer-facing team and surveys such as NPS and CSAT.

Focus on your entire customer base: When it comes to subscription businesses, if you only focus on the high-value accounts you stand to lose a lot of your base and revenue. By creating a health score for your customers, it gives your team an objective, consistent metric to track customer success across the entire base, not just the high dollar accounts. Now you can spend your time focusing on the accounts that need your attention, not just those that are top of mind.

Better manage your customer portfolio: With an early customer warning system, Customer Success Managers no longer just rely on periodic health check ins with customer accounts. By utilizing a set of active lists to monitor their customer base and flag those that require attention they can more easily manage their entire portfolio.  This allows for more proactive actions and improves the conversation when it comes time for time-based check-ins at renewal time.

Increase executive visibility: When implementing a new solution or strategy one of the most important components is being able to report back to your executive team. With this solution, the Customer Success team can provide regular executive reports to share the status of customer health across the entire organization. These reports enable you to track progress as well as identify problem areas and opportunities where you can optimize the process.

Implement an Early Customer Warning System to Prevent Churn and Promote Sales

An Early Customer Warning System empowers you to shift from reactively putting out fires to proactively preventing churn and promoting upsell opportunities, leveraging a digital-first customer success strategy. You can build an Early Customer Warning System by creating a customer health score system to track customers’ status, creating customer success management plans to promote desired outcomes, putting into place custom triggers and signal alerts, and using an executive dashboard to monitor results.

Using an Early Customer Warning System benefits you by allowing you to proactively manage customer data from your entire account database. This enables you to better manage customer portfolios and increase executive visibility.

Fortunately, you don’t have to build your Early Customer Warning System from scratch. Totango’s Spark modules such as the Customer 360 Success BLOC come with built-in tools to help you track customer health score and automatically trigger actions which promote higher health scores. Try it free to experience how an Early Customer Warning System can help you prevent churn and promote sales opportunities.

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