Definition

customer scoring models

Contributor(s): Corinne Bernstein

A customer scoring model is the component of customer relationship management (CRM) programs that refers to various metrics used to help companies predict the long term financial value of customers. Customer modeling and scoring enables businesses with large prospect databases to identify which message, product or service is most appropriate for each customer and how ready they might be to buy. This technique could help identify new patrons or generate additional revenue from existing customers.

Companies can employ the scores along with other data to size up customers and categorize their predicted behavior or actions. This can include customer segmentation based on who is most likely to buy a product (and how quickly), what factors the buyer might consider in making a purchase and how much they might be willing to pay. Inversely, customer scoring models may also determine buyers that might negatively discuss a company, cancel a subscription or make a return.

Various types of scoring models can also track the prices individuals pay, the advertisements they interact with, the benefits they receive and their satisfaction with customer service and support channels. Organizations that can predict which customers have the highest lifetime value can ensure that they receive special preference and tailored marketing communications. These organizations can also determine if it makes sense to offer an incentive to clients who are likely to lapse.  

Types of customer scoring models

  1. A customer health score (CHS) indicates the long-term likelihood for a customer to drop off or become a high-value, repeat customer through renewal, cross-selling or up-selling Key performance indicators (KPIs) for customer health scores include the churn and renewal rates for customers who make purchases.
  2. Customer satisfaction (CSAT) is a metric used to measure the degree to which a product or service meets or exceeds the customer's expectations. CSAT measures how a customer feels about a specific service or product, but does not address how a customer feels about a company overall.
  3. A net promoter score (NPS) is a metric for assessing customer engagement and loyalty for a company's brand, products or services. NPS is calculated by asking customers how likely it is that they would recommend the organization to a friend or colleague. The answers are given a score from zero to 10, with 10 being the most positive. Customers are then categorized as either promoters, passives and detractors. Promoters (scoring 9-10) are the most loyal, passives (scoring 7-8) are satisfied, yet unenthusiastic, and detractors (scoring 0-6) are unhappy. The overall NPS is tallied by subtracting the percentage of detractors from the percentage of promoters.
  4. A customer effort score (CES) provides a way to evaluate how much effort is needed on the customer’s part to achieve satisfaction in their experience with a company. The CES is usually calculated by averaging the response to a single follow-up survey question after a customer support experience. The customer will typically be asked to rate the interaction on a scale of "very difficult" to "very easy." The CES, similar to the NPS, is a means of measuring the relationship between customer satisfaction and customer loyalty. In contrast to other models, the CES measures individual customer experiences based on specific processes rather than products or services.
This was last updated in January 2019

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