Your shopping behavior is earning you a secret score

Companies rank customers based on CLV scores
Posted at 10:25 AM, Nov 26, 2018

On this Cyber Monday, plenty of online retailers are happy to take your money, but how will they treat you once the holiday season is over?

The Wall Street Journal uncovered how companies use a secret scoring system to rank customers, and determine what kind of promotions to offer them, and even what level of service.

It's called the Customer Lifetime Value (CVL) score.

"We’ve always treated the customers differently, this just takes it to a new level," said Darrin Duber-Smith, a marketing professor at Metropolitan State University of Denver. "Now we’re identifying quantitatively, how much better are you, customer A, than customer B."

Back in the day, a store you shopped at frequently would know how much you spent, if you returned items frequently, or if you complained a lot. The store owner might even a know a little about your personal life. But nowadays, there are companies that exist only to compile this data and sell it.

"Now, it could be that every place you call or order from knows quite a bit about you, and they know about you not only from their internal data but from data they have bought from other places," said Computer Science Professor Steve Beaty.

The Cambridge Analytica scandal brought this to the forefront earlier this year. More companies are now being transparent about whether they collect data and if they share it. But as for CLV scores, those remain a secret.

While no specific companies told the Wall Street Journal how they use the scores, the Journal spoke to data analysts who compile scores for companies. They found things that can lower your score include calling customer service a lot, shopping only for discounted items, or returning a lot of items.

Different companies use different data and different scoring systems. Some scores may only consider your shopping behavior, while others consider a variety of data points including your age, gender, zip code, and marital status.

If you’re a 41-year-old married woman who usually pays full price for items and rarely returns things, your high score could mean you get better service, and sales promotions.

Duber-Smith said a higher score might affect how much time a company is willing to devote to keeping your business.

"You might want to offer the person who hasn’t been around for two months a really nice sales promotion. You might want to offer the infrequent customer a coupon or discount to get them in, and then a frequent customer you might want to offer them a rewards program," he said.

But while high scores may have benefits, Beaty said it's concerning that this information can be used to treat you differently than another customer. Especially since it's unclear how often, if ever, the data is updated.

"How I am today might not be how I am tomorrow, and how I was yesterday might not be how I am today," he said.