5 On Your Side

5 On Your Side: The secret score companies give customers

Posted February 25, 2019 8:26 p.m. EST
Updated February 26, 2019 11:31 a.m. EST

— Many of us rate companies and use ratings to help make choices, but did you know many companies do the same thing to us?

It's called your Customer Lifetime Value score.

5 On Your Side's Monica Laliberte tells us it's completely different from your credit score.

Your CLV relates to you as a customer, and how profitable you'll be to a company.

"In a nutshell, customer lifetime score is a company's expected belief about how valuable that customer is going to be over the entire time a customer interacts with that company," said Duke University's Carl Mela.

Carl Mela

Mela studies CLV scores as a Marketing professor at The Fuqua School of Business.

Shoppers that 5 On Your Side talked with had never heard of it and weren't so sure they're ok with it.

Brad Hubinek asked "What's it gonna do for me, I guess, as a consumer?"

Mela says there are upsides for some customers and downsides for others.

Your score differs between companies and goes up and down based on the kinds of interactions you have:

For example, paying full price for products raises your score.

Buying only discounted items or making returns, lowers it.

"Customers who return a lot are worth a lot less to the company," Mela said.

At banks, customers who bounce checks or miss payments obviously have a lower CLV score.

But a college student, with no financial history, could score higher because of future banking potential: auto and home loans, even future investments..

With mobile phone providers, service costs associated with exchanges and calls about problems could lower your score, but Mela says having kids could increase it.

"The likelihood of bringing additional members into play through your family is gonna raise your customer score, because again that's more revenue in the future," said Mela.

Future revenue for companies translates into benefits for you.

"The more transactions I have with an organization and the less demands on their time, the more service I'm likely to get in return," said Mela.

Service through in-store savings, coupons and deals, upgrades, even shorter wait times when you call customer service.

Mela recently experienced his customer value with an airline he regularly flies: an immediate fix when his flight was suddenly cancelled.

"I looked at my phone and already a new flight is booked for me... meanwhile I look over my shoulder... I see a long line of people waiting at the terminal to try and make alternative arrangements," Mela said.

Know that customer value is not about being nice.
From a corporate perspective, whether you're nice or rude, a long conversation costs money.

And while it's called a "lifetime" score, it's usually based on two to five years, since our habits change over time.
An example: when you have a child, your CLV score at a baby store goes up.

Once your kids age out of what that store carries, your CLV there drops.  

Mele says all this customer tracking isn't necessarily a bad thing when it pays off for both sides.

"If I'm a good customer then I do have incentive to be tracked," he said. "I get more benefits than I would have otherwise gotten."

So what's your score? You probably won't ever know.
The information is considered a trade secret.

One way you can determine whether it's high or low -- is the benefits you're offered.

As for that question from Brad Hubinek: "What's it gonna do for me?"

Turns out, he and his wife may be enjoying the benefits of a high CLV score with a car brand they're loyal to: with loaner cars, better service scheduling and more.

"They wash the car, they vacuum the car, you can take it in any time," Marti Hubinek said. "And that's what draws us back, so probably will end up with another Lexus."

And THAT's what it's all about.

Giving good customers, good benefits so that the company keeps making money.