Peter Fader is a marketing professor at the University of Pennsylvania’s Wharton School whose idea of customer service might strike some people as rather cold. “Not all customers,” he told The Wall Street Journal recently,”deserve a company’s best efforts.” He’s so serious about that idea, he helped popularize the idea of something called a customer’s lifetime value score. This, friends, is a secret score you probably didn’t know you had. But if you’ve ever called customer service, for example, and they’re rather unfriendly and keep you on hold for what seems like forever, chances are — yep, you guessed it. Your score’s not so good. Fader’s own scoring method is based on your transaction history, and he co-founded a firm called Zodiac Inc. that performs analyses of those histories which he eventually sold to Nike.
What most people may not know is, for one thing, that these scores exist. But even more important — according to that WSJ piece in which Fader is quoted, anyone with a bank account, cell phone or who does any shopping of any kind online has at least one of these scores. And probably more than one.
“Credit card companies,” according to the WSJ, “use the scoring systems to decide what to offer customers who want to cancel their cards. Wireless carriers route high-value callers immediately to their most skilled agents. At some airlines, a high score increases the odds of a seat upgrade.
“‘There’s no free lunch,’ says Sunil Gupta, a marketing professor at Harvard Business School who has researched models for calculating lifetime value. ‘The more profitable you are, the better service you will get.'”
The piece goes on to note that there are actually “hundreds” of analytics firms focused on calculating these lifetime value scores on behalf of business clients. They all have different approaches and more or less operate with a black box, keeping their methodologies close to the vest. Pam Dixon, executive director of the World Privacy Forum, told the WSJ there needs to be more light shined on these scores, because “You can essentially be accused of being cheap or a fraudster, and it may not even be true.”
The data that feed these secret scores comes from everything from transaction histories to social media profiles as well as third-party data brokers. And the scores are used in all sorts of ways. For example, if you’ve got a high, really good score, a company might not want to waste offering you some kind of discount offer, since your score suggests you’re going to keep buying anyway.
“Many (companies) say the scores make them more comfortable offering costly services and products in the short term because they are confident they will pick up more business in the long term,” the WSJ pieces notes. “Some say they aim to increase each customer’s lifetime value by encouraging repeat business.
“In some respects, the scores are just a high-tech version of what shopkeepers have done for generations—make judgments on a customer’s value based on how they look or behave.”
