customer lifetime value scores

Special Report: Customer Lifestyle Value Scores, Privacy, and Concerns

HILLSBOROUGH COUNTY, Fla. – Correctly known as the Customer Lifestyle Value (CLV) Score, this number is used in every aspect of daily life. A CLV Score, in addition to your credit score, tells so much about you. Until recently, this decades-old practice was secret and minimal. Now it predominates at least 25 aspects of one’s behavior and is intrinsically linked and tracked to everything seen, done, thought of, or considered. 

This score determines prices you pay, the products and advertisements you see, and the perks you receive or don’t, including healthcare, insurance, finances, and job security. This year the technology and socio-economic shifts have occurred so rapidly that it is nearly impossible not to notice the changes. 

I witnessed a huge data dump and marketing follow-up that occurred after browsing for cars online. Because of the times we are in, I didn’t directly go to the car dealerships as I may have in the past. I looked online. Immediately I received a deluge of car advertisements on social media, television, mailings, etc. I started to think someone was driving by in a new car every day. Cars were everywhere and I blamed myself. “I’ll own this because I looked online,” I thought.

Then this happened. I was updating a fitness/health watch and recharging the battery. Because I have a broken wristband, I visited the installed application on my iPhone, updated the watch, and looked at accessories through the app only. I clicked the band pictured below, considered it, and logged out. A couple of days later, I logged onto Facebook and to my astonishment, this advertisement was front and center in my feed.  

Disturbing but not surprising information. A quick search revealed so much. According to a 2019 press release, Google’s decision to buy the health-tracking device company Fitbit for more than two billion dollars “is raising concerns over how users’ data will be used by the tech giant.”

Google appeared to anticipate the fears and noted in the announcement of the purchase that “privacy and security are paramount” to the company.  PBS/WEDU reported as well that Google promised to be transparent about the data it collects and to “never sell personal information to anyone.” 

Google also said it will not use the health data for its own ads and will give users the choice to “review, move or delete their data.”

Fitbit, which currently has 30 million active users, echoed that message. “Strong privacy and security guidelines have been part of Fitbit’s DNA since day one, and this will not change,” the company said in a press release then.  

Now? This month, the European Un (EU) is expected to approve a $2.1 billion purchase of Fitbit by Google.  The European Commission and antitrust regulators reviewed the effects of this acquisition on consumers, privacy, marketing, etc., both companies pledge not to use the information. 

In April 2014, the Federal Trade Commission (FTC) published a report called, “The Scoring of America: How secret consumer scores threaten your privacy and your future,” which details the top categories involved in a CLV score, how to calculate the score, and the key issues which are lengthy in this 90-page document.

On April 8th of this year, Andrew Smith, Director, FTC Bureau of Consumer Protection published, “Using Artificial Intelligence (AI) and Algorithms,” in which he explains, 

“Headlines tout rapid improvements in AI technology — machines and algorithms — to make predictions, recommendations, or decisions has enormous potential to improve welfare and productivity. But it also presents risks, such as the potential for unfair or discriminatory outcome or the perpetuation of existing socioeconomic disparities.”

That’s a mouth-full about the progress that has been made. In the 1970s the FTC enacted some of the first legislation addressing “…automated decision-making, and financial service companies have been applying these laws to machine-based cretics underwriting models for decades,” Smith wrote. He also referred to a 2016 report titled “Big Data: A Tool for Inclusion or Exclusion?”

In 2018, the Wall Street Journal’s writer, Khadeeja Safdar, published “On Hold for 45 minutes? It Might Be Your Secret Customer Score.” Safdar explained that the “secret number” is used by all manner of companies to measure the potential financial value of their customers. 

Companies like Quora and Graphic Optimize have information online detailing how scores are created through but not limited to: transaction records, website interactions, customer-service conversations, social-media profile, third-party brokers like Alliance Data Systems and FICO, Experian and the like, marital status, demographics, zip codes, and behavioral details such as the number of returns made or what time of day shopping occurs. 

“Not all customers deserve the company’s best efforts,” Peter Fader, Marketing Professor at the University of Pennsylvania who helped popularize lifetime value scores,” told the WSJ in 2018. Fader’s scoring method is based on transaction history, which he told the WSJ, “is all companies need to determine how customers will behave in the future.”

In 2018 Fader sold the firm he co-founded, Zodiac Inc., which performs analysis for Nike Inc. among others. Adobe offers the Adobe Experience Platform for this purpose. FICO offers the Choice Score, while Experian uses the Median Equivalency Score. Marketing professionals may use the Consumer View Probability Score to predict, identify, and target marketing prospects in households likely to be profitable and pay the debt. This particular score offers 13 levels with three high-probability levels. 

Most-Tracked Category Scores: 

  • Financial and Risk, including things like a Churn Score which predicts the likelihood of switching carriers, airlines, brands, fraud, credit card offerings, retailers, car dealers, mortgage and insurance brokers, bankruptcy, and more 
  • Fraud, and the measure of predictability to commit fraud, identity theft, etc.
  • Custom Consumer Scores including probability, job security, churn, medication adherence, brand-name adherence and propensity, fraud, creditworthiness, popularity, reputation, wealth, measure of health, energy consumption, Job Success Probability (JSP), Job Success Score (JSS) and more
  • Regulated Credit and Financial Services
  • Identity and Authentication including the Affordable Care Act’s (ACA) Individual Health Risk; Hopkins Frailty Score, and Frailty (CMS) score developed by the Center for Medicaid, FICO Medication Score (MAS), Web.MD Personal Health Resource Utilization Scores, lifestyle choices and associated risks, nursing home, and general health information entered on Form SF-36 which is a multi-purpose health survey, and more
  • SmartGrid and Energy
  • Social Scores including the Job Success Score, social media, reputation, wealth, business, charitable donations, and hobbies; sites used for research include Klout, Bosbaka, Kred, PeerIndex, ProsKore, Social IQ, Tweetgrader, Twitalyzer, among others
  • Tax Return/IRS
  • Law Enforcement
  • Environmental, including health risks and Green Energy scores
  • Donor and Contributor Scores, sometimes used by assisted-living facilities, nursing homes as well as voting probability and regularity of donations 

The key issues are important and varied. A partial list includes the following to be considered:

  • security, consent, secrecy and accuracy
  • identity theft and scoring
  • unfairness and discrimination
  • sensitive health, employment and lifestyle information
  • data in predictive scores

Those in the field of marketing, data-gathering, analysis, and the research of human behaviors have a plethora of platforms and information provided and leaked to influence basically any situation. 

Dan Hushon, senior vice president and chief technology officer of DXC, told Businesswire

“Tech-evangelist leaders will define new interactions between AI and people to create high-performing teams and shape digital strategies that unlock an organization’s full potential — securely and confidently modernizing applications, optimizing data architectures and moving workloads to the cloud to produce new and better business outcomes.”  

In a Vox Media article entitled, “Spend “frivolously” and be penalized under China’s new social credit system,” Vix writer Nadra Nittle details all the good and bad this scoring system brings.  

Nittle explained the system monitors many behaviors.  For example, both financial behaviors like “frivolous spending” and bad behaviors like lighting up in smoke-free zones can result in consequences. 

Penalties include loss of employment and educational opportunities, as well as transportation restrictions. As is common here in the US, those with high scores get perks, like discounts on utility bills and faster application processes to travel abroad.

Knowledge is power and key to protecting personal information. Similar to those gathering the information, protecting, growing and nurturing one’s CLV score is more critical today than ever before. 

Here are 5 CLV companies that have your data and say they will share it with you:

  • Sift, which determines consumer trustworthiness, asks you to email privacy@sift.com. (An earlier version of this article contained a link to an online form; the company disabled the page after receiving thousands of submissions.)
  • Zeta Global, which identifies people with a lot of money to spend, lets you request your data via an online form.
  • Retail Equation, which helps companies such as Best Buy and Sephora decide whether to accept or reject a product return, will send you a report if you email returnactivityreport@theretailequation.com.
  • Riskified, which develops fraud scores, will tell you what data it has gathered on your possible crookedness if you contact privacy@riskified.com.
  • Kustomer, a database company that provides what it calls “unprecedented insight into a customer’s past experiences and current sentiment,” tells people to email privacy@kustomer.com.
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