ATLANTA - Walking into a store and shopping is not a one-time event, so retailers track your spending habits. And then give you a score. It's your Consumer Lifetime Value.
In the past couple of months, consumers have been hearing about this number - the CLV score - and getting freaked out a bit, thinking, 'Wait! I have a score like my credit score and I don't know what it is?'
Well, we decided to look into this more and found an Emory professor who makes a living understanding just what this means.
"Customer lifetime value. You can think of it as a number that represents net present value, basicially, the sum of all of the profits you have and will generate for a particular company into the future," assistant professor Daniel McCarthy explained to us when we visited him at Emory University's Goizueta Business School.
How much will you buy and where you shop determines where the company puts you. Higher ranked customers have lesser hold times, more sales offers and other perks.
Think of it this way...if you are a customer who spends a lot you might be green. That's very good. If you spend some, but you're not a regular, you might be yellow. Middle of the road. But, if you buy once every few years, you might be rated red. At the bottom.
And lots of companies use it says McCarthy.
"I would be surprised if most companies weren't doing it to some degree or another, to varying degrees of sophistication, of course."
Professor McCarthy's own company created a template for CLV scores that he sold to Nike. He says, all big companies have some type of system to rate you.
And here's what determines your score: how much you spend; how often you pay full price; and how you return items. There were some concerns that your zipcode, sex or race played a role, but McCarthy says, it doesn't to any real degree.
"Your transaction history is going to dominate any demographic features."
But, listen, this has been around on a smaller scale for a very long time. Even small mom and pop shops rate you. Let's say you're a regular at a locally-owned restaurant and tip well. Well, the waitress remembers you and you get red carpet treatment each time she sees you. That's an unofficial CLV score.
Here's the professor's advice for raising your profile with a retailer.
"Make more purchases. Return less."
And get a frequent flier or loyalty card from your favorite businesses. They track just what you like, offer you deals which makes you spend more at that company rather than shopping around.
The bottom line is the more money you make for the company the more they like you.