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Strategy

The Potential Threats and Benefits Of Publicizing Customer LTV Score

Retention marketers must critically examine key variables and market conditions when deciding whether public customer scoring is right for their business

Evan F.P.
January 23 2019

The jig is up, marketers: your customers are increasingly aware of the fact that their lifetime value scores are being tracked.

Privacy advocates and customers alike are becoming increasingly interested in the information tracked by companies, how it affects customer service, and how brands are using it to their advantage. As we’ve seen with Facebook, consumers want to know how these scores are used to sell to them, target them with exclusive offers or discounts, or how they can be used to bargain for a better deal when considering a switch to another service. Marketers will need to be part of the internal conversation on whether or not these scores should be made public.

It’s a conversation that has already started playing out in prominent publications like the Wall Street Journal, and marketers across the business spectrum must bring themselves up to speed on this potentially divisive topic.

So before marketers consider opening up their LTV scores or presenting some form of them to the public, what potential pitfalls and benefits should they consider?

You Are Sending A Message

 Every piece of customer data you keep can tell the world what your company values are, so if you haven’t already, audit your calculation for relevance, accuracy, and potentially sensitive considerations. This is to protect your brand, as privacy advocates are concerned that companies are keeping inaccurate consumer data and even preventing customers from disputing those inaccuracies.

Consider British eCommerce brand ASOS, which is so reliant on and sure of its LTV formula that it’s published papers about it. For ASOS, LTV is vital, because as they “do not recoup delivery costs for returned items, customers can easily have negative lifetime value.” That said, internal value is complicated, using over 132 “handcrafted” metrics in such a complex way that to the average customer it may as well be a black box. For many companies, publishing that score as-is would likely accomplish very little because it’s beyond what most given customers would understand.

Because of this, marketing professionals will have to consider how LTV information is presented to consumers, a question which calls upon basic retention marketing psychology. Focusing on a positive profile whenever possible will be ideal, informing even the least profitable customers that they have neutral or average value at minimum. Like a good loyalty program, a good public-facing LTV will be rooted in a feedback loop that keeps customers coming back for more.

Speaking of which, retention marketers need to consider whether or not they intend to loop LTV into their extant loyalty programs, and how. For many companies, it’s more or less the same function — offering discounts to customers who are already strong value propositions.

Transparency Has Its Benefits

Just a few years ago, speculating about the publicizing of LTV scores was pretty common. Strong arguments were made about if, how, and why companies should let customers know their scores. Many of those arguments will be recognizable to those who have debated for and against general transparency practices in business.

Publicizing a customer’s LTV score can be a show of mutual respect. Most people don’t complain when a stranger gets upgraded to first class on an airline because they understand the airline’s likely motive for the upgrade: that person is probably a frequent flier with a higher LTV than others on the plane. Were LTV to go public, consumers would know what information is involved in business decisions about them, and act accordingly in order to get better treatment. The psychological investment in your brand would increase, raising in turn the likelihood of their long-term loyalty.

This has the potential to be even more effective than a loyalty program. Unlike a loyalty program, where points and levels require navigating through specific and sometimes complicated stages, a system using a public LTV can be calculated to directly equate specific behaviors with a higher score, and therefore, better benefits or treatment.

Customer Service Can Be the Cost

Marketers will have to make this decision in concert with their colleagues in customer service, because ultimately, CS reps are on the front lines – and any decision to publicize LTV information will matter most immediately to them. Businesses have long been assumed to work with impartiality; that every customer is treated equally no matter their purchasing behavior. Of course, a public LTV reveal would debunk that notion fairly quickly.

A customer with a low score in your system is likely going to think that any negative customer service experience is due to that score. Bad service on the phone? ‘That’s because they think I’m cheap.’

That becomes even more complicated when your LTV system takes into account demographic information beyond mere spending. If a brand marketer knows that young single women are the most heavily spending group and assigns LTV accordingly, a middle-aged dad may feel undervalued — and take his business elsewhere. When it becomes clear that your system assigns higher value to those in a particular geographical region or ZIP Code, your popularity there may soar — while other potential market sectors could look to more nationally oriented brands.

Customers with high scores, meanwhile, may well begin to demand concessions — something cell phone providers and cable companies are already dealing with in high-competition markets. Customers who know they’ve spent plenty on your company could expect better treatment, or as cable and phone companies have seen, call up threatening to quit a service in favor of a competitor unless their demand for a better deal is met.

Marketers will need to consider these and more factors as the debate continues over whether or not to publicize LTV scores. The only thing that’s sure is that professionals in every B2C sector are already considering their reactions to the growing call for transparency.

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