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One to One Glossary of Terms

Actual Value: The net present value of future financial contributions from the designated customer, behaving in the way he is expected to behave, knowing what we know now, with no significant unanticipated change in the customer’s needs, in the competitive landscape, or in the company’s planned strategy. Same as lifetime value (LTV).

Below Zeros (BZs): The customers who cost more to serve than they will ever return in value. Examples: A Below Zero might be somebody who takes a lot of free services, but doesn't return much revenue. It could be a complainer whose complaint was never resolved and therefore no longer does business with you. Not only is that person worth zero on that account, but actually has below-zero value because he or she will tarnish your reputation in speaking to other customers.

Best Practices: A case study considered to be a good example of a business discipline.

Beta Testing: Testing a pre-released (and potentially unreliable) version of a product, business initiative, or software by making it available to selected users. Whereas an "alpha" test involves in-house testing, a "beta" test denotes external testing.

Bricks and Mortar: Slang referring to businesses that exist in the real world, as opposed to just the cyber world. Examples include bricks-and-mortar retail outlets, bricks-and-mortar warehouses, and bricks-and-mortar law firms.

Call Center: The part of an organization that handles inbound/outbound communications with customers.

Channel: An avenue through which products and services are rendered to end- use customers. Car dealers, retailers, computer resellers, grocery wholesalers are all examples of channel members.

Channel Conflict: This occurs when a business attempts to render products to the same set of customers through a variety of avenues that might conflict with each other. An example is selling cars direct to consumers on the Internet, which creates a conflict with bricks-and mortar dealers who also sell the cars.

Churn: A term that describes customer attrition, or customer defection. A high churn rate implies high customer disloyalty.

Clicks-and-Mortar: Slang describing a business that has successfully integrated its online cyber-world existence with its offline real-world existence. For instance, an online appliance store that allows customers to schedule repair visits at its Web site would be an example of a clicks-and-mortar application.

Co-opetition: Partnering with your competition.

Collaborative Commerce: GartnerGroup's term for net marketplaces.

Collaborative Filtering: Also called Community Knowledge, this is essentially a matching engine. It allows a company to serve up products or services to a particular customer based on what other customers with similar tastes or preferences have preferred in this particular product or service. For example, Amazon.com uses collaborative filtering to recommend books to you that were read by people with similar interests.

Community Knowledge: See Collaborative Filtering.

Consumer Direct: Also known as Direct-to-Consumer, it's the channel that includes all products and services delivered directly to the home through catalogs, telemarketing, TV shopping, kiosks, Web sites, and the newly emerging automatic grocery-replenishment services. Consumer Direct describes the process involved when a manufacturer sends goods directly to a consumer via the Internet (such as providing music or video) with no intermediaries, but the term also refers to direct-mail and catalog channels.

Contextual Commerce: When the advertisement on the Web site directly pertains to the kind of information a person is viewing, and changes with each visitor, and with each drill down.

Cookie: Cookie is Netscape's term for a small amount of data stored by the user's browser. This allows us to remember key things that you tell us. When we see that information again, it allows us to recognize you and helps us identify your needs.

CRM: An acronym that stands for Customer Relationship Management.

Cross Selling: Selling related goods and services to a consumer. This process is only one way to increase your Share of Customer.

Customer: A customer is someone who encompasses past, present, current and potential purchasers of a company's products and services.

Customer Differentiation: The second step in the one-to-one strategy labeled "IDIC" is to differentiate customers. Customers are different in two ways: they have different value to the enterprise, and they need different things from the enterprise. Customer differentiation is vital to pursuing Learning Relationships.

Customer Experience Development: The process of overseeing and influencing the totality of a customer’s experiences with a brand, product or service, spanning all interactions and transactions.

Customer Loyalty: The degree to which customers are predisposed to stay with your company and resist competitive offers.

Customer Portfolio Management: An organizational structure placing line responsibility for improving Return on Customer in the hands of portfolio managers.

Customer Relationship Management (CRM): CRM is the same as one-to-one marketing. This customer-focused business model also goes by the names relationship marketing, real-time marketing, customer intimacy, and a variety of other terms. But the idea is the same: establish relationships with customers on an individual basis, and then use the information you gather to treat different customers differently. The exchange between a customer and a company becomes mutually beneficial, as customers give information in return for personalized service that meets their individual needs.

Customer Valuation: The value of a customer to an enterprise, composed of two elements. Actual valuation is the customer's current Lifetime Value, and strategic valuation is the customer's potential value, if the customer could be grown to his or her maximum potential. (See also Share of Customer).

Cyberspace: A metaphor used to describe the "place" where customers "go" when they engage in transactions electronically via the Internet.

Data Aggregation Agent (DAA):: As the increasing demands of marketers and service providers for customer information begin to clash with privacy concerns, new entities called Data Aggregation Agents (DAAs) emerge. By consolidating and controlling outside access to a customer's personal data, DAAs will help businesses provide the customer with relevant and timely offers while protecting individual privacy. The basic function of a DAA would be to act as a central, online storehouse for a consumer's personal information. In a wide-open, wireless world, customers will require their DAAs to shield them from mobile "spam," while sending through messages that truly respond to their needs.

Data Mining: Analyzing information in a database using tools that look for trends or anomalies without knowledge of the data's meaning. Data mining is crucial in CRM strategies, particularly in e-commerce.

Database: Any collection of information -- from a simple shopping list to a complex collection of customer information -- is technically a customer database. However, the term is usually applied to computerized records of information.

Deep Domain Expertise: Slang for a core competency in a vertical market such as financial services or retail.

Design for Manufacturability:: Designing, or redesigning the production process of a product so that it can be manufactured with the least amount of parts in the shortest amount of time, using standard as opposed to custom parts. (The concept originated in Japan in the early 80s.)

Design interface: The mechanism by which a customer specifies exactly what he or she needs. An important aspect of mass customization.

Dialog: Interactive communication between a business and a customer. In a one-to-one enterprise, each customer contact will also serve as a data-collection point.

Differentiation: See customer differentiation.

Dot.com: Internet-based companies that rely on digital technology and the use of the Web as the primary communication and interaction media.

Drip Irrigation: Gathering customer information slowly over time, rather than overwhelming customers, prospects and visitors with long surveys they might be inclined not to fill out, and using each piece to build on every interaction.

Dynamic Pricing: When pricing is determined at the time of the transaction, as in auctions, reverse auctions, exchanges and negotiation.

E-business: A term that is most frequently applied to the business process that results when you rely on digital technology and the Internet as the primary communication and interaction media.

E-commerce: E-commerce deals with using the Internet, digital communications and IT applications to enable the buying or selling process. Some experts define e-commerce as all steps that occur in any business cycle; others as consumer and business purchases over the Internet. Yet another definition includes IT-support transactions, such as the sale of computer code by programmers, that occur online.

E-tailer: A direct-to-consumer business practicing e-commerce. Typically, an e-tailer is a business that, if it weren't for the Internet, would have transactions with consumers in bricks-and-mortar retail stores.

Enterprise Application Integration: A generic term for software that integrates legacy and disparate systems.

Enterprise Resource Planning (ERP): Back-end processes and systems; i.e., inventory management and billing. Tying your back-end systems with your front-end or customer facing systems is what allows customers to be able to check the status of their order, and check stock availability on an item. Without front/back integration, customers couldn't do this.

Explicit Bargain: The "deal" that an enterprise makes with an individual in order to secure the individual's time, attention, or feedback. See also implicit bargain.

Golden Question: A strategic question that reveals several important pieces of information about a customer. For example, "Would you buy a birthday present for your pet?"

IDIC: The four-step methodology for implementing one-to-one relations with customers. IDIC stands for - identify customers, differentiate them, interact with them and customize.

Implicit Bargain: When mass-media advertisers sponsor a show or an article, they are in effect making an "implicit bargain" with consumers: watch our ad and see the show for free. The problem with an implicit bargain is that, because the medium is non-interactive, there's no real way to tie the particular consumer who watches the show back to the ad, or whether they saw it. That's why we call it an implicit bargain it's an implied bargain, as opposed to an explicit bargain, which can be made directly with an individual consumer.

Internet: The vast collection of interconnected networks that connects different kinds of computers around the world. All use the TCP/IP protocols and that evolved from the ARPANET of the late 60's and early 70's.

IT (Information Technology): Computer technology; machines based on microchips that enable computing interactivity.

Keiretsu: A Japanese term describing a group of affiliated corporations with broad power and reach. In Japan, six giant keiretsu -- Mitsubishi, Mitsui, Dai Ichi, Kangyo, Sumitomo, Sanwa, and Fuyo --dominate much of the country's economic activity.

Kiosk: A booth-type structure that provides a computer-related service. For example, Automated Teller Machines (ATMs) and some tourist information booths are considered kiosks. Some physical stores have started to install kiosks to provide Internet access to customers.

Learning Relationship: A relationship between an enterprise and an individual customer that, through regular or repeat feedback from the customer, enables the enterprise to become smarter and smarter with respect to the customer's individual needs. When a customer and an enterprise are involved in a Learning Relationship, with every cycle of interaction and customization, the customer finds it more convenient to deal with the enterprise. The result is Customer Loyalty, because to start the relationship again with another company, the customer would first have to re-teach the competitor what has already been learned by the one-to-one enterprise.

Legacy System: An older or outdated computer system or application program that continues to be used because of the exorbitant cost of replacing or reengineering it. Often such systems offer little competitiveness and compatibility with modern equivalents. Legacy systems are frequently large, monolithic and difficult to modify, and scrapping a legacy system often requires reengineering a firm's business processes as well.

Lifetime Value: Also known as LTV, Lifetime Value is the "run rate" of a customer's actual value.

Living Touchmap: A management tool that helps companies understand the individual dynamics and value of customer interactions over time.

LTV: see Lifetime Value.

Market Breakers: Competitors who enter an industry with a totally different business model, usually intended to attack existing competitors on price and using alternative revenue sources to become profitable.

Market Makers: A well-targeted set of customers in an industry, while preserving existing relationships and pricing models.

Market Share: A company's sales expressed as a percentage of the sales for the total industry.

Mass customization: The cost-efficient mass production of goods and services in lot sizes of one or just a few at a time. Mass customization is not the same as customization. Customization involves the production of a product from scratch to a customized specification, whereas mass customization is really the assembly of a product or the rendering of a service from pre-configured modules or components.

Matching Engine: An algorithm or equation for matching products being offered to the particular tastes of a customer.

Microsite: A mini-site within a site, usually for a partner brand.

Mobility: The subject of mobile/wireless.

Most Growable Customers (MGC): Those customers for whom the Strategic Value, that is the potential value of the customer, most exceeds the customer's current Actual Value. These are the customers who have the most growth potential -- growth that can be realized through cross selling; through keeping the customer for a longer period; or perhaps by changing a customer's behavior and getting them to operate in a way that costs the enterprise less money. Most Growable Customers are also known as second-tier customers (STCs).

Most Valuable Customers (MVC): Those customers with the highest actual value to the enterprise -- the ones who do the most business, yield the highest margins, are most willing to collaborate, and tend to be the most loyal. MVCs are those with whom the company probably has the greatest Share of Customer. The objective of an enterprise with respect to its MVCs is retention. See also Below Zeros, Most Growable Customers.

Needs-based Differentiation: How customers are different, based on what they need from the enterprise. Two customers may buy the same product or service for two dramatically different reasons. The customer's needs refers to why the customer buys, not what he buys.

Niche Marketing: A marketing segmentation strategy in which the firm focuses on serving one segment of the market. Niche marketing is very much like segmented marketing, only the segments are smaller -- a niche is a small, distinguishable segment that can be uniquely served.

One-to-One Marketing: Focused on the individual customer, one-to-one marketing is based on the idea of an enterprise knowing its customer. Through interactions with that customer the enterprise can learn how he or she wants to be treated. The enterprise is then able to treat this customer differently than other customers. However, one-to-one marketing does not mean that every single customer needs to be treated uniquely; rather, it means that each customer has a direct input into the way the enterprise behaves with respect to him or her.

Operational entanglement: Enmeshing the operations of the enterprise with those of the customer. Providing tools so the customer can perform some of the functions that otherwise would have been performed by the enterprise, usually so the customer can assume more control over the service being rendered.

Pareto Principle: Named after Vilfredo Pareto, the 19th-Century economist and sociologist, the Pareto Principle is also known as "the 80:20 rule." It says that 80 percent of an enterprise's revenue comes from 20 percent of its customers. In practical terms, though, it might be 90 percent of the revenue coming from 5 percent of the customers, or 60 percent coming from 30 percent of customers, depending on the firm's Valuation Skew of its customer base.

Peer to Peer (P2P): Technology that allows peer groups-usually groups of a particular company's customers-to communicate and exchange information with one another. It is used among both B2C and B2B companies.

Permission Marketing: A marketing method whereby companies get their customers' permission to market products or services to them. By talking only to volunteers, permission marketing guarantees that consumers pay more attention to the marketing message. The term was coined by author Seth Godin in his book, Permission Marketing. See also Explicit Bargain.

Personal Digital Assistants (PDAs): Technology that helps people manage their time and conduct business through the Web/email without the need of a computer (such as a Palm Pilot).

Personalization: Involves customizing some feature of a product or service so that the customer enjoys more convenience, lower cost, or some other benefit.

Picket fence: A term used to describe a particular transition strategy for becoming a one-to-one enterprise. The picket-fence strategy is based on isolating all or most of your Most Valuable Customers and your Most Growable Customers from the traditional marketing initiatives that the rest of the customer base is subjected to, and over time expanding the population of customers "behind the picket fence."

Portal: A gateway to the Internet that provides not only email, calendars, bulletin boards, and chatrooms to visitors or customers, but also customer-oriented service. A good portal solves problems for its visitors or customers. Companies should use them as access points to improve customer service.

Portfolio: A non-overlapping group of individually identified customers, managed by a portfolio manager, with similar needs and/or values. No customer will be in more than one portfolio.

Potential Value: The net present value of the maximum reasonable future financial contributions from the designated customer, if the company were to succeed in applying an optimum proactive strategy for changing that customer's otherwise expected behavior.

Predictive Model Markup Language (PMML): A new industry standard created by IBM and Oracle that allows models to move from system to system.

Product-service Bundle: The services and features that surround the core product, such as invoicing, delivery, financing, packaging and palletization, promotion, and so forth.

Prosumer: The answer can vary according to what the "pro" stands for in a particular instance: producer, professional, or proactive. The word "prosumer," a blend of "producer" and "consumer," was coined in 1980 by Alvin Toffler in his book "The Third Wave" to describe a future period in which an empowered consumer sector would influence the design and manufacture of products to individual specifications. That era is now upon us, say analysts who believe that 'Net-based commerce has the power to eliminate the middleman between manufacturer and purchaser.

Pure Play: Slang term that refers to any business that exists only in the cyberworld, and not in the real world. Pure play businesses do not have bricks-and-mortar locations. E*Trade and Amazon.com are examples of pure plays.

Real Time: Refers to the utmost level of timeliness regarding the transmission, processing, and/or use of information. A firm that collects and uses customer data in real time can manage relationships with individual customers much more effectively. See also Zero Latency.

Real-time Marketing: Regis McKenna's term for relationship marketing or CRM. Refers to the utmost level of timeliness regarding the transmission, processing, and/or use of information. A firm that collects and uses customer data in real time can manage relationships with individual customers much more effectively. See also Zero Latency. The term referred to in his book, Real Time: Preparing for the Age of the Never Satisfied Customer.

Relationship Marketing: see Customer Relationship Management.

ROC (Return on Customer): The rate at which a business creates value from any given amount of customer equity. Mathematically, ROC is the sum of a firm's current-period profit from its customers, plus any changes in customer equity, divided by the total customer equity at the beginning of the period.

ROI (Return On Investment): A term describing the calculation of the financial return on a business policy or initiative that incurs some cost. ROI may be measured in terms of a payback period for the investment, or as a percentage return on a cash outlay, or as the discounted net present value of free cash flows of an investment there are many different ways to calculate it.

Segment: A group of customers related either by similar needs and/or values, or by outward characteristics (demographics, postal code, etc). Different from a portfolio, in that customers in a segment are usually not individually identified, and customers can be members of more than one segment.

Share of Customer: In contrast to Market Share, share of customer refers to the percentage of a particular customer's business a firm gets over that customer's lifetime of patronage. The ratio of a customer's Actual Valuation to Strategic Valuation.

Spam: Slang term for commercial email sent without your permission.

STC (Second-Tier Customer): See Most Growable Customer.

Sticky Application: A portion of a Web site designed to interact with customers, require customers to provide input and grow "smarter" over time about how to meet individual customer needs. The "application" becomes "sticky" as customers gain a stake in the service and grow reluctant to take their business elsewhere. See also Learning Relationships.

Strategic Value: The strategic value of a customer is the potential that customer has to give you, if you had a strategy to go get it; it's the customer's potential additional value over and above his or her Actual Value.

Super-distribution Marketing: A more appropriate, substitute term for "viral" marketing. The most successful super-distribution campaigns (usually email) offer something so unique that the message grabs your attention and impresses you so mightily that you can't help sharing it with friends and colleagues.

Trusted Agent: An enterprise that treats customers' interests as paramount and speaks on the customer's behalf in all its dealings. With most organizations this is a very difficult philosophy to implement, because in many cases the interests of the customer and enterprise don't coincide. Only in Collaborative relationships do the true interests of the customer and enterprise match.

Unrealized Potential Value: The difference between Potential Value and Actual Value.

Up Selling: Selling upgrades, add-ons, or enhancements to a particular product or service.

Valuation: What a customer is worth to an enterprise; see Customer Valuation.

Valuation Skew: The degree to which the value of a customer base is concentrated in a small percentage of customers. A steep valuation skew would be one in which a tiny percentage of customers account for the majority of the value of the customer base. A shallow valuation skew would be one where the valuation of customers is more evenly distributed across the whole customer base.

Value of Future Customer: The net present value of a future customer’s lifetime value (LTV).

Vortal: These are targeted vertical portals, sometimes called "vortals," "vertiports," or "affinity portals." They are aimed at specific interest groups and focus on providing consumers with a gateway to unbiased information from other sources. A good vortal solves problems for its visitors or customers.

Web Site: A collection of Web pages (documents containing text, graphics and photos that are downloaded to a computer screen) that are linked together in an organized structure. Most Web sites contain a "home page," or the first page a computer user sees when he or she visits the site.

World Wide Web: A graphics-and text-based system for publishing information over the Internet; the global series of linked computer systems originally designed by the U.S. Department of Defense. Most Web documents (or Web pages) are created in HTML, a relatively simple coding system. Computer users navigate the Web by clicking on hyperlinks, which download additional Web pages to the user's computer screen.

Zero Latency: A computer term describing an information system in which there is no or little time passing between the updating of an information record and its availability elsewhere in the system. See also Real Time.

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