Loyalty Square | Glossary
Retail Financial Services Telecom Ecommerce/Social Media Education
Behavioral Segmentation Scorecard Development Market Basket Analysis Personalized Recommendations Churn Management Text Mining Campaign Management Social Network Analysis Loyalty Measurement
Applied Data Mining Techniques Statistics Essentials Statistical Model Development Text Mining Analytics for Marketing Managers Analytics for Risk Managers Analytics for Collections Managers Mechanics of Financial Products Emerging Trends in Analytics
Free Pricing Piracy or Free Promotion Impact of Color Promotion thru' Spokes-characters Chief Customer Officer Speech Analytics Number Portability Cause Marketing Fear Marketing Global Recipe with Local Spices Facebook: Social Media Marketing
Management Team Partners Spotlight
Popular Quotes Do You Know? Glossary Ten Things in Retail Best Practices - Amazon Best Practices - Singapore Airlines Best Practices - Shopper's Stop Best Practices - Tesco


A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   X  Y  Z


Above the Line: The term is used when an ad is placed in the television, radio or published media, commonly referred as ‘above the line’ expenditure. On the other hand Direct marketing is referred as ‘below the line’ expenditure.

Acquisition: The process of running events and tasks to obtain new customers is called Acquisition. It can be done periodically or on a regular basis.

Activation Rate: A term very commonly used in the Credit Card industry – it indicates the percentage of customers that activate the card.

Affinity Card: A type of credit or debit card issued by banks that targets a specific group of population (e.g. teens, women, professional associations, etc.) or associates with a non-profit organization (e.g. WWF) involved in a social cause.

Affinity Marketing: A marketing strategy that campaigns to customer groups with similar interests (e.g. university groups, alumni associations, sport teams, etc.).

Appreciation Gifts: Gifts that are given to customers who don’t know how they qualified for the gift - also known as ‘Surprise and Delights’.

Attrition Model: A model that predicts the probability of a customer discontinuing a company’s service or goods for its competitor.

Attrition Rate: The rate or percentage of customers that have discontinued using a company’s product and are no longer a customer.

Auto Enrolment: The process of enrolling a customer in a program without their consent is called Auto Enrolment.

Auto Redemption: On reaching the threshold of points, the program member is given a reward, which is automatically generated.

Average Spend or Average Transaction Value: The average amount spent by a customer per individual sales transaction - a key objective of a loyalty programme.



B2B: Business-to-business. The direct communication between two companies is called B2B.

B2C: Business-to-Consumer. The direct communication between a company and a retail customer is called B2C.

Balanced Scorecard: A scorecard that can be used by managers to track the daily activities of their staff and monitor the outcome of these activities.

Below the Line: The term is used when an ad is done through direct promotional channels such as direct mail, telemarketing, emails, leaflets and brochures.

Benefits: The ongoing privileges that are offered to a member for being part of the program are the Benefits. A few examples include the express lines for program members and invitations to event where only members are allowed. Benefits help a customer feel recognized for their patronage - also known as Customer Benefits.

Blog: A blog is a website or any portion of a website that does ‘Web logging’. Blogs are medium of conveying ideas, thoughts, reviews and much more.

Brand Touchpoints: Brand Touchpoints is the cumulative experience that a customer gets through the entire sale process – pre-purchase, purchase and post-purchase.

Breakage: The variance between the points issued and points redeemed is called Breakage. Breakage may occur when participants drop out or lose interest in a program.

Brick & Mortar: Businesses/retailers functioning with a physical office presence, as compared to just the Internet are called Brick and Mortar.

Burn, Open & Closed: The ability to receive rewards based on the loyalty program currency is Burn – Open and Closed. The Open burn option enables customers to redeem the rewards from several companies, while the Closed burn option allows the redeeming of the reward options limited to the sponsoring company. For example, if airlines only offered airline rewards for a customer for flying with them that would be a closed burn, but if the airlines offer rewards from hotels, cruises and retail merchants it is an open burn.



Call to Action: It is the process wherein the customer is requested to call, visit the web site to enrol, refer a friend, complete a survey or simply use the product.

Campaign Effectiveness: An analytic method of measuring the effectiveness of campaigns.

Campaign Management: A process that involves targeting a specific group of customers and involves coordinating activities such as customer segmentation, design and fulfilment.

Campaign: An amalgam of methods that brand a company - advertising, promotions or sales – with activities designed to achieve an objective.

Cannibalization: Cannibalization refers erosion of sales of an existing product due to launch of a new product in similar category by the same manufacturer. For example, if Unilever launches a new soap, it impacts the sale of an existing soap in similar category.

Channel Profitability: The process of analyzing channel performance and profitability through product revenue and total sales is referred as Channel Profitability.

Channel: The method of distributing products and services to end-users - Retailers, resellers and wholesalers are some of the channels. It also refers instore, online or catalog sales channels.

Churn Rate (see Attrition Rate)

Clicks & Mortar: A successful integration of online e-commerce channels and offline Bricks & Mortar outlets is called Clicks and Mortar.

Clickstream Data: Clickstream data is a collection of user's activity on the Internet, including every website and every page of every website that the user visits, the time spent on the web pages or site, the order of the pages visited, etc. 

Closed-Loop Analysis: A process in which data analysis, campaign planning and customer interaction are combined in a ‘closed loop’ for continuous improvement.

Cluster Analysis: Cluster Analysis is a statistical technique to classify observations into similar groups (clusters) with similar characteristics.

Coalition Model: A model of rewarding customers for promotional currency that is shared between 2+ partners.

Co-Branded Card: A card issued by two companies (generally a bank and a retailer) is called a Co-branded Card.

Consumer Segment: A group of Consumers with similar characteristics, where the method of communication or a promotional offer can be similar for the entire segment.

Contribution Margin: The process of calculating the profit of individual products is referred as Contribution Margin.

Control Group: A group that gets general promotion, but is not exposed to the new promotion. This is primarily done to compare the efficacy of a promotion by comparing improvement in sales between a test group for whom the new promotion is given and a control group for whom the general promotion is administered.

Cost Benefit Analysis (CBA): Cost Benefit Analysis involves evaluating the total expected costs against the total expected benefits of a promotion.

Critical Mass: On reaching critical mass a program has sustained enrolment and accomplished sufficient behavioural change to make it self-supporting.

Customer One View or Customer 360: It is the process of collating customer’s information (e.g. customer’s demographic information, customer’s purchase data, customer’s response to promotional activity, customer’s interaction with call center, etc.) from various systems into a single database.

CRM (Customer Relationship Management): The methodologies, strategies, software, and Web-based capabilities - that assist an enterprise to organize and manage customer relationships are called CRM.

Cross-selling: The promotion of other products to current customers, often based on their past purchases is called Cross-selling.

Customer Acquisition Cost: The cost involved in acquiring a new customer using marketing and promotion.

Customer Churn: A term that is used to refer the loss of customers, typically used in industries providing ongoing services - credit cards, telecom, loyalty membership and so on.

Customer Database: Data pertaining to customer related information like customer personal details, transaction data, mailings, contacts, preferences etc.

Customer Experience Management (CEM): According to Bernd Schmitt, the term 'Customer Experience Management' represents the discipline, methodology and/or process used to comprehensively manage a customer's cross-channel exposure, interaction and transaction with a company, product, brand or service.

Customer Identifying Data: Personal information about a customer including name, Social Security Number (SSN), contact information like telephone, postal address, email, etc.

Customer Lifecycle: The various stages a customer goes through when considering, purchasing, using and maintaining loyalty to a product or a service. Marketing analysts Jim Sterne and Matt Cutler have developed a matrix that breaks the customer life cycle into five distinct steps: reach, acquisition, conversion, retention and loyalty.

Customer Lifetime Value: The total value of a customer during a Customer Lifecycle is called Customer Lifetime Value.

Customer On-boarding: Customer On-boarding is a communication process to enable a new customer feel comfortable using company’s products or services. This includes sending a welcome kit with terms and conditions, direction for product usage, etc.

Customer Retention:  The methods or strategies adopted to maintain customer loyalty is called as Customer Retention.

Customer Satisfaction Index/Score: An indictor that measures the customer satisfaction about a product/service.

Customer Segmentation: The grouping of customers based on factors like age, location, income, psychographics, spend, purchase profiles or combinations. In addition, Customer Segmentation is the process of finding customers with common behaviour or spending patterns.

Customer Value: The value of a customer varies based on company and industry –generally it is calculated on factors like frequency of purchase, tenure and the amount of money the customer has spent. To determine a customer's potential for incremental performance, that customer's current value statistics will be matched against the average for his/her cohort group. The difference between the two represents the customer's potential for a positive lift in value.



Data Mining: The process of converting data into relevant information using software tools to find patterns, groups, statistical correlations and more.

Data Warehousing: A vast repository of data that is used to extract, consolidate and analyse operational data.

Direct Marketing: Advertising that creates a direct relationship with the customer is Direct Marketing. Examples of direct marketing include email and tele-marketing.



Earn, Open & Closed: The points that a customer accrues over a period of time for a program is referred as Earn. The points accumulated from any participating source within the program is called Open, while Closed earn is the accumulation of currency only from within the participating source.

Electronic Wallet: A medium that stores financial information in a smart card. This can be used to complete electronic transactions without re-entering the stored data at the time of the transaction.

Enrolment/Re-enrolment: The process of enrolling in a loyalty program and becoming an ‘active’ member mainly done online, through call centres or at the point of purchase. On non-use the membership may expire and it’s necessary to re-enrol to participate in the program again.

Equity Programs: The program which accumulates program currency for customers, which can be redeemable for hard benefits.

Equity: The amount a member has earned that is translated into points or other program currency.

Event Based Marketing: It is an approach to understand customers’ needs based on either change in life events (e.g. marriage, child birth, etc.) or new interaction of the customer with the company (e.g. calling for a service, lodging a complaint, buying a prepaid mobile voucher, etc.



Flagship Store: A flagship store is a main store of a retailer that serves the mainstream customers.

Frequency/Loyalty/Relationship Marketing: A sales or marketing strategy that rewards customers for maintaining loyalty or repeat business. Typically, points are accrued based on the customers' transactions or activities. These points are then exchanged for incentives such as free or discounted goods and services and/or enhanced levels of service.



Fulfilment: The distribution of requested rewards like gift cards, merchandise and travel experiences.



Horizontal Price Fixing: The agreement between two or more parties to sell a product at the same price.



Incentive Program: A program that adds value to an offer or sales goal to encourage a specific response.

Influencer: A website or individual with content that is deemed influential in search result rankings - either by creating new content or placing links to other documents.

In-Kind Awards: The awards that are provided by the host company for its own products and services to its customers for maintaining loyalty.

Interactive Voice Response (IVR): An automatic interactive response by voice for telephone callers.



Liability: A percentage of the points accumulated by the customer are recorded in the company's balance sheet as a liability. An indication that the company is redeeming them in the future.

Lipstick on a Pig: A term used to indicate that a product might have undergone superficial or cosmetic changes, but that does not hide the true nature of the product.

Loyalty Card: A card given to a customer who is a frequent retail store user. It offers promotional benefits.

Loyalty Marketing Programs (also know as Frequency programs, Relationship programs): Marketing programs that recognize and reward customers based on tracking purchase and retention behaviour.



Market Basket Analysis: It is the process of analyzing the association of individual product items purchased in the same transaction.

Market Penetration: The marketing effectiveness that indicates the number of customers or revenue a company has achieved in a particular market segment, divided by the total number of companies or estimated revenue in that market.

Member Tier (Recognition Level): A customer is placed in tiers based on the volume of purchases, value contribution or account lifetime value. Such tiers provide higher level of customer service, greater rates of point accrual, more advantageous point exchange rates for rewards and less restrictive expiration and re-enrolment policies.

Membership Card: A club member card that is used as an ID.

Merchandising: The process of promoting certain categories of commercial activity.

Micro-Targeting: The process of collecting data about consumers to create marketing strategies based on individual preferences and behaviours.

Multi-channel implementation: Marketing strategies that use more than one media channel - television, radio, print, direct mail, mobile and the Internet.

Mystery Shopper: Shoppers posing as normal customers who do everything a normal customer does and then provides feedback of their experiences.



Net Present Value (NPV): The current value of all cash inflows and outflows of a customer, project or investment at a specific discount rate. NPV analyses a customer's purchases are worth over time and discount that information back to the present.

Net Promoter Score (NPS): A score that is used to gauge the loyalty of a firm’s customer relationships.



OLAP (On-Line Analytical Processing): A method for retrieving information and conducting business intelligence analysis from a data warehouse that summarizes data to provide information as reports and graphs.

On-Demand Redemption: Customers request for a reward of their own choice over the telephone via fax or internet.

Online Reputation Management: The process of recognizing and replying to a topic that includes direct consumer engagement or web content for consumer viewing. Content that is favourable is promoted or rewarded, whilst the unfavourable content is not promoted or reported for inappropriate content.

Open Enrolment: The enrolment can be done by anyone but the program must be opted-in by the individual.

Optical Card: A card that store information on an optical memory stripe, which is quite similar to CDs.



Payout Rate (also known as Funding rate): It is computed by dividing the value of the reward by the amount spent. For example, if 1 point is earned per every dollar spent, and if every point is worth 1 cent, then the payout rate is 1% of all purchases.

Perceived Funding Rate: The perceived funding rate is the points and rewards in a loyalty program that is earned by customers. It is calculated by dividing the retail price of an award by the amount that had to be spent to earn the award.

Perceived Value: The perceived value describes how customers value rewards. For example a $50 gift certificate would have a perceived value of $50, whereas a concert with backstage passes to meet the band would be perceived much higher than the face value of the tickets.

Personalization: Personalization refers to the process of offering individualized pages to an online visitors, tailoring products to every customer’s preference.

Planogram (POG): A diagram that displays fixtures and products of how retail products should be displayed in a store.

Platinum Rule of Customer Service: The service that aims at providing what the customer requires with a little more than what they expect.

Player Model: The player model rewards customers with another company's promotional currency and it’s inexpensive while customers get instant recognition.

Point Accrual: A prefixed accrual system, wherein the members within a Loyalty Program receive incentives or rewards for purchasing products and services.

Point Caps: The limit to the amount of points a customer can earn in a given time. This facilitates elimination of fraudulent practices.

Point Expiration: The non-use of program currency by a member will lead to an automatic deduction known as Point Expiration. Point expiration is sometimes referred to as breakage.

Point of Sale (POS): The POS at a retail location can mean two things - 1) a communication vehicle located at or near a check out or 2) a device or system that captures the time of sale transactions.

Points: The units of currency that indicate the amount of equity earned by a customer for participating in a program.

Positioning: The process of identifying the 'character' of a product or company – in terms of efficiency, user-friendliness, cost-effectiveness and so forth that contribute to the positioning of a product or service

Precision Merchandising (also Precision Retailing): This process involves gathering, aggregating, and analyzing customer, merchandise and selling channel data, devising assortments that are specifically created for that group of customers, stores, or selling channel.

Prepaid Card: A card that allows a customer to buy goods and services up to the prepaid value.

Private Label Card: A credit card carrying the name of a retailer but actually issued and managed by a third party processor. Examples of stores who have private label card include JC Penney, Walmart, Home Depot, etc.

Product and Service Bundling: This is the process of bundling two or more product or services together as one offering to increase sales.

Product Mix: A combination of products manufactured or traded by the company in order to maximise their presence felt in the market, increase market share and profits.

Promotional Model: A model that creates an illusion of value, though it has no continuity and does not motivate specific, individual customer behaviour.



Real Time: The transactions that occur as and when it happens, eliminating the lag for data to be captured, stored and then fed into another database.

Recency: The last time a customer interacted with the program in a recorded event such as visiting the web site, making a purchase, calling the customer contact centre etc. Recency facilitates the company in identifying future buying patterns of a customer.

Recognition: The process of thanking customers for their patronage is Recognition. It may include preferred program status, expedited handling, appreciation gifts, etc.

Redemption: It is the process of exchanging the program currency with the loyalty rewards.

Relational Marketing: A marketing strategy that uses personalized marketing and sales for maintaining long-term relationships between marketers and individual customers.

Relationship Chain: It is the correlation between the incremental sales or increased retention directly attributable to company’s loyalty strategy.

Relationship Marketing: A marketing strategy that builds and maintains good relations with customers to maintain loyalty.

Repeat Purchasers: Customers purchasing products/services from a retailer more than once are Repeat Purchasers.

Retention Rate: It is the percentage of all the customers who continue to do business with the company for a given period of time.

Return on Investment (ROI): A measure to evaluate the efficiency of the investment and is computed by dividing the profit by the investment.

Reward Sourcing: The activities necessary for developing reliable sources of supply or vendors to provide rewards for customer loyalty, retention or incentive programs.

Reward: The exchange of an item with value for points or something offered as compensation for executing a desired behaviour.

Rewards Earning Ratio: The time taken for a customer to earn a reward. For example, it takes around 5 international flights or 10 domestic flights to earn a free domestic flight).

RFM (Recency, Frequency and Monetary) Analysis: It is a quantitative technique used to determine best customers by examining how recently a customer has purchased (recency), how often they purchase (frequency), and how much the customer spends (monetary).

Rules Engine: It is a system that executes a certain business rule in a runtime production environment. The rules might come from legal regulation (e.g. customers part of ‘Do Not Disturb’ can not be contacted) or business policies (e.g. customers with past delinquencies to be given minimum loan) or marketing strategies (e.g. customers who spent more than $2,000 gets a free return ticket).



Scumware: Advertising software that is very intrusive and superimposes hypertext links on web pages visited by a user.

Search Engine Reputation Management: Managing search results to show only neutral or favourable content for a brand or personal name.

Search Listing: The result provided by a search engine based on a query about a specific web document. A typical search listing includes – a page title, descriptive text (called a "snippet"), page name/URL, cache information and many more.

Search Reputation Management: The process of including favourable content in search results through monitoring and adjusting search results using SEO practices.

Search Results Management: Displaying multiple listings in a single search result.

Search Visibility: In a search result, the level at which a website can be found across all queries.

Segment Mobility: Moving customers from one performance category to a more profitable category.

Sentiment Analysis (also called Opinion Mining): An analysis that determines the attitude of a speaker or writer on a topic or a product/service.

SEO Practices: The methodologies utilized to enhance or modify web document structure and content, so that the web documents are included in the search engine listings.

SEO (Search Engine Optimization): The process of designing or modifying web pages and content to enhance visibility in designated search results of search engines.

Share-of-Customer: The amount a customer has spent for a product/service category, which a marketer has succeeded in achieving.

Share-of-Market: The percentage of business (transactions) within a category, held by one company compared to the total business from all the competitors.

Silent Attrition: Silent Attrition occurs when the customer stops using the service (let’s say, a credit card) and doesn’t inform the company.

Skimming: The process of copying the encoding located on the magnetic stripe from one card to another.

Smart Card: A card that is embedded with ICs that can store data.

Soft Benefit: A consideration provided to a member for the member's special status, a special treatment of sorts - special access, special deals/ discounts, special experiences.

Soft Points: The points without any monetary value - the value being derived from the benefit it allows.

Spokescharacters: Characters that are very appealing and are brand-related, usually cartoons that are used on commercial websites to increase brand recognition and loyalty. Some examples are the the Amul girl, Air India Maharaja and Nerolac Goody Tiger.

Sticky Traffic: A web user using a Website or online game for a long period of time. This is a highly desirable demographic from a marketer's viewpoint.



Target Market: A product released to meet a specific section of the market segment.

Targeting: Choosing the best customer prospects that fulfil company objectives.

Tier Level: Programs that increase customer benefits and reward earning opportunities e.g. gold and platinum levels.

Tier Mobility: The movement between membership tiers by customers. Tiers are often assigned on an annual basis.

Trigger Marketing (also see Event Based Marketing): Programs that send some form of communication on events such as birthdays, anniversaries, thank you letters, etc. or signals of imminent attrition.



Up-sell (up-selling): A sales method that induces customers to buy more expensive products/services.



Value Added Proposition; The process of administering and increasing the value to both the customer and the company.

Value-at-Risk Customers: A high-value, high-yield customer that has a high propensity to churn.

Vested Equity: Points are given to a customer in lump sum, upfront. It can only be used as time passes or the desired behaviour is shown.

Virtual Communities: Online communities started by marketers to reinforce a sense of belonging in users, and to connect with like-minded people.

Visual Merchandising (VM): It is the art of presentation, which puts the merchandise in focus. It educates the customers, creates desire and finally augments the selling process. Visual merchandising includes window displays, signs, interior displays, cosmetic promotions and any other special sales promotions taking place in the store.



Web Bugs: Small, transparent graphics that are invisible to users that can be embedded in either web pages or e-mail messages.

Winback program: A program developed to win back lost customers.