It's been five decades since I first started studying and writing about marketing. Back then, the Industrial Age was in its prime. Manufacturers churned out products on massive assembly lines and stored them in huge warehouses, where they patiently waited for retailers to order and shelve boxes and bottles so that customers could buy them. Market leaders enjoyed great market shares from their carefully crafted mass-production, mass-distribution, and mass-advertising campaigns.

What we all learned from the Industrial Age is that if an enterprise wanted to make money, it needed to be efficient at large-scale manufacturing and distribution. The enterprise needed to manufacture millions of standard products and distribute them in the same way to all of their customers. Mass producers relied on numerous intermediaries to finance, distribute, stock, and sell the goods to ever-expanding geographical markets. However, in the process, producers grew increasingly removed from any direct contact with end users.

Producers tried to make up for what they didn't know about end users by using a barrage of marketing research methods, primarily customer panels, focus groups, and large-scale customer surveys. The aim was not to learn about individual customers but about large customer segments, such as “women ages 30 to 55.” The exception occurred in business-to-business marketing, where each salesperson knew each customer and prospect as an individual. Well-trained salespeople were cognizant of each customer's buying habits, preferences, and peculiarities. Even here, however, much of this information was never codified. When a salesperson retired or quit, the company lost a great deal of specific customer information. Only more recently, with sales automation software and loyalty-building programs, have business-to-business enterprises begun capturing detailed information about each customer on the company's mainframe computer.

As for the consumer market, interest in knowing consumers as individuals lagged behind the business-to-business marketplace. The exception occurred with direct mailers and catalog marketers who collected and analyzed data on individual customers. Direct marketers purchased mailing lists and kept records of their transactions with individual customers. The individual customer's stream of transactions provided clues as to other items that might interest that customer. For example, in the case of consumer appliances, the company could at least know when a customer might be ready to replace an older appliance with a new one if the price was right.

As the twentieth century progressed, direct marketers became increasingly sophisticated. They supplemented mail contact with the adroit use of the telephone and telemarketing. The growing use of credit cards, and customers' willingness to give their credit card numbers to merchants, greatly stimulated direct marketing. The emergence of fax machines further facilitated the exchange of information and the placing of orders. The Internet and email facilitated direct marketing. Customers could view products visually and order them easily over the phone or online, receive confirmation, and know when the goods would arrive.

As the 21st century drove interactivity between customers and companies, and among each other, even companies that don't really understand social networking realize they have to get on board. If 33 million people are in a room, you have to visit that room.¹

But whether a company was ready for customer relationship management depended on more than conducting numerous transactions with individual customers. Companies needed to build comprehensive customer databases. Companies had been maintaining product databases, sales force databases, and dealer databases. Now they needed to build, maintain, mine, and manage a customer database that could be used by company personnel in sales, marketing, credit, accounting, and other company functions.

As customer database marketing grew, several different names came to describe it, including individualized marketing, customer intimacy, technology-enabled marketing, dialogue marketing, interactive marketing, permission marketing, and one-to-one marketing.

Modern technology makes it possible for enterprises to learn more about individual customers, remember those needs, and shape the company's offerings, services, messages, and interactions to each valued customer. The new technologies make mass customization (otherwise an oxymoron) possible.

At the same time, technology is only a partial factor in helping companies do genuine one-to-one marketing. The following quote about customer relationship management (CRM) makes this point vividly:

CRM is not a software package. It's not a database. It's not a call center or a Web site. It's not a loyalty program, a customer service program, a customer acquisition program, or a win-back program. CRM is an entire philosophy.

—Steve Silver

Whereas in the Industrial Age, companies focused on winning market share and new customers, more of today's companies are focusing on share of customer, namely, increasing their business with each existing customer. These companies are focusing on customer retention, customer loyalty, and customer satisfaction as the important marketing tasks, and customer experience management and increasing customer value as key management objectives.

Various kindred customer-focused efforts are more than just an outgrowth of direct marketing and the advent of new technology. As the Interactive Age progresses, mass marketing must give way to new principles for targeting, attracting, winning, serving, and satisfying markets. As advertising costs have risen and mass media has lost some effectiveness, mass marketing is now more costly and more wasteful. Companies are better prepared to identify meaningful segments and niches and address the individual customers within the targeted groups. They are becoming aware, however, that many customers are uncomfortable about their loss of privacy and the increase in solicitations by mail, phone, and email. Ultimately, companies will have to move from an “invasive” approach to prospects and customers to a “permissions” approach. On the flip side, customers—now in contact with millions of other customers—have never been more informed or empowered.

Despite being introduced in enterprises large and small over two decades ago, the full potential of CRM is only beginning to be realized. Of course, every company must offer great products and services. But now, rather than pursue all types of customers at great expense only to lose many of them, the objective is to focus only on those particular customers with current and long-term potential in order to preserve and increase their value to the company.

In this fourth edition of their widely used textbook, Peppers and Rogers offer a careful context as well as modern thinking on how to grow the value of a company by growing the value of the customer base, how to increase profits by using modern technology and behaving ethically, and how to look ahead to what will be coming next.

Philip Kotler
S. C. Johnson Distinguished Professor of International Marketing,
Kellogg School of Management, Northwestern University (Emeritus)

Philip Kotler is widely known as the father of modern marketing. His textbook Marketing Management, coauthored with Kevin Keller, has become the foundational text for marketing courses around the globe. First published in 1976 by Prentice Hall, it is now in its 16th edition. In addition to his many books and university honors, Dr. Kotler has established the annual international World Marketing Summit, now in electronic format to reach audiences worldwide.

The One to One Future: Building Relationships One Customer at a Time was our very first book, and we sent it to the publisher in February 1993 (“paper manuscript only, please; no electronic files allowed”). During the three previous years it took us to write the book, we often referred to it as a work of “business science fiction,” in which we were trying to imagine how businesses would compete once interactive technologies became ubiquitously available. And while we thought the future we were describing was technologically inevitable, we also judged that it was still 10 or 20 years away and would most likely arrive when fiber-optic cables were finally connected to individual homes and offices.

On p. 5 of our book, we said that in the 1:1 future:

products will be increasingly tailored to individual tastes, electronic media will be inexpensively addressed to individual consumers, and many products ordered over the phone will be delivered to the home in eight hours or less. In the 1:1 future businesses will focus less on short-term profits derived from quarterly or annual transaction volumes, and more on the kind of profits that can be realized from long-term customer retention and lifetime values.

We went on to describe some of the social implications of truly ubiquitous, always-on interactivity, suggesting that our vision of the 1:1 future:

holds immense implications for individual privacy, social cohesiveness, and the alienation and fractionalization that could come from the breakdown of mass media. It will change forever how we seek our information, education, and entertainment, and how we pursue our happiness. In addition to the “haves” and “have nots,” new class distinctions will be created between the “theres” and “there nots.” Some people will have jobs that require them to be there—somewhere—while others will be able to work mostly from their homes, without having to be anywhere.

However, while we thought this future was still a decade or two away, the year after our book was published Netscape released its Navigator web browser, the first commercial product that truly allowed businesses to participate in a completely new interactive medium, the World Wide Web. And commercial interest in the World Wide Web grew explosively. There were just 130 websites at the end of 1993, most operated by academic or government entities, but by 1997 there were more than a million, and by 2001 there were nearly 30 million, almost all of which belonged to businesses.¹

These businesses all needed advice, help, answers, and suggestions. They wanted to know what the best policies would be for succeeding in a world where their customers were now just a click away from the competition. Our book took off as webmasters working for companies around the world sought out new strategies and best practices for interacting with their customers one at a time, now that they could. The management guru Tom Peters called The One to One Future the “book of the year” in 1993, and in 1994 BusinessWeek called it the “bible of the new marketing.” In 1995 Inc. magazine put us on its cover, and George Gendron, the magazine's chief editor, said “Peters was wrong. This is not the book of the year. It's not even the book of the decade. It's one of the two or three most important business books ever written.”²

So we kept thinking about all this, and we wrote more books, and we began conducting workshops and giving presentations to businesses, associations, and conferences around the world. We formed a consulting company, Peppers & Rogers Group, all the better to help companies come to grips with the powers and limitations of this new type of marketing. Over the years we have consulted for, spoken with, and advised literally hundreds of companies in more than 60 countries around the world, from Algeria, Argentina, and Bulgaria, to Turkey, the United Kingdom, and Vietnam. We know what works and what doesn't, and we also know what works in some cultures but not so much in others. Moreover, when someone—anyone—comes up with a promising new idea in this discipline, we rapidly hear about it. And then we speak about this new idea, and we write about it.

We created the IDIC framework (identify-differentiate-interact-customize) in the mid-1990s as a part of our consulting methodology. We tested it and refined it during our consulting work for many different companies before it first appeared in print in our 1999 book The One to One Fieldbook: The Complete Toolkit for Implementing a 1to1 Marketing Program, which we wrote with the leader of Peppers & Rogers Group's consulting practice, Bob Dorf. The Fieldbook included checklists, questionnaires, exercises, and self-help tools to guide businesses looking to gain more of the advantages offered by the internet, mobile phones, customer databases, and mass-customization technologies. By 2004 this IDIC framework had clearly shown its merits, so we used it as an organizing principle for the first edition of this textbook, and it remains a highly useful organizing principle today.

As we write these words, companies all over the world are hard at work on their digital transformations, customer initiatives, and customer experience programs in an effort that was largely underway, but has been greatly accelerated by the COVID-19 crisis, and is likely to remain highly active even after the virus is finally gone. McKinsey estimated that e-commerce penetration levels alone increased so dramatically that in just the first three months of the COVID-19 crisis (2Q, 2020), the United States fully realized ten years' worth of e-commerce growth,³ virtually at all once. Online penetration in the U.S. consumer economy has increased by 35%, on average, from the onset of COVID-19 through July 2021,⁴ and figures from around the world show similar jumps. Whether you are contemplating a career in marketing, or your own company is hustling to get its digital act together, or you're simply trying to survive in a digital world where every quarter seems to produce a newly disruptive technology, we hope that the lessons in this revised and updated edition will be invaluable.

We have dramatically increased the emphasis on the financial issues that often confound marketers as they try to justify the business value of a better customer experience that may cost money in the short term. We've also radically reshaped the sections on customer analytics, to empower marketers with the knowledge they need to have intelligent conversations with the quantitative analysts, and to make objective, data-driven decisions without having to write an equation or calculate a standard deviation.

One more thing: In The One to One Future we did make one big prediction that has not come true, at least not yet anyway. Back then, we made this prediction in Chapter 9, which we titled “Make Money Protecting Privacy, Not Threatening It.” If anything, recent experience has shown that there are a number of giant, even monopolistic businesses today that show no intention whatsoever to protect their users' privacy. Indeed, some businesses have become very profitable, even though they were built on the premise that the private, personal data of their users is a commodity to be bought and sold to the highest bidder (quite literally). And we say users in this case because the consumers who use platforms like Facebook, Google, or even LinkedIn are not actual customers at all. Many such social media platforms' customers are the advertisers and other businesses that pay to gain access to users' personal data—data about the products or services a user has looked at, or even about the messages a user has exchanged with friends. As the saying goes, if you think an online product is free, that means you're not really the customer—you're the product.

So in this fourth edition we have also added extensively to our discussion of privacy protection—what it means, how it can happen, how it might occur in the future, what regulations are beginning to enforce it, and so forth. But don't get us wrong. We still think that the ultimate future will be one in which the most successful companies will be trustable—proactively trustworthy. They will want to act in their customers' own interest, because in the long run this will create the most value from each customer. We believe that the moral arc of progress continues to point upward—that, over time, more and more enterprises will find it in their own best interest, not just ethically but financially, to embrace a more socially beneficial purpose and to act in their customers' interest. Moreover, we predict that as more businesses embrace trustability, consumers will show less and less tolerance for privacy-abusing companies, even those that offer their services absolutely free to their users.

In the future, we believe, business executives will strive to treat every customer the way they'd like to be treated themselves, if they were the customer. And we very much hope that you will be one of these future business executives. Enjoy our textbook and let us know what you think at peppersrogers1@gmail.com.

Don Peppers and Martha Rogers Ph.D.
January 2022

We started the research and planning for the first edition of this book in 2001. Our goal was to provide a handbook/textbook for students of the customer-centric movement to focus companies on customers and to build the value of an enterprise by building the value of the customer base. We have made many friends along the way and have had some interesting debates. We can only begin to scratch the surface in naming those who have touched the current revision of this book and helped to shape it into a tool we hope our readers will find useful.

We are indebted to the chorus of contributors and writers whose voices have helped to make this book what it is. As big as this book is, it is not big enough to include formally all the great thinking and contributions of the many academicians and practitioners who wrestle with deeper understanding of how to make companies more successful by serving customers better. We thank all of you, too, as well as all those at dozens of universities who have used earlier editions of the book to teach courses, and all those who have used the book as a reference work to try to make the world a better marketplace. Please keep us posted on your work!

This book has been greatly strengthened by the critiques from some of the most knowledgeable minds in this field, who have taken the time to review this book as well as earlier editions and to share their insights and suggestions with us. This is an enormous undertaking and a huge professional favor, and we owe great thanks to Becky Carroll, Jeff Gilleland, Mary Jo Bitner, James Ward, Ray Burke, Anthony Davidson, Susan Geib, Rashi Glazer, Jim Karrh, Neil Lichtman, Charlotte Mason, Janis McFaul, Ralph Oliva, Phil Pfeifer, Marian Moore, David Reibstein, and Jag Sheth. Thanks to John Deighton, Jon Anton, Devavrat Purohit, and Preyas Desai for additional insights, and we also appreciate the support and input from Mary Gros and Corinna Gilbert. And thanks to Maureen Morrin and to Eric Greenberg, and to John Westman, co-founder of Novellus, Inc. and adjunct professor at the Harvard Extension School and Boston College Carroll School of Management.

Don's class of “Markets of One” at Menlo College in Spring 2021 contributed to our insights on Facebook and trust. Thanks to Dr. Julie Edell Britton, who team-taught the “Managing Customer Value” course at Duke with Martha for many years, and the smart students there, and to Rick Staelin, who has always supported the work toward this textbook and the development of this field. Additional thanks to all of the marketing faculty members at Duke, especially Christine Moorman, Wagner Kamakura, Carl Mela, and Dan Ariely, and all those who have used and promoted the book and its topics.

Many thanks to David Allison, CEO of Valuegraphics; to Mike Betzer, CEO of Hypergiant and formerly an executive at Khoros and Lithium; to Guy Nirpaz, founder and CEO of Totango; to Zeynep Manco, formerly a consultant in the Istanbul office of Peppers & Rogers Group; to Roger McNamee, venture fund executive, early investor in Peppers & Rogers Group, and author of the book Zucked, for his insightful comments on the threat that Facebook poses both to individual privacy and to the future of business competition itself; to Karl Wirth, founder of Evergage (now a part of Salesforce) and author of One-to-One Personalization in the Age of Machine Learning; to Steve White, president and special counsel to CEO at Comcast; to Brooks Bell, founder of Brooks Bell, a digital marketing agency; and to Karen Ganschow, head of data sciences at Aware Super in Australia and formerly General Manager Consumer Marketing and Customer Strategy at National Australia Bank.

Much of this work has been based on the experiences and learning we have gleaned from our clients and the audiences we have been privileged to encounter in our work with Peppers & Rogers Group. Dozens and dozens of the talented folks who have been PRGers over the past years have contributed to our thinking—many more than the ones whose citations appear within this book, and more than we are able to list here. Our clients, our consulting partners and consultants, and our analysts are the ones who demonstrate every day that building a customer-centric company is difficult but achievable and very worthwhile financially. Special thanks go to Hamit Hamutcu, Orkun Oguz, Caglar Gogus, Mounir Ariss, Ozan Bayulgen, Amine Jabali, and Onder Oguzhan for their thinking and support. We also thank Tulay Idil, Bengu Gun, and Aysegul Kuyumcu for research. And to Thomas Schmalzl, Annette Webb, Mila D'Antonio, Elizabeth Glagowski, and Mike Dandrea of the 1to1 Media team, and especially Marji Chimes, our gratitude for a million things and for putting up with us generally. We also appreciate the work Tom Lacki has done for this book and our thinking, as well as the work of Valerie Peck, Alan Pennington, and Deanna Lawrence. Special additional thanks for ideas in the original edition that have survived to this version to Elizabeth Stewart, Tom Shimko, Tom Niehaus, Abby Wheeler, Lisa Hayford-Goodmaster, Lisa Regelman, and many other Peppers & Rogers Group alumni as well as professionals who are the winners of the 1to1 Impact Awards and PRG/1to1 Customer Champions, who are best in class at customer value building.

Our executive editor at John Wiley & Sons, Sheck Cho, has been an enthusiastic supporter of and guide for the project since day one. As always, thanks to our literary agent, Rafe Sagalyn, for his insight and patience.

We thank the many professors and instructors who are teaching the first customer strategy or CRM course at their schools and who have shared their course syllabi and suggestions. By so doing, they have helped us shape what we hope will be a useful book for them, their students, and all our readers who need a ready reference as we all continue the journey toward building stronger, more profitable, and more successful organizations by focusing on growing the value of every customer.

The real secret sauce to finishing the many details has been Amanda Rooker—a truly resourceful researcher and relentlessly encouraging and gifted content editor, who has patiently and capably assisted in winding us through the morass of secondary research and minutiae generated by a project of this scope. Cheerfully and brilliantly finding, handling, resolving, and tracking inconsistencies, errata, and potential pratfalls is just part of her genius. If there are any errors left, they are our fault, not hers.

As ever, we remain grateful to our patient and supportive spouses, Pamela Devenney and Dick Cavett.

Don Peppers and Martha Rogers, Ph.D., are often credited with having created, or at least kickstarted, the whole customer-centric approach to business which became known as customer relationship management (CRM). In their first book together, The One to One Future: Building Relationships One Customer at a Time, they called the concept “one-to-one marketing.” Since then, they have written 10 more books further exploring, elucidating, and expanding the subject (see list at the end of this section).

Over time, the discipline has evolved, new terminologies have been created, and many of the practices Peppers and Rogers included as elements of one-to-one marketing would today be considered to be part of the customer-experience-management discipline. In the B2B space they would be considered part of the account-based marketing (ABM) or customer success management disciplines.

In 1993 they founded the Peppers & Rogers Group, which became a leading customer-centric management consulting firm with offices and clients on six continents. In 2013 they were inducted into the Direct Marketing Association Hall of Fame, and in 2016 they were jointly ranked by Satmetrix (now a unit of NICE) as the world's number-one most influential authorities on customer experience management.

Much sought after as public speakers, Peppers and Rogers have delivered talks or workshops in about 60 countries around the world. Whenever they speak, they make it a point to tailor and adapt their messaging for companies in virtually every business category imaginable. Today, they have once again joined forces to form CX Speakers, a business exclusively designed to deliver keynote presentations, instruction, workshops, and thought-leadership consulting focused exclusively on the customer experience and all its related topics, which range from digital technologies, disruption, and innovation to customer metrics, social selling, customer success, customer advocacy, trust, and corporate culture.

Prior to his career as an authority on customer-centric competition, Don Peppers served as the CEO of a top-20 direct marketing agency, and his book Life's a Pitch: Then You Buy (1995) chronicles his exploits as a celebrated new-business rainmaker in the advertising industry. He holds a B.S. in astronautical engineering from the US Air Force Academy and a master's in public affairs from Princeton University's School of Public and International Affairs. He also has a popular voice in business media and is LinkedIn's most widely followed authority on customer experience, with more than 300,000 followers.

Martha Rogers is the founder of Trustability Metrix, a firm designed to help companies understand how to measure and improve their levels of trust by customers, employees, and business partners. After a career in advertising copywriting and management, Rogers has taught at several universities, most recently as an adjunct professor at the Fuqua School of Business at Duke University, where she codirected the Teradata Center for Customer Strategy. Rogers has been widely published in academic and trade journals, including Harvard Business Review, Journal of Advertising Research, Journal of Public Policy and Marketing, and Journal of Applied Psychology. She has been named International Sales and Marketing Executives' Educator of the Year. Rogers earned her Ph.D. at the University of Tennessee as a Bickel Fellow.

Books by Don Peppers and Martha Rogers, Ph.D:

• The One to One Future: Building Relationships One Customer at a Time (Doubleday, 1993).
  • Tom Peters: “Book of the Year” (1993)
  • BusinessWeek: “Bible of the new marketing” (1994)
  • Inc. Magazine: “One of the two or three most important business books ever written” (1995)
• Enterprise One to One: Tools for Competing in the Interactive Age (Doubleday, 1997).
  • Wall Street Journal 5-Star Rating
• The One to One Fieldbook: The Complete Toolkit for Implementing a 1 to 1 Marketing Program (Doubleday, 1999), coauthored with Bob Dorf.
• The One to One Manager: Real-World Lessons in Customer Relationship Management (Doubleday, 1999).
• One to One B2B: Customer Development Strategies for the Business-to-Business World (Doubleday, 2001).
  • New York Times Business Best Seller
• Managing Customer Relationships: A Strategic Framework (Wiley, 2011).
• Return on Customer: Creating Maximum Value from Your Scarcest Resource (Doubleday, 2005).
  • One of Fast Company's “15 Most Important Reads” of 2005
  • One of Fast Company's “25 Best Business Books” in 2007
• Rules to Break & Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism (Wiley, 2008).
  • Inaugural title in Microsoft's “Executive Leadership Series”
• Managing Customer Relationships: A Strategic Framework, Second Edition (Wiley, 2011).
• Extreme Trust: Honesty as a Competitive Advantage (Penguin, 2012).
• Managing Customer Experience and Relationships: A Strategic Framework, Third Edition (Wiley, 2016).
• Extreme Trust: Turning Proactive Honesty and Flawless Execution into Long-Term Profits (revised and updated Penguin Paperback, 2016).

Books by Don Peppers:

• Life's a Pitch: Then You Buy (Doubleday, 1995).
• Customer Experience: What, How, and Why Now (BookBaby, 2016).