The working vocabulary of negotiated commerce.

Attrition Migration Tracking (AMT) is the methodology that classifies every customer into one of The Six Portfolios by comparing two rolling 12-month windows of purchase behavior (P1 and P2) and applying quintile scoring within each portfolio. AMT was engineered 25 years ago for retailers managing $1B+ customer files and remains the most operationally useful customer-classification technique available.

AUR (Average Unit Retail) is Gross Sales divided by gross items sold — the average selling price per item across the file at posted prices, before any discounts. It is the cleanest measure of pricing strategy because it isolates the operator's posted-price decisions from the promotional behavior that affects realized prices.

Average Settle Price is NOR Sales divided by gross items sold — the post-discount realized price per item across the file. It is the honest counterpart to AUR, revealing what customers actually paid rather than what the store asked for. The gap between AUR and Average Settle Price is the effective Discount Rate at the item level.

Cancel Rate is the share of NOR Sales lost to cancellations before fulfillment — items removed from an order by the customer or shop after payment but before shipping. It is an emerging Key Measure that has grown in importance as DTC adopted post-purchase windows, abandoned-cart recovery flows, and fulfillment delays. Cancel Rate signals payment, intent, and operational issues that Return Rate cannot.

Category Indexing is a customer-level scoring technique that compares an individual customer's spend in a category against the average customer's spend in the same category, expressed as an index where 100 equals average. A customer indexing at 250 in a category is spending 2.5x the average customer's spend in that category; a customer at 0 has not purchased in it at all. The continuous, relative score reveals cross-sell gaps and category intensities that binary purchase flags cannot see.

Customer Portfolio Management (CPM) is the discipline of classifying every customer on file into one of six behavioral states — New, Reactivated, Growth, Stable, Declining, Defected — and managing the movement between them. CPM treats the customer file as a portfolio of distinct audiences rather than a single average, and prescribes a different offer mechanism for each state.

The Declining Portfolio is the set of customers who purchased in both P1 (current 12 months) and P2 (prior 12 months) and whose quintile rank dropped from P2 to P1. Declining customers are still buying but spending less than they were — and they will defect next year if the movement isn't reversed. This is the portfolio that customer-generated offers and negotiated commerce were built to address.

The Defected Portfolio is the set of customers who purchased in P2 (13–24 months ago) but did not purchase in P1 (current 12 months). They shopped last year and have not this year. Defected is the hardest portfolio to recover, but the one that reveals the most about why customers leave. Prior-period quintile rank is preserved so operators can prioritize recovery investment by historical value.

Discount Rate is total discounts divided by Gross Sales — the share of posted-price revenue forfeited to promotions, customer-generated offers, and discount activity. It measures promotional discipline and is the metric that directly tests whether the Discount Allowance is correctly funded. A rising Discount Rate without a corresponding lift in volume signals margin compression.

Gross Sales is the sum of item selling prices multiplied by units purchased, before any discounts, returns, or cancellations. It represents the maximum revenue the business could have collected if every customer paid full price and kept every unit. Gross Sales is the starting point for the three-layer sales reporting that produces NOR Sales and Net Sales.

The Growth Portfolio is the set of customers who purchased in both P1 (current 12 months) and P2 (prior 12 months) and whose quintile rank improved from P2 to P1. These customers are increasing their commitment to the brand at posted price. The Growth Portfolio is the engine of organic file expansion — and the portfolio operators most commonly mismanage by discounting customers who are already buying more.

IPT (Items Per Transaction) is Net Items divided by total orders in the period — the average number of distinct SKUs purchased per transaction. IPT measures basket breadth (how many different products), distinct from UPT which measures basket volume (how many total units). IPT is the metric most directly informed by CGO basket-building strategy.

Key Measures are the foundational metrics used in Customer Portfolio Management and ecommerce reporting. They establish a precise vocabulary across three sales layers (Gross, NOR, Net) and three quantity layers (Items, Units, Orders), producing the diagnostic measures — AOV, AUR, UPT, Discount Rate, Return Rate, Cancel Rate — that reveal portfolio health and inform offer strategy.

Net AOV is Net Sales divided by total orders in the period — the average order value calculated after discounts, returns, and cancellations have been removed. It is the AOV measure that flows to the P&L and the only AOV that survives every reduction in the sales hierarchy. Two related measures (Gross AOV and NOR AOV) exist but answer different questions.

Net Items is gross items less returned items and cancelled items — the count of distinct SKUs customers actually kept after every reduction. It is the foundational quantity measure that feeds IPT (items per transaction) and serves as the item-level counterpart to Net Units. Items are distinct SKUs; multiple units of the same SKU count as one item.

Net Sales is NOR Sales less returns and cancellations — the revenue the business actually retained after all reductions. It is the bottom of the three-layer sales hierarchy and the number that flows to the P&L. Net Sales is what the operator can spend, save, or reinvest.

Net Units is gross units less returned units and cancelled units — the total quantity of all SKUs that customers actually kept after every reduction. It is the volume counterpart to Net Items and feeds UPT (units per transaction) and UPI (units per item). Units are quantities; multiple units of the same SKU each count toward the total.

The New Portfolio is the set of customers whose first-ever purchase falls within the current 12-month period (P1) with no prior history in earlier periods. New is the entry point to the customer file and the portfolio whose second-order conversion rate determines whether the brand grows or churns. Each customer in the New Portfolio is quintiled by P1 net sales to separate high-value first-purchasers from low-value ones.

NOR Sales (Net of Returns) is Gross Sales less discounts, but before returns and cancellations. It is the middle layer of the three-layer sales hierarchy and the cleanest measure of marketing performance — because marketing drives the discounted purchase decision but does not cause returns. NOR Sales isolates what marketing earned from what fulfillment or product fit lost.

The Reactivated Portfolio is the set of customers with a purchase in P1 (current 12 months) and P3 (24–36 months ago) but no purchase in P2 (13–24 months). These are customers who went dark and came back on their own initiative. Reactivated is often the highest-margin recovery opportunity in the file because the customer self-selected to return.

Return Rate is the share of NOR Sales lost to returns — the post-purchase leak measure that reveals fit, quality, and product-market issues. Unlike Discount Rate, which is a marketing decision, Return Rate is largely an operational and product signal. It is the metric that separates what marketing earned from what fulfillment, fit, or quality lost.

Settle Price is the price at which a buyer's offer and a seller's accept-line meet in a negotiated commerce transaction. It is the SKU-level outcome of the negotiation system and a direct measurement of customer willingness-to-pay.

The Stable Portfolio is the set of customers who purchased in both P1 (current 12 months) and P2 (prior 12 months) and whose quintile rank remained unchanged. Stable is usually the largest portfolio by customer count and the base of the customer file. The strategic risk is silent erosion — Stable customers drift into Declining quarter by quarter unless retention work keeps them engaged.

The Six Portfolios are the behavioral states that classify every customer on a retail or DTC file: New, Reactivated, Growth, Stable, Declining, and Defected. Each customer occupies exactly one portfolio at any given time, scored by quintile within the portfolio, and each portfolio responds to a different offer mechanism.

UPI (Units Per Item) is Net Units divided by Net Items — the average quantity purchased per distinct SKU in an order. UPI of 1.0 means customers buy one of each item they purchase; UPI of 2.0 means they buy two of each. The depth-of-purchase metric reveals volume-buying behavior that UPT alone cannot.

UPT (Units Per Transaction) is Net Units divided by total orders in the period — the average unit count per order. It measures the unit-volume side of basket size, distinct from IPT (items per transaction) which measures the distinct-SKU side. UPT moves when customers buy more of the same product; IPT moves when they buy more different products.

Capture Rate is the percentage of paid visitors who give an ecommerce store permission to talk to them again — through email signup, account creation, or add-to-cart. It is Stage 2 of the Yield Ladder. Most stores in the $100K–$5M band lose 60% or more of their potential customer yield here.

Channel-Stage Fit is whether an acquisition channel is structurally capable of returning a store's target yield at its current revenue stage. It is the diagnostic question that sits before Stage 1 (Spend) of the Yield Ladder. Most stores under $1M revenue are on the wrong channel mix for their stage, not the wrong budget.

Customer Yield is the return a store earns on every dollar spent acquiring a customer, measured across five stages: Spend, Capture, Convert, Repeat, and Portfolio. Unlike CAC — a single output number — yield is diagnostic. It tells you which stage of your acquisition system is leaking.

Repeat Rate is the percentage of first-order ecommerce buyers who place a second order within a defined window — typically 60 or 90 days. It is Stage 4 of the Yield Ladder. A 10-point gain (e.g., 28% to 38%) roughly halves effective CAC over six months without changing acquisition spend.

The Yield Ladder is a 5-stage diagnostic model for ecommerce customer acquisition. The stages, in order, are: Spend, Capture, Convert, Repeat, and Portfolio. Reading top to bottom, the lowest broken stage is your bottleneck. Fixes upstream of a broken stage don't compound — they leak.

The Financing Allowance is the markup buffer that absorbs the cost of capital embedded in inventory between purchase and sale. It is Allowance 2 of The Five Allowances and has grown materially since interest rates increased after 2021.

The Market Adjustment Allowance is the markup buffer reserved for non-promotional price flex: competitive repricing, MAP enforcement gaps, currency moves, liquidation pressure, and AI-agent negotiation pressure.

Markup Performance is the discipline of pricing retail products with a defended floor — COGS plus Profit Markup — and a flex zone above it built from The Five Allowances: Shrink, Financing, Shipping, Discounts, and Market Adjustment.

Profit Markup is the portion of retail price above COGS that funds Variable OpEx, Fixed OpEx, and Planned Net Profit. Together with COGS, it forms the defended floor of retail pricing.

The Shipping Allowance is the markup buffer that absorbs inbound freight, outbound fulfillment, and free-shipping promotions. It is Allowance 3 of The Five Allowances and the most underestimated pricing buffer in ecommerce.

The Shrink Allowance is the markup buffer that absorbs inventory loss between receipt and sale — damage, miscounts, return fraud, fulfillment errors, and in physical retail, theft. It is the first of The Five Allowances and the most stable allowance in the framework.

The Five Allowances are the priced-in buffers that sit above the defended price floor and absorb the operational volatility of running a retail business: Shrink, Financing, Shipping, Discounts, and Market Adjustment. They are the mechanism that lets retail price flex — through promotions, free shipping, competitive moves, and customer-generated offers — without eating Profit Markup.