Once upon a time, companies who measured the profit coming from each transaction, product line, or customer segment were considered to be first in class. Over time this best practice of measuring profitability has evolved from focusing on individual transactions to focusing on the profitability of the total customer experience. Unfortunately, some organizations have not adapted to this new approach.
In today’s highly connected world, customers are seeking to build relationships with brands, and they do not view marketing activities and transactions independently. Each of these are just different types of touch points that a customer has with a brand, and the customer does not really distinguish between them. For example, a great purchase experience is a superior marketing tactic that will drive future purchases. For the customer, the overall experience that he has with a brand (which includes all types of touch points) impacts his future relationship (and likelihood of additional purchases) with the brand.
Since customers are evaluating a brand based on their total experience, companies should also focus on this total experience. From a measurement and analysis standpoint, instead of trying to maximize profits for any given product line or transaction type, companies should try to maximize profitability over their total customer experience. As a result, this might mean that a company should lower its price (and profitability) on some products that introduce a customer to the brand in order to maximize the total number of products that a customer purchases over the lifetime of the relationship with the brand. It also might mean that a company should heavily invest in certain marketing programs with existing loyal customers, if it will help customers recommend the brand to others.
The key to successfully maximizing the value of the total brand experience is understanding the role each transaction and touch point plays in the development of the experience. Once a company stops focusing only on the sale, but instead on the long term relationship, it will unlock long term profit potential.