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Feb 18 2009

We are living through historic times, with a new president and administration facing a wide range of challenges, not least of which is how to best shore up an increasingly fragile and volatile domestic economy. As decisions are made regarding what policies should be implemented, the Obama administration will begin to examine the impact of their options on many levels. Understanding the best balance between short-term results and long-term value is something businesses do as a matter of course, but which poses unique challenges for non-profit and government organizations.

Corporations, with the main goal of creating economic value, use metrics such as ROI to evaluate the financial impact of initiatives – both short and long term. More specifically, when companies invest in customer strategies to improve retention, increase share of wallet or attract more of the right type of prospects, the impact can be measured in terms of increased revenue and profits resulting from better retention of valuable customers or success in up-selling or cross-selling to existing customers. Such measurement is sometimes called ROC, or return on customer (a term coined by Peppers & Rogers Group).

The challenge of evaluating the value derived from a policy change or new program initiated by a government agency or non-profit is more difficult in that, success is not measured in terms of increased revenue or corresponding profits. Rather, agencies such as the Departments of Education or Environment are tasked with providing services to the general public and/or specific constituent groups. They also often have a mandate to shape certain behaviors, i.e. establishing what individuals or corporations can or cannot do. Their priority is not to increase the bottom line (with the exception of the IRS).

In their book, “Return on Customer,” Don Peppers and Martha Rogers suggest that even though the resulting benefit is harder to measure, there is value that can be derived from government agencies and non-profits developing a better understanding their constituents’ experience. The extension of such an approach would result in constituents’ needs being met more frequently. Although improvements resulting from development and application of a customer strategy would, most likely, not be measured by a corresponding increase in revenue, the benefit could be tracked in terms of lower costs resulting from more streamlined and cost-effective interactions. In other words…”it might cost less for a government agency to run a more constituent-friendly organization.”

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