Solid as a ROC

Ive found companies, especially large ones with tons of employees and ongoing business initiatives, love to assign metrics. But Ive never been able to jump wholeheartedly on the metric bandwagon. Metrics present a neat solution, but life rarely is that tidy.

For instance, in publishing, I easily can assign metrics to how many articles a writer produces, but what about their quality? Thats a harder one, yet in truth, quality is at least as important as quantity, if not more, in producing a successful publication. Readers pay attention to informative, well-produced material, not abundant junk.

For the last several years, the industry has had a razor-sharp focus on the metric of return on investmentthe strategy was to spend in order to cut expenses and raise profitability. But does this equate to a successful, growing business or just one that saves its pennies to stay afloat?

Insurers currently seem to be contemplating this very question (see The Case Against ROI, p. 12). While this approach may have had some merit in recent tougher times, it appears to be getting out of step. The focus today is on growth, and how does a business grow? By serving its customers.

So instead of ROI, what about return on customer (ROC)? This concept will be the title and focus of a book scheduled to come out in March of next year from Doubleday. The authors, Don Peppers and Martha Rogers, who have published other books and founded their management consulting firm a little more than 10 years ago, coined the phrase one-to-one marketing. In their most recent offering, according to the publisher, they focus on assessing customer equity and taking action in every facet of the company to increase that equity, including technology investment.

In a column on ROC in CMO magazine, Peppers and Rogers say: A business must make the most of its scarce resourcecustomersin the same way a farmer must make the most of his scarce resourceland. Just as farmers must resist the temptation to increase profits in a given year by foregoing conservation, so must businesses resist the short-term temptations raised by the pending fourth quarter. Should they throw out that much-needed call-center improvement, or that better training module, in order to make their numbers?

You rightly may be thinking this is just another metric. But my purpose here is not to advocate or criticize this particular metric. Rather, Im talking about insurers thinking in terms of a quality experience for the customer, just like a quality experience for a reader, and the technology that will provide one. Quantifying that experience is a far less vital concern than delivering it throughout the business process. Even Peppers and Rogers in their column agree: Perhaps the biggest single implication has less to do with calculating and using the metric and more to do with the type of culture a company must cultivate if it wants to maximize ROC, rather than simply maximizing current-period profits. So, while its an overstatement to say ROI is dead, it may be more apt for enduring profitability to say, Long live the customer.

Sharon S. Schwartzman
Editor-in-Chief