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Digital public services: Does cost per transaction matter?

With the increasing pressure on public sector organisations to cut spending, it’s no surprise that one of the main drivers behind the digital by default initiative is cost-savings.

Public sector organisations often measure the cost of providing their service in terms of “transactions” – each individual interaction between the service user and the service provider. For example, let’s say someone calls their local council to find out how to apply for a service they need. The staff member points them to the appropriate online form, and the call ends – that’s one transaction.

And these transactions – over the phone, face-to-face, or by post – can be expensive, which is what makes digital services so attractive. In the example above, pointing the user to an online form avoids the need for them to come into the council office and fill it out in person, which means a cheaper transaction and (in theory) money saved.

Cost Comparison by Channel

But is this “cost per transaction” approach really showing the whole picture?

Suppose the user above fills out the form online and discovers halfway through that they’re missing some information. They ring up the council office again for assistance (another transaction), are pointed to a different department (another transaction) and are asked to fill out a different form to get the information they need. Once they’ve submitted the original form, they call up a few days later to check the progress.

By the time the user has accomplished their initial goal, they’ve completed 6 individual transactions with various departments. To the individual departments, everything looks fine – online forms were completed in favour of paper ones. But in reality these transactions add up, meaning the overall cost to satisfy the user’s need is quite high.

This is an example of failure demand – increased interactions resulting from a failure to meet the user’s actual need the first time around. This is costly not only to the service provider, but also to the user in terms of time and effort.

To find out more about how service providers are measuring these costs, we conducted a survey of public sector professionals from a range of departments.

How do service providers measure cost?Our research revealed that more than half (54%) of service providers measure cost based on individual transactions, rather than completed tasks (e.g. a form fully processed or a query resolved). And only 29% of our respondents said they considered the cost to the user when evaluating changes to their service.

So how can service providers take cost to the user into account, to reduce failure demand?

1. Know your users.
The first step is understanding exactly what people are trying to accomplish when using your service, and what obstacles they’ll face getting there. You’ll likely find that most of your users fit into three or four different types, or personas. Consider how the people in these personas will interact with your online services and try to anticipate their needs.

2. Keep it simple.
Make sure instructions are clear and the path that users need to follow is straightforward. Think in terms of the end goal the user is trying to achieve, how you can guide them through from beginning to end. By helping users understand right away what they’ll need to do to complete their task, you can reduce the likelihood that they’ll need to call or come in.

3. Make it personal.
Use what you know about each person to proactively make them aware of other services and information that might be useful – before they need to call. For example, simple payment / renewal reminders sent via email or SMS can reduce late payments and the need for future follow-ups.
Designing services to reduce cost to the user not only delivers a better experience, but will ultimately cut costs for the service provider as well. Implemented correctly, digital is a great way to do this, allowing for simple, personalised self-service through more cost-effective channels.

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