February 22, 2022
6 mins to read
When talking about business ROI, we often don’t include the value of UX design. UX can influence the customer's overall experience with your app and your whole business. This means the better the user experience, the more engagement will be, thereby contributing to your bottom line.
People involved in tracking business metrics view user satisfaction differently, often treating it as one of the so-called “Vanity metrics,” i.e., metrics that look nice on paper but do not say anything about the value of the business. Nothing could be further from the truth — user satisfaction and other effects of UX designer work may affect the company’s state.
Jared Spool said each organization cares about 5 things:
Increasing new business/market share
Increasing revenue from existing customers
Increasing shareholder value
Improving UX is reflected in the optimization or increase of the company’s revenues. For example, thanks to an improved shopping path, we can count on a higher conversion. Regular UX testing with user groups makes us create a solution that responds to their problems. And how efficiently we solve the problem of the target user leaves the competition far behind and provides us with crowds of returning customers (e-commerce) or counteracts the churn rate (applications).
UX efforts result in:
Increased customer satisfaction
Increased conversion rates
Lower support cost
Reduced development costs/waste
Increased customer loyalty and retention
Improved usability, or ease of use of your products
Reduced risk of building the wrong product
All these effects have business value and directly or indirectly increase your business’s bottom line.
How to calculate ROI
There are multiple methods for calculating ROI. The most common is net income divided by the total cost of the investment or ROI = Net income / Cost of investment x 100.
ROI from UX also means reducing errors, saving costs related to maintaining a website, application, or store, and increasing the efficiency of sales teams and customer support. UX uses design processes that put the target user and his problems at the center. UX designers try to design a digital product that will meet users’ expectations, so designers conduct interviews and UX tests, allowing them to work out the most satisfactory solution. By staying in touch with users, they discover issues that need to be addressed to give the user the best possible experience. By observing how users use the product, e.g., by tracking KPI for UX or conducting UX tests, they can save time and resources devoted to product development and customer service.
Some organizations omit UX when creating a product from the beginning by developers, using ready-made libraries to build the interface, or only working with UI designers — they think they care about UX. Not a wise decision.
ROI of UX design explanation
ROI is a financial metric used to calculate any investment’s value. For example, if you’re running an e-commerce business and purchase an e-book. You will compare the cost of that e-book to the profit it is bringing to your business. This calculation will give you understanding of whether the plugin is worth the investment.
The ROI of UX design is not easy to calculate. It will not be wrong to say that calculating the exact return on investment of UX design is nearly impossible. There are specific challenges because UX ROI statistics calculations become complicated for design and designers.
It’s not just about money
The most important thing is that the ROI of UX is not just about direct money-making processes. Since ROI deals mainly in monetary terms, creating an equivalent UX ROI calculator is difficult.
When calculating the ROI of UX design, you need to look at the bigger picture. To understand UX value is to switch the focus from money to the customer experience value. This can be seen by the time people spend on your mobile or app or the loyalty they show by sticking to your product or service.
When creating a UX Business Case, you can’t just look at the momentary, short-term impact of a particular design process or practice. UX is a time-consuming process that requires many iterations. Additionally, to see the actual value of a project, it is necessary to give that product or service some time in the marketplace.
One example of UX ROI, in the long run, is customer loyalty. For example, Apple has strong customer loyalty, so they still stick to the company even if the product does not meet their expectations. This is where we can see how the long-term effects of UX design pay off.
Accurate calculations are impossible.
Another essential aspect to consider when calculating the potential ROI of UX design is that it is impossible to find the exact statistical profit value. The main reason is that the statistical value of a project cannot be calculated until the product or service is launched and attracts some customers.
When working on a project, especially for an innovative product, there is hardly any data or market research to calculate a realistic ROI value from UX research. Therefore, it is essential to be flexible when calculating and evaluating a project’s ROI.
The above-mentioned factors indicate that it is difficult to calculate ROI from user or usability research. However, this doesn’t mean that UX design doesn’t add monetary value or profit to your business.
The value of the UX project
Investing in UX is crucial not only for modern organizations; it is inevitable. Almost all leading companies have dedicated people working on better design and providing their recipients with a better experience. These organizations are making millions, indicating the monetary value of UX design.
Metrics for ROI in UX design
Some of the essential metrics for UX design include:
Conversion rate is a very important metric in online and offline environments. It is important to analyze when someone interacts with your design and/or gets to know about your product or service and how much time and effort it takes for them to become your customers. You can look different at these metrics. Determine the percentage of people who become your customers after interacting with your design.
The dropoff rate refers to the percentage of potential customers who leave your product or service during conversion. This shows that there is something that the audience is not getting or that they expect something different from your product or service. Measuring the dropoff rate can help you understand your potential customer’s pain points.
User satisfaction is one of the most metrics regarding the ROI of UX design. User satisfaction can be measured by conducting usability tests and surveys about the performance of a product or service. This not only helps in understanding users’ perceptions about your design but also clarifies their expectations from you in the future.
Retention rate is another metric to focus on in UX design. Conducting frequent surveys and analyzing the percentage of loyal users to your products and services is an excellent way to understand your position in the market. Your retention rate also tells you how good or bad you’re doing concerning your competitors.
The user experience is often misunderstood and questioned regarding its added value and how it contributes to the organization’s profitability. UX design holds great promise in creating a better return on investment. Understanding that the ROI calculations for UX design do not follow generally accepted standards is essential. There are several factors to consider when assessing the value of a project. The most important of these are user satisfaction and the project's long-term effects. Organizations must ensure that customer needs are prioritized. This will not only help you attract loyal customers but will also bring you monetary benefits.
Alex Szczurek • February 22, 2023