Do we need to estimate the effect the design has on your business? Is it even possible to gauge its impact on your product or service? With the growing importance of the internet and gadgets in our lives, companies pay more attention to the look and feel of their proposition. Here, the question, ‘How to measure the value of UX design?’, arises.
Design, as any other business process, can be translated into numbers. For that, companies can employ design ROI. This metric covers revenue and is helping in risk prevention and cost optimization.
The attitude to ROI of design will differ from company to company. No wonder, since the general attitude to the design process also varies. This article will discuss different types of approaches to design ROI and how they affect measuring the ROI of user experience.
"Measuring the ROI of UX research and design turned into a 100% increase in productivity and $30 million in savings in the first year"
Is it worth it? Several cases prove it is. For General Electric, one of the leading electric companies, measuring the ROI of UX research and design turned into a 100% increase in productivity and $30 million in savings in the first year. For Continental Office, the traffic rate increased by 103%. It won't take you long to figure out that the ROI evaluation for UX design is vital for the overall success of your business.
Below, we are going to outline:
- What the return on investment of UX design is
- Reasons to measure it
- Ways to calculate design ROI
- When to start measuring return on investment
Also, we are going to share with you our case on how measuring ROI affected the business results.
What is the ROI of UX?
ROI of UX, as return on investment in general, is the ratio between the money spent and earned. It helps to determine the profitability of solutions and develop a strategy for growth.
When we decide to calculate the ROI of user experience, the main difficulty we come across is the need to calculate things that are not obvious. Of course, any design team member can make a professional assessment of a given design. But in many cases, this evaluation is about the creative, no financial side of things.
Moreover, the McKinsey report on The Business Value of Design states that less than 5% of the leaders of the enterprise, medium, and small businesses can make objective design decisions.
This problem is caused by the fact that user experience is about feeling good when interacting with the design. Users may feel good because of various factors. And here, the UX research comes into play.
In the general process of measuring ROI, the research helps determine the points worth measuring. And later on, to define what to change to make the results better. Next, it’s important to perform an analysis of improvements. Calculate ROI once again to evaluate the changes.
We would say that measurement of UX effectiveness is a process that never ends. But when you stop doing that, you cannot get a data-driven estimation of the work the design team does and the revenue it brings to the company.
Why You Should Calculate ROI for UX
We have already mentioned that the approach to design is different in various companies. In The New Design Frontier from InVision, five types with different approaches to design are pointed out:
- Producers 41% - the companies where the design is only about aesthetics
- Connectors 21% - the companies that use design as a workshop
- Architects 21% - the companies where the design has certain standards
- Scientists 12% - the companies that experiment and conduct testing of the design
- Visionaries 5% - the companies where the design is one of the business processes
Here, we don’t compare different approaches to the design. Still, they impact the methods of calculating the design ROI.
Thus, for the Visionaries, designer work has a 92% of the proven impact on revenue. Producers have only 22%.
Still, regardless of the approach to the design, all companies agree that it is crucial to calculate return on investment. But what are the main arguments?
Costs reduction
Bad decisions can cost a lot. For example, we’ve launched a website. However, users are not satisfied with the UX. They keep calling to understand how to pay for the product or cannot handle the registration process. Your support team keeps processing various tickets and explains to every user what exactly they should do to get what they need.
A company can avoid such a situation by preventing the problem. If we know that the website may have problems with certain pages, we either fix them or spend more on solving issues with clients. Obviously, you would choose the first option.
Conversion rate optimization
A crucial point for every business is turning prospects into leads. However, sometimes the visitors just do not click the button on your website. You keep spending money on advertisements and attracting visitors, but all in vain.
The great news is that you can fix it. By calculating the ROI of UX, you uncover the points that you need to focus your efforts on.
Sales increase
If your products do not bring you money, your business won’t stay long on the market. With UX ROI, you can expect the income that design brings you. And what’s more important: you understand when exactly something goes wrong, and you need to rethink your design.
Team performance improvement
The decisions that you make in design can save your time. But they can also make your team work even more. For example, if you try to fix the mistakes randomly, the developers spend hours. But as a result, they need to spend even more hours, as these fixes have caused more problems.
When you have a system and understand how design affects your users’ behavior, you save the time of your team. And you benefit from their performance.
Raising LTV
Attracting new clients may cost you a fortune. Of course, new customers are important for business development, but there are other things that can also bring your money. User-centered design can help you with increasing the lifetime value of your customers. If they are satisfied with the experience of making the first purchase, they are more likely to make the second one. When the retention level is high, the LTV is also high, therefore ROI of UX gets bigger.
How to Calculate the ROI of UX
So how to measure the ROI of UX? To do this, you need to know a simple formula:
Here, we also need to understand what Net Return on Investment and Cost of Investment are.
Net Return on Investment stands for the general results of the money you’ve spent on the solution you’ve employed. For Net Return on Investment, you need to consider development costs, the money you spend on customer service, increase in sales or Net Promoter Score, new customers, improvement of brand image.
Cost of Investment includes salaries, recruitment, and equipment costs. For the ROI of UX, it is the money you spend on the design team.
Also, calculating the ROI of UX is impossible without knowing the basic UX ROI metrics. There are five of them:
- Conversion rate
- Drop-off rate
- Single task
- Single usability
- Operational costs
Let’s dwell upon each of the ROI metrics of UX.
Conversion rate
Previously, we have mentioned that we can improve the conversion rate when we measure the ROI of UX design services. Therefore, we may use this metric in our research.
Conversion rate determines the % of users who have performed the desired action. With the help of UX, you can improve it.
Drop-off rate
This is the number of users you lose at any stage of the sales funnel. For example, a user has already added products to the cart but left the website or app.
To understand your current drop-off rate, use Hotjar and Google Analytics.
Single task
Do you know exactly how much time your sales or support team members spend on closing tasks? By measuring time, it’s possible to reduce the time needed to complete the tasks. It will help any organization to save time and spend it on earning money.
Single usability
If the usability score of your website is low, your users will never be satisfied. Single usability metric includes task completion rates, time spent on tasks, count of satisfaction and error.
Besides, the single usability metric (SUM) also affects the conversion rate. You enjoy a low bounce rate. Satisfaction from using your product along with completion rate is high, and more and more users become your clients. Thus, when you improve SUM, you improve conversion rate as well.
Operational costs
How much money would you spend on support or development of a poorly designed website? Have you ever wondered how to reduce these costs? When you measure UX design ROI, you also can directly affect the overall operational costs.
Still, the list of the metrics of measuring UX design is huge. We’ve listed only 5 of the most popular. Check this list by Nielsen Norman Group. They’ve included the full set of options for calculating ROI.
How to Start Measuring the ROI of UX design?
Measuring the ROI of UX design may be tricky. It requires four steps. However, in many cases, it is not limited by them:
1. Choosing the right UX metric
Before you start calculating the ROI of UX, you need to determine the metric for the calculation. For example, if you want to reduce the operational costs, the conversion rate will be useless for you.
Sometimes, we cannot even predict how much our mistakes may cost. Are you sure you need to get every visitor register on your website? In many cases, you just need them to make a purchase.
When the registration is obligatory (and when the registration form appears right at the moment you are ready to pay!), it’s more likely you will quit the website.
Sales increase was one of the e-store basic metrics. After thorough research and implemented changes, the income got up to $300,000,000 per year. No secrets in this success story. Now customers can make purchases without getting registered.
2. Understanding the right time to measure ROI of UX
It’s always a good idea to start measuring the ROI of UX when you have at least some financial history. In this way, it will be easier for you to define what works for your business and what is useless in achieving your business goals.
Additionally, calculating ROI is necessary when:
- the revenue is not as high as expected (In most cases, we turn ROI into money. However, some businesses choose other KPIs. For example, you may choose the lifetime value of employee productivity. Everything depends on your intentions.
- Nielsen Norman Group states that ‘calculating the ROI of UX is more about demonstrating that design that improves the customer experience has a positive impact on our business goals – whatever those goals might be’.r it started to drop)
- you understand that you have some UX issues and want to know how much do they cost your business
- the results of your researches demonstrate that the behavioral patterns of your visitors are changing
3. Setting KPI
In most cases, we turn ROI into money. However, some businesses choose other KPIs. For example, you may choose the lifetime value of employee productivity. Everything depends on your intentions.
Nielsen Norman Group states that ‘calculating the ROI of UX is more about demonstrating that design that improves the customer experience has a positive impact on our business goals – whatever those goals might be’.
4. Converting from metrics to KPI
The calculations are complicated. You need to know the conversion ratio, and it’s better to ask for help. The team of professionals will explain how to calculate the ROI of UX design and will do everything for you so that you get the correct numbers. We at Arounda believe that half of success in measuring the ROI of UX lies in choosing the team that understands your needs and struggles to help you reach business goals.
We may suppose that when Stripe decided to redesign the customer page, their main intention was to satisfy users with easy access and simplified processes. Obviously, it turned into higher income.
A great example of measuring ROI of UX is the cost reduction of the customer tickets after a redesign.
To understand cost reduction, we need to know Ticket reduction and cost for one ticket. To define the ticket reduction, it's necessary to subtract the number of tickets after redesigning the number of tickets before the redesign. The number that we get is ticket reduction.
The next step is to multiply this figure by the cost for every ticket.
Imagine the situation: we have 10,000 tickets before the redesign, 2,000 tickets after the redesign. According to the formula above, our ticket reduction is 8,000.
If every ticket's cost is $5, we get a cost reduction of $40,000 every month, in a year, the cost reduction will be $480,000.
5. Making relevant reports
Sometimes, the numbers look fantastically big for you, but they are lower than you could get. Moreover, they are lower than average on the market. It’s vital to make a report that will explain the numbers you have and provide you with hints on how to fix these numbers. Also, the report should contain the information on sources that generated those numbers.
The report will not provide you with the information on money sums you can earn by following the hints but will give you the estimates. You can use them to rebuild your strategy or introduce some new directions to it.
If you start measuring the ROI of UX now, you’ll get a chance to grow your product faster. Moreover, calculating the ROI of UX for a new product can become a helping tool in determining areas for growth.
With the help of professionals, it won’t take a lot of effort from you. You will be focused on the development and get all information you need for that put in the forest of a handy report.
Arounda Case Study: ROI of UX Design for Food Delivery Service
Working with Lunchcrafters, a food delivery company, our main challenge was to improve the conversion rate, increase the number of customers who placed orders, and the most important thing - to raise the number of orders. We worked with web design, UX, and UI to calculate the ROI and achieve settled results.
The results we faced:
- Conversion rate: 10% (increased by 5 times)
- Customers who placed orders: increased by 2.8 times
- Orders: increased by 5 times
How do we calculate the ROI of UX for Lunchcrafters?
In our calculations, we used the following information:
- Net Return on Investment (included service life span - 7 years - and conversion rate that increased from 2% up to 10%)
- Costs on Investment (salaries of researchers, designers, and developers who worked on the project)
As a result, we can estimate the ROI of UX for Lunchcrafters was $12 for each dollar spent.
Make Data-driven Decisions with the ROI of UX
If you need to demonstrate the value of your design efforts, the most effective method is to calculate your return on investment.
All in all, calculating the ROI of UX helps with handling bad UX, including strategy development and task prioritizing. It is helpful when it comes to cost reduction, business metric improvements, and achieving settled goals.
"Calculating the ROI of UX helps with handling bad UX, including strategy development and task prioritizing"
Ready to calculate the ROI of your design and don’t know where to start? We’ll be glad to help you with this inquiry. Arounda is your guiding light in the world of design. We can assist you with website or app redesign, UX/UI optimization, and research, along with ROI measurement. Need a design from scratch? We can also do that.
Contact us to discuss the design of your website or app to make it work for your business.
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