Table of contents
Does user experience really matter that much? Do you need to invest in UX if you want to develop a software product? Will this investment noticeably pay off in the future? And finally, how do you calculate the expected return? Let me address each of these questions below, so they can stop keeping you up at night. The ROI of user experience and the UX itself are tough nuts to crack but once you master the basics and get to know the logic behind them – you can rest easy and put any doubts you may have had behind you!
Return on Investment (ROI): some basic facts
What is ROI?
ROI is a standardized financial KPI that is widely used to evaluate the profitability of an investment. It’s popular because it’s simple, easy to understand and compare, and quite versatile, suitable for multiple applications.
Why is it important to estimate ROI before making any decisions?
Almost every business decision (like developing a new product, hiring people, buying new tools and equipment, etc.) has to generate income. Estimating ROI is the easiest way to evaluate and compare different investments, so you can choose to proceed with only the most promising and profitable ones. Of course, it’s not a perfect science, since, for example, the calculation doesn’t consider details like the duration of an investment – but the results obtained may still serve as a good starting point. You just have to be aware of it when making assessments and comparing results.
How to calculate ROI?
The general formula is pretty clear:
ROI = net profit of investment / cost of investment * 100% (net profit = gain of investment – cost of investment)
However, more often than not, it just isn’t that simple and you’ll see why, below.
Calculating ROI: 3 main issues that you may come across
1) Defining and standardizing ROI
It may be difficult to decide which gains and which costs to include in the calculation. You may need to standardize this within your organization if you want to obtain results that can be compared.
2) Inconsistent values and units
When doing business and making investments, you often deal with a lot of immeasurable values or values expressed in many different units. That’s why you may need to build your own ROI model and make some added calculations to come up with a common (money-related) denominator. For example, calculating risk-reduction ROI requires doing some additional math before proceeding to the main formula.
3) Intangible profits
Sometimes it’s impossible to make very precise calculations for ROI because the investment leads to intangible benefits, like:
- better brand recognition (investment: TV or billboard ad campaign),
- improved team communication (investment: new communication tools),
- better brand image (investment: charity campaign),
- reduced stress levels (investment: company events and trips),
- improved customer experience (investment: hiring UX researchers and designers).
Speaking of the latter…
Clients very often want to know about the ROI of UX immediately because, otherwise, they’re very reluctant to add UX experts to their projects. They’re not sure if this investment is going to pay off or if it’s worth trying in the long run.
However, the benefits are huge, even when they are difficult (yet not totally impossible) to measure.
So, let’s take a closer look at the ROI for UX design.
How to calculate the ROI for UX design and why it’s so confusing
This is a crucial question but before we cut to the chase and learn some more about the ROI of UX itself, it might be eye-opening to first familiarize yourself with some of the greatest benefits of making UX design part of the development process in general.
What are the benefits of UX design, testing, and prototyping in the development process?
- Increased speed of development
Thanks to prototyping you can quickly improve your design concept – without slowing down the next stages of development.
It’s always cheaper to detect usability issues early on in prototypes rather than in already developed products so that you don’t have to turn an entire project upside down, multiplying costs.
- Better understanding of the target audience
Dedicated UX research will tell you more about your audience than any other activity, so you can adjust the product to the actual needs of your users.
- Increased chances of getting many more customers
A user-friendly interface is more likely to convert your audience into customers, since it simplifies the product and makes it more intuitive to use, with clearer CTAs, etc.
This list might make you wonder if the ROI of UX is actually possible to calculate since all the benefits we mentioned are pretty hard to measure. And here comes the answer…
Measuring the ROI of design: why is it so hard?
It’s almost impossible to estimate the exact ROI of UX in advance, as you don’t have any data to work with. It would be all about guesswork; and assumptions based on guesswork are usually far from accurate. But one thing is certain – if you start your project the right way from the very beginning, you will avoid accumulating a lot of additional costs related to having to fix an already existing product. Or even worse – finding out that your target audience doesn’t really need your product after all. So UX design is certainly something worth considering. Plus, you can try to calculate the ROI of UX later on in the project, and then you’ll have a nice case study and a good starting point for any future design-related plans.
How is UX ROI measured and when can you do it?
It’s possible to calculate the ROI of UX after some modifications and improvements have been introduced. You may want to consider running A/B tests to observe what works and what doesn’t, or make some design changes within a product and check to see how your users react, and how profitable those changes are. UX experts will help you detect usability issues and bottlenecks, and remove any obstacles preventing growth in revenue. This is measurable and should be quantified.
Just remember that higher revenue may come in many forms, for example:
- More purchases
Example: A UX redesign of a button increased purchases by 300 000 USD during the first year.
- Less support calls
Example: A few years ago, Mozilla noticed a 70% decrease in support calls after spending +/- 14 weeks on making usability improvements.
- Bigger and faster conversion rates
Example: After reinventing their design, Virgin America noticed a 14% increase in conversion rate, 20% fewer support calls, and booking speeds that were twice as fast as usual.
These numbers speak for themselves. Excellent UX design has the same power to push a project towards success as poor UX design has to drag it down to failure, so underestimating the value of UX may come at a painful cost. And this kind of underappreciation is very often grounded on lack of information, ignorance or negligence... just see below.
Common misconceptions that block the inclusion of UX designers
What are the most common misconceptions behind resistance to include UX designers in the development process?
- “We know what users want.”
Well, you may be surprised at how wrong a company can be when it comes to knowing their audience. Assumptions that are not based on UX research, are rather associated with cognitive biases, which don’t lead to any constructive conclusions whatsoever and might be the first step to failure.
- “We have graphic designers, they can do it.”
There’s a difference between graphic designers and UX designers. In short, the first type is more focused on how the product looks and on the artistic and emotional aspects of the project, while the job of the second type is to make sure the product actually works for its users. Even if it means compromising on things that look pretty but, for example, are distracting for the audience.
- “I don’t have time or money for the research.”
Sure you do. Because if you don’t invest in research now, you will have to invest much more later on, when it turns out that there are a lot of things that need to be changed because something doesn’t work as it should – something that has already been developed and introduced to the market. In extreme cases, lack of research may even cause an entire project to fail, losing everything that has been invested.
- “Too much additional time is needed, and we can’t afford it.”
It does take more time in the beginning (this should be considered in the planning process) but it also speeds up the development stage significantly. Plus, it reduces the risk of having to take a few steps backwards, later on, slowing down progress due to having to make huge modifications that would lead to major delays.
- “It’s only for big companies.”
No. It’s for every company, as success is the goal for every business owner, as well as growth and scaling up over time. Most projects start small, but obviously no one involved wants them to stay that way.
- “It’s bullshit.”
Well, all of the above-mentioned arguments and examples prove that these common misconceptions contradict themselves. If these benefits and numbers still don’t sound convincing to some people, then there is probably nothing that will ever change their minds.
Conclusion: invest in UX!
Even if you can’t calculate the exact ROI of UX design for your product at the moment, it should be pretty evident by now that its long-term benefits are indisputable, since it leads to less costs and faster growth in profits. So, if you have any questions or plans regarding this topic, don’t hesitate to get in touch with us, and we will make sure that your project is on the right track from the very beginning.
Cover image by Amélie Mourichon on Unsplash.