What ROI can we expect from UX

Categories: Others |

If we bet for a complete UX redesign of our digital products, we expect more than a beautiful and functional interface. Behind just “the looks”, there’s a well-planned work in order to accomplish our business goals and aim for a positive ROI. But at the end of the day… how can we measure the ROI in terms of user experience?   

The ROI of UX

As we mentioned in a recent post about UX, “some tangible benefits that result from UX design includes positive responses from the customers, higher sales, better conversion ratios, and increased web traffic”. However, many times these benefits are hard to identify. That’s unless you can find a series of useful metrics to demonstrate in which way UX increases the ROI and user loyalty to your company.

When creating the UX design for a product or company, wireframes or visual designs shold not be the main or only goal. You need to start by stating clear business goals and drawing a roadmap to achieve those goals. There are 3 main categories of metrics to help us understand the ROI of a goal- oriented UX:

  • Money earned: for example, conversions or ARPU (Average Revenue Per User)
  • Money saved: for example, support costs or task performance efficiency.
  • Non-monetary results: for example, user loyalty or recommendations to people

By understanding and using these metrics in our business strategy we can compare either before-and-after stages of UX design results, especially in terms of money we earn or save.

In order to understand how to apply these metrics, let’s see some of the most representative that we should calculate and how to do it.

Metrics of UX ROI

Conversion rates

Imagine that our company has an e-commerce website. So, when we optimize a sales funnel’s performance, the result is increased sales. And we can measure the value of a UX design’s contribution by the additional revenue since it was implemented.

In this case, the key metric is converting visitors to customers, which is the number of site visitors who successfully finish the purchasing process. To know how much profit each new order would contribute, we can apply the following formula:

Number of people who complete the purchasing process / number of site visitors * 100% = conversion (%)

By obtaining this information, we can be able to determine how much more money we earn in sales revenue per day since the implementation of the UX design; which part of it would pay our UX investment, and in how much time.

Later, we can go further and compare the results of an improved user experience with other ways of acquiring customers, such as advertising, or some other marketing actions. This will allow us to know which of these efforts can acquire the same number of customers with less monthly spending.

All of that data can be obtained from Web analytics Tools that is constantly tracking our conversions, and CRM (Customer Relationship Management) systems, which provides interesting information to define user behavior patterns.

However, it’s necessary to contextualize the UX results into general marketing efforts and other factors to completely understand what can affect them; and what is their maximum revenue to be expected. But, definitely our UX design efforts can raise conversion rates.

Average Revenue Per User (ARPU)

Average Revenue Per User - ARPU

If we have a subscription-based application or service, or even if our business is based in a freemium model and rely on regular user participation, one of our highly important metrics is the average revenue per user (ARPU). From its results, we can motivate in a better way our customers to use more product features and increase our sales. To calculate ARPU, we can apply this formula:

Revenue from paid services / Number of registered users = ARPU ($)

Once we have that information, we can determine what services we need to increase sales, and how much it cost the additional revenue. We need to understand what design changes would pay for our UX budget and how long it would take to pay for it. Even if our product or service is already profitable, the idea is to generate additional profits since the implementation of UX improvements.

To understand ARPU correctly, it’s necessary to take other considerations into account, such as specialist’s resources limitations, or the increase of taxes for using our services. So, we have to contextualize data from Web analytics tool with other sources of information, like CRM systems or own business platforms.

Support Costs

When clients acquire our products or services, there are some tasks we have to do in order to provide them the best experience. Those tasks involve support costs that we need to minimize without damaging user expectations. Online support services can include online chat support, managing support forums, and answering to contact forms. These are complemented with non-digital support costs, such as support phone calls, or even support visits to customers’ home.

In this case, our goal might be to decrease the support cost per user. We can calculate it this way:

Total support expenses / number of registered users = support cost per user ($)

For example, by fixing our current contact form –which will automatically segment the consultation topics-, we can reduce the number of phone calls and save the time that sales team can use in other tasks, like inviting potential clients to use our service.

Once we indentify the necessary user interface changes to reduce support costs, we need to calculate the time in which the problems can be fixed, based in the users’ behavior. As in the previous metrics, that information can be obtained from Web analytics and CRM tools.

Support-cost metrics aren’t so much precise, so our main task in this case is to identify the usability problems to be solved. If we can, it’s a good idea to make previous interviews with real users in order to define them with more reliability.

User Performance

If a user can’t complete a task in our website or takes too much time to do it because of a bad user experience design, maybe it’s not that meaningful for us. But if we multiply it for a higher number of users who have the same problem every day, we definitely should be worried.

As we noticed, users’ performance depends highly on the user experience we can provide them through an optimized website, where they can do tasks in an easier way and in less time. So, the best way to measure if our UX design is effective is to compare the total time that users need to execute an operation in a specific period of time before and after the UX redesign. And also how much saved money it represents. This time can be calculated through this formula:

Total time to execute an operation = time to execute an action #1 + time to execute an action #2 + … + time to execute an action ##

Then we have to calculate the economic value of this saved time as a result, for example, of helping users to solve their problems with a product without telephonic assistance:

Economy per year = economy per month #1 * number of users in month #1 + … + economy per month ## * number of users in month ##

Also, we can run an AB test of our website, by testing two different versions of it with real users at the same period of time in a natural environment. In this way we can validate which of the UX changes are more urgent and have a more profitable potential.

As in the other metrics’ cases, the time information can be obtained from Web analytics tools. And if we can assign an economical value per action, we can configure them to have this data. However, there are always external factors that influence users to complete or abandon a task. But to get this information is a good way to start measuring the ROI of our UX design.

Let’s start to calculate!

Calculate UX profit

Those metrics let us measure the value of our UX design work not in the abstract—the intangible value we’ve provided to ‘happy users’— but in terms of the profits this work delivers to our company and customers. So, the only question left is: Are we prepared to increase our profitability through a custom UX?

References:

UXmatter.com

The five plans of UX design