ROI of User Experience
Executives and product owners will talk to great lengths about “how UX is important” and “the importance of it as part of the product building process”. But when it comes to execution, they will try to avoid user experience and run as far as possible from it.
The reason: They struggle with the ROI of User Experience. As a result, they don’t want to spend any part of their budget on UX. They would rather spend it on the development of new products or enhancing existing product features as that is where they can see the immediate results.
Companies continue to build platforms without investing in UX, and a lot of executives and product owners are okay with it until they are hit with a roadblock called SALES.
Product owners or executives are not able to see the value of UX (as most people continue to struggle to quantify UX). It can be really challenging to calculate the ROI of UX for any product or service. Here are some UX metrics that can help you build a strong business case for investing in UX.
Four UX Metrics To Calculate ROI Of User Experience
METRIC 01: Conversion Rate
This metric is easiest to calculate and very easy to understand for executives. If you can directly impact the top line, that is one the best metrics to use to get your point across – as everyone understands SALES.
A conversion rate is the ratio of visitors to customers:
Total customer purchases / Total Number of visitors x 100 = Conversion Rate
UX can have a significant impact on conversion rates. Poor UX could lead to users not trusting your product, struggling with navigation, being unable to find what they need, getting lost, and being unable to complete the signup or purchase flow – these are just a few impacts of a poor UX. The importance of accessibility on digital products is also growing day by day and is now becoming more of a necessity than just nice to have, which is also part of UX strategy.
UX in the digital age is all about leveraging data to help make better decisions, A/B testing can help improve the ROI of UX as it helps us better understand user behavior and modify the product accordingly. A few tools which can be used are:
METRIC 02: Support Cost Per User
When a product is released, the company must provide a support service to assist users with any questions or challenges they are having when using the product. Initially, with a low number of users the support costs are fairly minimal, but as the user base grows, so do the support costs. By doing a deep dive into the user journey and leveraging data such as heat maps, we can better understand the challenges of users and see if there is a way we can avoid a support call, chat, forum discussion, or email.
Tools such as Hotjar are great to identify the customer’s challenges, also Hotjar tool is free to use with limited functionality.
You can calculate the support cost by:
Total support expense/number of registered users = support cost per user
METRIC 03: User Retention Rate
User retention rate gives you a better understanding of your “loyal” customers or could be just customers that are satisfied with the service you are providing. A lot of times company’s focus is to acquire new customers, but the fact is that:
1) The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20%.
2) Existing customers are 50% more likely to try new products and spend 31% more when compared to new customers.
User retention rate helps in increasing your WOM (Word of Mouth) and builds your brand. A study from Bain & Company states that if you succeed in increasing customer retention rates by only 5% it can result in 25% to 95% gains in profit. Tools such as Google Analytics can easily do the numbers for you and give you your user retention rate.
You can calculate your user retention rate:
Retention Rate = ((CE-CN)/CS)) X 100
- CE = number of customers at end of a period
- CN = number of new customers acquired during a period
- CS = number of customers at the start of a period
Let’s say you start the month with 100 customers. By the end of the month, 15 people have left, but you attracted 20 new customers, so you now have 105 customers. When we fill in the formula with those figures, it looks like this:
((105-20)/100) X 100 = 85%
METRIC 04: SUM (Single Usability Metric)
This metric is definitely more challenging to grasp as well as to implement compared to the ones that are stated above. It is more of a usability metric, rather than an ROI metric but this can help quantify the effort that is put into improving the user experience. SUM is a standardized, summated, and single usability metric that measures Efficiency + Effectiveness + Satisfaction.
SUM metric is a combination of subjective and objective variables. Data collected from users performing the task includes the time users require to complete the task, a tally of errors they encountered while completing the task, users’ overall success or failure in completing the task, and users’ responses to one or more post-task satisfaction scores
Objective Variables - Time, Errors and Completion Rates Subjective Variables - Post Task Satisfaction score
Ensure that the tasks performed can be repeated, this way you can create a benchmark. Leverage SUM to focus on core product features, that you won’t measure quarterly or yearly. Here is a case study from AutoDesk to better leverage the SUM metric.
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Talk to executives and product owners by leveraging the above UX metrics to help build a strong business case for investing in UX. Help them realize the importance of user experience through the ROI of UX, thus impacting the top line and bottom line of their business.
Idea Theorem™ is an award-winning design & development agency based in North America. Through our empathy-driven approach, we have crafted digital products that have positively impacted over 10 million users. Our mission is to shape the digital future by delivering exceptional experiences. Contact Us if you have any questions; we will gladly help you.