A Practical Guide to UX ROI: How UX Helps Business Metrics
As users, we don't need numbers to say whether we enjoyed using a particular product or not. Even with all the complexity of our user experience, we often restrain ourselves to a simple "I like it" or "I don't" remark when using a new product.
While even this simple reply would mean a great deal to a UX designer, businesses prefer to operate with more objective data. Businesses like metrics: KPIs, NPSs, ROI, NMP.
"How can we calculate the value of our UX efforts?", "Should we invest more in UX research?", "What's UX's ROI?" — these are all the typical questions that arise during conversations between business stakeholders and UX team members.
Sometimes the answers to these questions decide whether you will have a UX researcher in your company at all.
In almost every one of these conversations, the term return on investment, or ROI, pops up.
In this article, we'll talk about how we can calculate the ROI of good user experience. We'll also touch on how implementing ROI metrics can benefit your overall UX strategy. Buckle up, and let's make a strong case for UX research.
What Is the ROI of UX?
There are a lot of examples when a properly conducted user research coupled with user-centered design significantly improved company’s business metrics.
For example, after the user-centered redesign, Virgin America's website conversion rate increased by 14%, while the number of web-related support calls were reduced by 20%. IBM reported a 50% reduction in maintenance costs and a 300% return on UX design investment after investing hundreds of millions of dollars into their UX strategy.
Even the tiniest change to the user experience can yield great profits for businesses. By "tiny" we mean, for example, one button that increased a website's annual revenue by $300 million. And all it takes is a proper usability test to reveal such an opportunity. UX efforts result in:
- Increased customer satisfaction, as well as B2B satisfaction
- Increased conversion rates
- Lower support cost
- Reduced development costs
- Increased customer loyalty and retention
- Improved usability, or ease of use of your products
All these effects have business value, and directly or indirectly increase your business's bottom line.
Research demonstrates that preliminary UX research helps to avoid rework, saving up to 50% of the time that developers spend fixing avoidable issues or developing unused features. Every dollar invested in UX can bring up to $100 in return.
Companies focused on customer experience and user experience perform better financially. Companies that conduct user research save on development and support costs.
Put simply, UX works.
However, UX is complex. As the Nielsen Norman Group put it, user experience encompasses all aspects of the user's interaction with the company, its services, and its products.
How do you measure something that broad and multi-dimensional with a simple financial metric such as ROI? There are several ways you can do it, and you should pick what works for you under your specific circumstances. Later we'll talk about what those circumstances might be, but for now, let's have a look at common ways of measuring the ROI of user experience.
How to Calculate the ROI of UX
There are six metrics that can be directly affected by UX activities:
- Conversion rate
- Drop-off rate
- Learning time
- Training costs
- Support costs
You can calculate each one of those by using ROI calculators.
Let’s look at the most common metrics that UX experts use in order to demonstrate the positive ROI of their activities.
Conversion rate is one of the strongest ROI arguments for user research and user experience improvement.
According to the most common definition in UX field, conversion rate is the proportion of users who take a desired action.
For example, your web service landing page has 2,000 daily visitors. The desired action you want them to take is signing up for your premium features. On average, 100 out of 2,000 visitors sign up daily.
- Conversion rate: 100 ÷ 2000 x 100% = 5%
Your current conversion rate is 5%.
Let’s say that by improving the usability of a sign-up page, reducing the number of web service related errors and improving overall user experience after conducting usability research, you were able to increase your conversion rate by 5%, so now it’s 10%.
Let’s say your annual site profit is $100,000. You spent $15,000 on UX efforts, including salaries, recruitment and implementation costs.
In order to calculate the UX ROI, we will use this conversion rate UX ROI calculator:
The annual UX ROI is 5:1, which means that every dollar you’ve invested in UX activities earned you five times more.
The second common metric that can be used to calculate UX ROI is the drop-off rate.
Drop-off rate shows how many people left your conversion funnel at each particular step.
- Drop-off rate = (visits to the current conversion step - visits to the previous conversion step) ÷ visits to the previous conversion step x 100%
For example, if you have 100 people adding items to your cart daily, and only 20 of them proceed to the checkout, your drop off rate is 80%.
- Drop off rate = (20-100) ÷ 100 x 100% = -80%
Suppose that after UX research you redesigned your cart, added functions like “recommended products” and dropped unnecessary ones like SMS confirmation. Now your drop-off rate is 55%.
Here’s how we’ll calculate UX ROI of a decreased drop-off rate:
The annual UX ROI is 3:1 — every $1 spent on UX activities added $3 to the bottom line.
Now that we know how to calculate conversion rate and drop-off rate, let's talk about UX metrics that directly correlate with them.
There are two types of questionnaires developed to measure the usability of a product: those that measure the difficulty of tasks and those that measure the overall perception of satisfaction.
Measure Task Difficulty
Questionnaires for measuring task difficulty are:
- ASQ: After Scenario Questionnaire, three questions, measures
- NASA-TLX: a measure of a mental effort, five questions
- SMEQ: Subjective Mental Effort Questionnaire
- UME: Usability Magnitude Estimation, one question
- SEQ: Single Ease Question
These questionnaires measure the perceived difficulty of tasks that users completed during the usability testing and should be used directly after the task was completed.
Their results reflect the ease of use of a product. If it's hard to use, people will likely switch to the competition. In fact, 79% of users will search for another site to complete the task if the content is not optimised.
Questionnaires that measure perceived satisfaction are:
SURP-Q is an eight-item questionnaire that measures how usable, credible and visually appealing the product is. Given that 57% of users won't recommend a business with a poorly designed website and 90% of users stop using apps due to poor performance, it's safe to say that SURP-Q results directly correlate with business metrics like customer acquisition and customer retention rate. You can compare your SURP-Q rating to industry-wide standards or your previous results to see whether there is room for improvement.
NPS (Net Promoter Score) is a simplified version of SURP-Q that includes only one question. However, due to its simplicity and efficiency, NPS is now widely used to measure the overall satisfaction of users with your products. It allows you to break users into three major categories:
- Promoters: Loyal users who will keep buying and promoting your product among other people
- Passive: Satisfied, but unenthusiastic customers who can switch to competitive products
- Detractors: Unhappy customers who can damage your brand and hurt growth through negative word-of-mouth
Although it's hard to tie NPS to specific UX efforts, you can use it in controlled environments to understand whether users or usability session participants found your product appealing and satisfying. NPS is great for adjusting and evaluating overall UX strategy efforts.
Both satisfaction metrics and task difficulty correlate with conversion rates. The easier it is to perform tasks on your website and the more pleasant the service is, the higher your conversion rate will be.
In turn, drop-off rate can be reduced by decreasing the difficulty of tasks, e.g. the easier it is to buy from you, the more people will buy.
Single Task Metrics
Sometimes you can measure UX ROI by focusing on a single performance metric of tasks that your users perform. Those metrics can be:
- Task completion time
- Task completion rate
For example, the UX design team at Lucidity measured the time it took account managers to finish the ad company setup process with their clients. After calculating the usual average time it required to complete the task, the team was then able to reduce it by 71%. That, in turn, increased the expected yearly revenue by $9 million. Usually, you can perform such UX ROI calculations by using ROI calculators for decreased support costs or increased productivity.
Single Usability Metric (SUM)
Single Usability Metric (SUM) encompasses all aforementioned usability metrics: task completion rates, task time, satisfaction and error count. In order to measure it, you can use SUM calculator. SUM reflects the overall usability score of your product and is best used when you compare versions of your products with each other or perform A/B tests.
A higher rate of SUM correlates to conversion rates. The easier and more satisfactory your product is to use, the better the conversion rates are. Drop-off rate can also be decreased by improving your SUM measurements. The less errors your users experience, the higher the chance they’ll stay within the conversion funnel.
Google’s HEART Framework
Google’s HEART framework is specifically developed for measuring ROI of UX. It consists of five main categories:
- Task Success
In order to measure those metrics one has to employ different methods. The most effective way to measure happiness would be questionnaires, while task success and engagements are best observed during usability tests.
Such measurements will correlate with conversion rates of your product, which, in turn, can be used for calculating UX ROI as described before.
It’s interesting to note that Google recommends focusing on just two metrics that are the most critical to your project and not trying to calculate everything there is.
A/B tests are widely used in almost every activity related to measuring the value of UX. Most often they work in conjunction with the other practices mentioned before. With A/B tests you can compare the UX metrics of your current product and prototypes before implementing these changes for end-users.
UX professionals often employ A/B testing with unmoderated tests and on-page analytics, tracking clicks, page views and conversion. It allows measuring how even small adjustments to the user interface affect both usability metrics (completion rate, task time) and business metrics (conversion rate, drop-off rate).
Those measurements are then used to calculate the ROI of UX activities as demonstrated in the previous sections.
When to Calculate the ROI of UX
There are several circumstances under which you might start calculating the ROI of your UX activities. Those define not only how you measure the ROI but also in what capacity.
Here are the most common scenarios where you can benefit from measuring ROI.
When You Need to Persuade Business Stakeholders
Even though we're well past the times when you had to prove the value of UX and user-centered design to everyone, sometimes we're still forced to do so. Skeptical business stakeholders might ask you to demonstrate specific numbers before committing to UX-related expenses.
In this case, you can perform usability studies for the most troublesome areas of a product you're working on and compare the results with industry benchmarks or even a prototype that addresses those problems. That way you'll unearth those issues and at the same time show the business possible areas for improvement.
Unmoderated A/B tests that compare versions of the product on conversion and satisfaction rates will provide you with the data that businesses readily act on.
When You Need to Solve a Specific Business Problem
UX research is great when a business needs to address specific issues. For example, one of the most common problems in e-commerce is a high cart abandonment rate — almost 70%. While there are multiple reasons for it, many of them are directly connected to issues with usability: 31% of customers abandon carts due to being forced to create an account and 23% due to a long checkout process.
Focusing on a single task metric such as the length of the checkout process and completion rates will allow you to address usability issues while also positively affecting your business’s bottom line.
When You Need to Balance Your UX Strategy
UX design inevitably leads to changes in your product. However, while those changes may benefit some of its aspects, you have to see the bigger picture. For example, if you decrease cart abandonment rates after completely getting rid of the registration process, your retention rates may suffer.
Another example would be to prioritise one task (e.g. sending messages by making the "Send" button bigger and more colourful) while neglecting other important features like sending images and adding new groups, which may lead to decreased user acquisition rates and conversion rates.
Finally, implementing dark UX patterns for quick business gains will almost always result in a ruined reputation and low Net Promoter Score.
That's why it's important to combine low-level metrics such as task completion rates and SEQ-scores with high-level metrics such as NPS and SURP-Q to track whether local UX gains diminish long-term benefits.
Let the ROI Inform You
Even though measuring return on investment for your UX activities provides a lot of benefits — not only to businesses but to the UX professional themselves — it should not guide your UX efforts.
After all, the pinnacle of user-centered design is being focused on the user, not ROI. Chasing numbers will hinder your satisfaction and usability rates in the long run.
Instead, treat measuring ROI like an additional perspective in the UX designer’s arsenal, not the ultimate destination. When you do, you’ll get benefits from both the business and UX worlds.