ROI on User Experience

January 14, 2014

That said, ROI is always calculated in terms of increase or decrease of a key variable.

These increases and decreases usually fall into one of six categories:

  • Increased sales – either incremental revenue from add-ons or through an easier sales process, which is typically called “conversion rate” though that often gets mixed up with “website conversions”. The metrics for this are typically found in the sales and finance department. Coupled with the estimated costs of usability testing and UX development, you’ll be able to work out over what timeframe it will take for the UX work to pay for itself.
    Increased productivity – Most often found when there are large pools of employees completing certain repetitive tasks. Metrics are found in operations, HR, and finance (for overhead items like office space, equipment, etc.) For example, if you optimize the UX on a series of screens so that what was once a 5 minute task is now a 2.5 minute task, then you’ve increased a person’s productivity by 100%. That’s huge. HUGE. If the company has 100 phone agents who have an average salary of $40,000 + benefits (~$8,000) (+ an unknown amount for overhead), you could either release or retask those agents on other activities with a savings of $2,4000,000/year. (half of 100 agents x $48,000)
  • Increased customer satisfaction and loyalty – This is extremely difficult to measure, and should be used as a primary cost justification only in extreme cases. That said, one method of measuring customer loyalty is in terms of customer retention. (Important especially in organizations that know when their customers are most likely to defect to a competitor or a more mature product offering.) The calculation takes into account the cost of new customer acquisition and amortizes the cost over the average customer retention period. Increasing average customer retention is a cost savings for the company, and can cost justify UX & usability work related to customer loyalty. The metrics of success will come from sales and marketing.
  • Decreased training and support costs – If customers generate calls or support tickets or other uncompensated overhead costs to the business, then those costs should be measured. The easiest way to do this is how airlines handle the it. When a passenger, for example, calls an agent to check flight status, the airline knows how long that call will last, and based on the average cost/minute for phone agents (including salary, benefits, and overhead like the phone line, office space, electricity, etc), the airline can assign a $ value to the cost of the call. Because airlines handle large volumes of calls every day, if there is an increase of 2500 check flight status calls/day at a cost of $2.00/call (theoretical cost!), then we could expect that would increase uncompensated support costs by $5,000/day. If the airline wanted to do a $50,000 eye tracking usability study to get that number down to 1225 calls/day (assuming a clean 50% improvement), then that usability study would pay for itself in 20 days.
    Be wary in cases where training and support are part of the company’s core business model – otherwise it doesn’t make sense to decrease these costs, (i.e., if the company’s revenues are earned from consulting)
  • Decreased development time and costs
    Measured in terms of development resources and time to market. For example, if moving to a system with design patterns and object oriented CSS will decrease the need for an additional UX hire and 5 developer hires (a reasonable ratio), then that’s a cost savings of all of those non-hires salaries + benefits + overhead (computers, software, office space, desk, etc). Similarly, if a strong UX framework decreases the development time from 6-months to 3-months for a project that will increase revenues by $100k per month, then bringing the project to market 3 months early adds $300k to this year’s revenues.
  • Decreased maintenance costs – Again, this is a function of the number of developers needed to complete project work. Bad UX is often a reflection of poor design and complexity in the underlying code. A hallmark of good UX is the elimination of unnecessary or marginal features. This reduces the complexity of the code base, making it more robust and less buggy. As a wise man once said, “there are no bugs in the code you don’t write.”

From: http://www.normalmodes.com/blog/2012/02/27/calculating-roi-on-ux-usability-projects/

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