Calculating the ROI(Return on Investment) of UX

Summary: Display the design importance of your company by calculating ROI.

As UX practitioners, we see an intrinsic interest in enhancing the experience of goods and services. Yet a lot of people don’t see it this way. And often, these people make assumptions about the funding.

One of the most successful methods of estimation is to measure your return on investment(ROI) when you need to show the importance of your design efforts. In essence, you have to illustrate how improvements to your design affect the bottom line — sales, cost savings, or another primary KPI.

▪️ What is the Return on Investment (ROI)?

Investment Return (ROI) is a financial metric used for the measurement of investment performance. The ROI = income is usually measured as a proportion of investment/investment costs. For examples, if an application is made of $2,000 and the revenues are improved by $2,500, then the ROI = (2,500 to 2,000)/2,000 = 25%.

In order to explain the effect of innovation in a field of design — such as product improvements, accessibility or consumer analysis — ROI is used more widely. When this is used, ROI can not be as easy as political, as the cost is not always assessed in the same unit as the profit and the result is not always estimated.

ROI for UX

▪️ How to Calculate the ROI of UX?

There are a few steps to calculate the ROI of UX.

▪️ What is the UX Metric and How to Collect it?

UX metrics is a collection of objective data points used to calculate, compare and monitor user experience of a website or device over time. These are vitally important for ensuring that UX design choices are taken and tested using fair facts rather than opinions.

So we can collect the Metric data during the time of User research or Usability test etc.

Some of the example of UX Metric:

  • Satisfaction rating
  • Ease-of-use rating
  • Perceived usability
  • Questionnaire scores
    (NPS, SUS, SUPR-Q)
  • Conversion rate
  • Returning visitors
  • Success rate
  • Time on task
  • Error rate
  • Productivity
    (for example, the number of
    orders processed in an hour)
  • Frequency of return visits
  • Renewal rate
  • Customer-support tickets
  • Phone calls, chats, emails, texts
  • Training hours required
  • Number of client complaints
Example of UX Metric data after the user testing.

▪️ What is KPI and How to Convert UX Metric into KPI?

KPIs (key performance indicators) represent the overall objectives of your company — such as sales growth, profitability or increased user numbers. Metrics are all measures that are used to quantify these higher targets.

And when you’re conducting any kind of usability testing, such as UX Benchmarking, it’s crucial to choose metrics that represent your goals and the overall KPIs of your company.

we need to ask ourselves: what does my organization care about? you’ll be presenting this ROI calculation to. Stakeholders, executives, clients? What do they care about? KPIs focus on the details and culture of the company, but most of the KPIs come down to money.

Some of the below examples of KPI:

KPIs

For most situations, you’re going to try to turn your UX metric into a numerical number. But, that’s not always important. Note, the ROI calculation is about demonstrating how design influences what the organization cares about. Often this could include, for example, measuring the sum of time saved for a more effective system.

▪️ Calculate ROI:

We already know how to calculate ROI, now we will understand it with a real-life example:

As par the data majority of people dropping(conversion rate 2%) in the checkout page so we have done User research to identify the problem and redesigned it.

We have been observed that after redesigning the website out of 100,000 people during the month of March 40,000 users purchased items. Thus, the site’s conversion rate is 40,000/100,000 = 40%.

Each user purchased an item on an average of $20 so (40–2)% x $20 = $760 profit per month then annually expected profit will be $760 x 12 = $9120.

Since the design project cost about $100, our return over three years may be around $27060.

That way you can show your stakeholders a range of possible returns to set expectations, and compare that range to the predicted cost of the project.

The Take-Away

  • ROI measurement is an analytical exercise to help you understand the relative importance of design projects.
  • They don’t have to be perfect can be estimated.
  • ROI report should be transparent make sure your audience(Stakeholders, executives, clients) understands where your numbers came from.
  • The ROI calculation is estimating so it could be before the project also.
  • This way, you can show your stakeholders a range of possible returns to set expectations and compare that range to the projected cost.

UX design and researcher