How to calculate the ROI of your UX activities
3 user experience metrics to help you measure the ROI of your UX efforts and optimize your conversion funnel
User experience is measurable in dollars and cents. That might sound counter-intuitive: after all, UX is about intangibles like ‘satisfaction’ and ‘delight’, right?
In fact, the impact of investment in user experience projects is more than measurable, and can be directly linked to revenues when measured correctly.
Knowing how to measure and present the return on investment (ROI) of UX activities is the key to successfully introducing user experience into enterprises. A global enterprise isn’t going to invest in UX just because it’s on trend or on the CEO’s mind. A global enterprise is only going to invest in UX if the figures add up.
Whether you’re a UX professional faced with convincing business-types of your value, or an enterprise manager seeking to understand the impact of UX projects, this post will get you started.
Bad or lack of user experience costs organizations
According to behavioral scientist Dr Susan Weinschenk, failure to consider UX in a product strategy can have eye-watering losses for global enterprises. Yet even now, enterprise software and UX aren’t always on speaking terms. Programmers typically spend 50% of their time on avoidable rework, the cost of fixing errors after development can be 100x more than before development, and internal training for unintuitive software can raise costs.
Over 1 trillion USD is spent on IT projects annually (according to IEEE’s Why Software Fails), but 15% of those projects will be pulled before completion. IEEE identifies 12 main causes of software project failure; 25% of those are related to UX mismanagement. These include:
- badly defined system requirements
- lack of alignment across customers, developers and users
- conflicts of interest among stakeholders
Good UX maximizes profits and minimizes loss
On the other hand, a software project that integrates UX into the development and design process sees demonstrable investment return. For instance, Walmart’s redesign of their ecommerce site resulted in a 214% increase in visitors. Bank of America increased its online banking registration by 45% after a UX redesign of the process. IBM’s report on User-Centered Design notes that “every dollar invested in ease of use returns $10 to $100.”
UX-centered software and digital platforms can have a tangible, measurable impact on ROI. But this impact needs to be measured and a compelling business case for UX activities needs to be made in order to convince stakeholders or CEOs that user experience is worth investing in.
Does it pay to do UX work?
Luckily, the impact of investment in UX is highly quantifiable. Let’s take a look at some of key formulae and figures that will help you prove the return on investment of user experience.
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What kind of UX metrics help calculate ROI?
“A good user experience, like a measurable ROI, doesn’t typically happen by accident. It is the result of careful planning, analysis, investment, and continuous improvement.” Jeff Horvath, UX Strategy Human Factors International
When measuring the business value of your organization’s UX efforts, it is important to be able to tie the results of your UX activities to the revenue that you earn, save or lose through the conversion funnel (such as a shopping cart, newsletter signup and document downloads). Using UX-oriented metrics makes the impact of your UX activities more objective and will avoid clients questioning their value. Here are 3 metrics to calculate your UX’s gains or losses:
Metric #1: Conversion rate
You can measure the relative impact that UX has on your key performance indicators (KPIs) by calculating the conversion rate. For example, say we want to find out how many of the people who visited our blog subscribed to our newsletter. In order to do this, we need to track the number of people who navigated to our blog and then the number of resulting subscriptions (conversions).
Our conversion rate will be the number of blog subscriptions divided by the number of those who had the opportunity to subscribe.
Subscriptions / Potential subscriptions x 100 = Conversion Rate (%)
So, if 1500 people reached our blog, and 150 of them subscribed, that means that 1 in 10 visitors subscribed. Our conversion rate is the percentage of this proportion (10%).
Because we’re measuring what’s happening directly on our site, UX greatly affects conversion rates. Branding, usability and accessibility within the conversion funnel are all related to our UX strategy. In user research, we use randomized controlled A/B tests to calculate the return on investment of UX. It is the strongest case you can make for UX ROI because it allows you to understand why certain components of your UX impact user behavior, as well as show causation (the relationship between the effort and the actual result). Randomized controlled A/B tests can be performed with a number of usability testing tools, such as UserTesting.
Metric #2: Drop off rate
Drop off rates measure the number of visitors who left the conversion funnel without completing it (without buying, in our example), but don’t necessarily leave your site. It is important to measure your drop rate in order to identify the steps in the funnel that are causing visitors to ‘drop off’. Once you’ve got your drop off rate calculated, you can set about conducting analysis into the design and usability of your conversion funnel and make the necessary improvements to the user experience to optimize conversion.
To calculate your drop off rate, you’ll need to use Google Analytics. Create segments for each step in the conversion funnel and let Google Analytics do the numbers. Your drop off rate is the number of users divided by the number of unique users in each segment.
Number of users / Number of unique users in each segment x 100 = Drop off rate (%)
Metric #3: Single Usability Metric (SUM) to record errors
Implementing poor UX choices can lead to user interface design problems and can affect your users’ ability to move through the conversion funnel. Whilst analytics tell you where and how many of your customers are dropping off the funnel, they do not tell you what the problem is. Measuring errors in your UX process help you gain a deeper understanding of the types of errors you’re making and how to avoid them.
One of the most effective ways of measuring errors is with the single usability metric (SUM). SUM is a standardized, summated and single usability metric that measures task completion rates, task time, and satisfaction and error counts. The SUM calculator takes the raw usability metrics on a task-by-task basis and converts them into a SUM score with confidence intervals. SUM will automatically calculate the maximum acceptable task time.
Task completion time is but one metric that goes towards understanding and therefore avoiding UX errors. There are plenty of other ways to improve your usability and eliminate friction in your design process. Spend some time analyzing your UX errors to optimize your conversion funnel.
Fewer UX errors = fewer conversion drop offs
So how do you leverage these UX-oriented metrics? Use them to take your UX further – whether that means getting the resources time, people or budget you need. The best way to drive the importance of UX to your business stakeholders or client is to start talking numbers as these allow you to compare before-and-after results against your own internal products or your competitors’ performance.