How To Calculate the ROI of UX: It's Not All About Money
There's a Chinese proverb that goes: "The best time to plant a tree was 20 years ago. The second best time is now." And we can agree that this can also be applied to investing in your UX. You want to be on time for all of the benefits that UX design can give you.
With it being 2023, it is evident now more than ever that good design is a crucial aspect of every product. Design choices can often make or break a project, with the market getting more saturated by the minute. Metrics of ROI in UX design thus play an essential role in both user satisfaction and money-making.
However, it will be wrong to say that calculating the ROI of UX design is easy. Understanding UX ROI involves focusing on customer experience value rather than just increasing revenue.
So, how to calculateROI in UX design?
In this post, we'll explain how to use ROI indicators and the key areas to improve your ROI of UX.
What is the ROI of UX?
ROI, short for Return of Investment, is a number that determines the return value of a certain investment in percent. You can directly measure the impact of your actions on sales or revenue when you calculate UX ROI.
The question now presents itself: What is the formula to calculate ROI?
A general calculation for ROI is: ((Income - Total Investment) / Total Investment) * 100.
For example, if you invested $2000 and your total income was 3000 then your ROI would be calculated like this:
((3000 - 2000) /2000) * 100 = (1000 / 2000) * 100 = 50%
If this calculation is applied to UX, this would mean that the ROI for your investments in UX would be 50%, which is a great return value. But not everything is about money.
Why is ROI important?
The importance of calculating ROI lies in much more than just the extra $ you earn from having an intuitive and functional product. User-centered products that are designed with care are literally making the world a better place. Great design is often invisible, and it's the bad ones that stick out and waste everyone's time.
Even more interesting is that today's fast-paced environment allows companies to quickly determine what is working and what is not and to change and adapt to an ever-evolving user and its needs. With the right tools and mindset, good design can give measurable results. This is great news for both the companies and the shareholders.
For example, a complicated product often leads to users reaching for the Support button a little too often. This could lead to your team being overwhelmed by customer requests and can strain and slow down the overall improvement of your product. By investing in a good design team, you can skip this and make your product clear and easy to use, thus relieving your employees of the stress of increasing support requests. Though it might not be obvious at first, this could be a great return on your financial investment that is not necessarily making you money but is improving the general well-being of your company. That's why we love to say–It's not all about money.
Paying attention to details like these can significantly improve your annual reports and allow you to expand your business faster. If you want to move at the speed of the market, you must be able to anticipate and even calculate every possible outcome of your decisions. The design was never one of the important metrics, but that is changing, and it's changing fast. It's time to bring a design to the front of what makes a good product really stand out.
Now that you know the basics about ROI, it's time to learn about the metrics for ROI in UX design that are essential to determine the value of projects.
Here are some of the basic ROI indicators in terms of good UX:
A conversion rate is a simple tool that defines the percentage of users that take a desired action, whether signing up as a customer or subscribing to your blog.
It is calculated by this formula:
(Users that take a desired action / Total visitors) * 100
This can be a simple tool to determine if your UX is good and if your visitors know what they need to do. A good UX system can easily navigate visitors to become potential customers. It's important to highlight your product's benefits and have clear Call-to-Action buttons that lead the way. If you're planning on investing in your UX, we suggest measuring your conversion rate before and after your investment and seeing if it made a difference. You can even use the method of A/B testing during the time you're improving your UX by making slight changes to your copy of the positions and wordings of your buttons and see your conversion rate change in real-time.
A good conversion rate is music to shareholders' ears as it is a very clear sign that you're doing something right with your product.
A bounce rate is the percentage of users that leave your website without interacting with more than one page of your website's content.
There is also a simple formula for calculating your bounce rate:
(Visitors who leave the website without interacting with other pages / Total visitors) * 100
By investing in the improvement of your UX, you can easily determine why your visitors are leaving your website. It can be that your landing page is overly complicated or that your Call-to-Action buttons need to be more visible. It can also suggest that you word your descriptions differently. An experienced UX designer can tell you right away what the problem is and how you can solve it. A lower Bounce Rate is arguably one of the best ways you can see how your investment is paying off and that it was worth the effort. The more the visitors stay – the more likely they will become customers.
NPS is short for Net Promoter Score. It is a type of survey that directly measures customer satisfaction and can be a good way to test if what you're improving is really helping your customers. This usually takes more time, but having real data from real people can benefit your success and is highly encouraged. Typically NPS is graded from 1 to 10, with grades from 1-6 commonly meaning that the participants are not going to promote and talk about your product and will even detract potential new visitors; grades 7 and 8 are passives, and 9 and 10 are the ones that will most likely promote your product and talk about how satisfied they are. Aim high!
Revenue per customer
By improving your product, you can also improve your revenue per customer in a couple of ways. Either you'll get new customers, which will increase your overall revenue, or you will get your current customers to expand their plan and earn more by having more plan upgrades. Ideally, you will have both.
A good UX redesign can both bring in new customers and make sure that the current ones stay loyal to your product.
To calculate an average of your revenue per customer, use this formula:
The average revenue per customer = Average revenue / Total customers
Test and compare it over time and see the benefits of having a good UX.
Clickstreams determine how many clicks a user takes to reach a certain goal. You can measure clickstreams with your chosen Analytics software and see how improving UX can significantly lower the number of clicks a user needs to reach a specific goal. No one likes clicking around aimlessly and a good UX designer knows this.
Now that we've shown you how to measure the ROI of your UX improvements let's talk about some key areas to improve your ROI.
Key Areas to Work onto Improve ROI of UX
Whether you track the ROI of UX frequently or not, there is always space for improvement. Although it might take some work to identify what is working and what is not when calculating the ROI of UX, it is essential to always keep in mind the following key points.
There is a good method to see how well your design behaves in a real-world scenario and how your improvements will affect the users. Expectation pointing is a method in which participants are asked how difficult they expect the task to be, and after they've completed the task, they are asked to rate how difficult it actually was. We suggest you do this before you do your design and then do a follow-up test to see how the behavior has changed. This can give you great insight into how the user thinks and how well you have solved particular problems.
Usability is a key factor in a good UI/UX system. Making a good site map can organize your data and make everything easily accessible and findable. A good interface is never in the user's way of reaching a specific goal. It should empower the users and keep them from slowing down and getting lost in an unorganized website's depths.
If a user is able to quickly navigate to what they came to do – they will more likely trust your product and will stay a customer. Make sure that you communicate with your design team and let them know what the key aspects of your product that you want to be highlighted are. Investing in a great UX designer can help you bring structure to your website or product and, therefore, improve your ROI.
The more the design of the product is invisible, the higher the chances that a user will like to use it. It's that simple.
To say that consistency matters is an understatement. Imagine a user figuring out how to navigate a certain page or a certain part of your product only to land on a new page that has completely different UI and UX logic. Situations like these can make your Bounce Rate go through the roof.
To escape this problem, a good design team can help you bring consistency to every segment of your website or product. It is important to have all of the pages follow the same logic, have the same UI, and function as seamlessly as possible. A great designer will determine all the font sizes, colors, button sizes, and the UX logic that binds it and land on a perfectly synchronized visual language that will make the usage of your product feel easy and intuitive.
In this day and age, productivity is all that matters to everyday users. In order for them to get from one task to the other in the shortest amount of time, a good workflow is key for minimizing extra clicks and, therefore, extra minutes spent on specific tasks. We can recommend enough how investing in a structured workflow can greatly benefit the ROI of your UX improvements.
Make sure to hire a designer that knows how important it is to create user journeys and can anticipate how a certain user will behave on certain tasks and functions. By understanding the next move, a designer can easily build a system around that and navigate the user clearly to perform their tasks with the utmost precision. A preconceived notion of how users will behave can help you build your product and skip the part where you guess what will happen. A/B testing comes into play here as well, as it can give you a lot of insight into what the user is doing and how you can make it more efficient.
We've seen that the ROI of UX design is heavily influenced by user satisfaction. The most impactful companies in the world are the ones that are using all the benefits of design to their advantage and putting big money into UX. The ones who know what the users want and need and the ones that can anticipate what the new trends will be and can adapt to them quickly.
The competition is fierce, and the market is growing exponentially. By showing you how to calculate the ROI of your design improvements, we've hopefully put you on the same track as those companies, as you will have more tangible proof that investing in design really pays off.
At Tenscope, we calculate the ROI of UX for every project, whether its branding, web design, UX redesign etc., and then analyze the UX improvements.
Use these methods and see for yourself or book a live demo with our team to find out how we can help.