Favorites, Product/Interface Design, User Experience

The ROI* of UX Design

I often think I repeat “you get what you pay for” like a mantra to myself as justification to spend more than I should on a home air purifier with a filter developed with NASA to be used on manned mission to Mars or fair-trade, single origin, micro-roasted coffee beans (really, what does that all mean?). Sometimes, these products have an excellent marketing team, but occasionally, these products truly deliver an exceptional user experience.

For those exceptional products, it’s quite clear upon use, that a substantial amount of time and research went into the product, justifying the higher price. But is this always worth it?

On the surface, this might seem obvious: after all, the less time and money is invested in a project, the greater the potential profits (and the more you can spend on in-home NASA technology) will be—right? In fact, all software products require significant investments — and despite those investments, businesses continue to waste countless amounts of money on products and projects that are eventually abandoned, or on fixing a vast array of problems that easily could have been avoided for a fraction of the cost.

As Dr. Susan Weinschenk notes, out of all software projects, up to 15 percent are abandoned, and at least 50 percent of all programmers’ time is spent doing easily avoidable rework. 50 percent! And talk to a developer and that number is probably even higher. No wonder they drink so much. Just kidding… 

Moreover, the cost of fixing an error after development is 100 times that of fixing the problem before development is completed. Add to these depressing numbers that, of the top 12 reasons projects fail, 3 of those reasons could be solved by using tools in the UX designer’s toolkit, like user interviews, prototyping and user testing.

Why Software Fails

According to IEEE, 3 of the top reasons software projects fail could be solved by investing properly in user experience.

  1. Badly defined requirements
  2. Poor communication between customers, developers and users
  3. Stakeholder politics

I look at this and think it’s pretty clear: you, whoever you are, an executive, a developer, or a product manager must consider the impact of User Experience Design not only on your customers’ satisfaction and engagement but also on $$$$ (cha ching!).

Understanding and calculating how UX delivers a ROI

In order to bring this home a bit, let’s start with an example. Say you’ve developed an sparkly SaaS (software as a service) product that creates business expense reports automatically, removing the headache of manually scanning in recipients and formatting everything just like your user’s finance department has requested.

When done right, a return is almost guaranteed

When done right, a return is almost guaranteed.

Your product does an excellent job of scanning accounts, learning what is and what isn’t a business expense and then emailing a report once a month with those line items. Once approved, that report is emailed to finance and you are reimbursed in no time. Even though this may all sound wonderful, for some reason, your product’s monthly churn rate (the percentage of users who cancel their subscriptions) is very high—let’s say 5%. This means that every month, 5% of your users cancel their subscriptions. Though you can always work to attract new users, it’s far cheaper to retain your current customers. So, what should you do?

To tackle this problem, you hire a UX designer to do some investigation. Using a mix of qualitative (user interviews, testing) and quantitative (analytics), the UX research results suggests users are having a difficult time getting their account set up. If they can’t set up their accounts, they aren’t going to find much value in your wonderful product.

Now that you have a better defined problem, it’s time to design a solution.

In a few months, once you have designed a different on-boarding process, implemented it and gathered some data on the new design, incredibly, you find your churn rate has decreased to 2 percent. A fairly straight forward design fix like this can increase your company’s revenue significantly.

Sound too easy? **

Let’s look at the numbers:

Let’s say you start with 1,000 users—if each user pays $50/month, the product should make you $50,000/month.

Before consulting with a UX design professional, though, you would lose 5% of these customers every month. In your first month, you would lose 50 users, leaving you with 950 users or $47,500/month. Over the year, this adds up to $30,000 in lost revenue from these customers alone.

But, because your product is also easier to use, more people are signing up and then converting to paying customers. So, each month you add an additional 60 customers at $3000 per month or $36,000 per year.

When you consider the potential lifetime value of this customer, the amount is really significant.  We’re talking like making it rain numbers ( in the millions***).

Screenshot 2014-11-26 15.53.08(2)

So, yes, it’s undeniable that investing in UX design is an investment, and sometimes (especially after production) it can be a large investment—regardless, though, it’s an investment that ultimately can result in a significant return.  Cue Liz Lemon.

tina-fey-making-it-rain

 

* It pains me, really pains me, to use business jargon but I couldn’t think of a more clever term.

** These numbers and calculation methods are simplified and based on hypothetical numbers to show there can absolutely be a ROI for user experience investment. It is very rare to be able to pinpoint one single issue causing UX problems and in general, issues are much more complex than the above example.

*** Basically a lot of nano-trade, ethically-roasted coffee beans.

 

Filed under: Favorites, Product/Interface Design, User Experience

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Drew Lepp is a UX/UI designer and founder of TimeKat, who aims to create online experiences that help make people happier and more productive.

She lives in Washington, DC and enjoys inventing terrible dance moves, never cooking and taking videos of her forever kitten, Tiny Taco.