Design ROI – How to Calculate the Value of Design Investments?

Due to its subjective nature, UX design is not simple to quantify and measure. UX also indirectly affects other areas of the business, namely sales, marketing, support, and engineering. But, for UX design to succeed within an organization, design leadership must demonstrate the value of its design investments.

What is ROI of Design?

In business, ROI is a performance measurement usually presented as a percentage. It calculates the direct return relating to an investment – hence the acronym return on investment.

You calculate ROI as follows:

ROI = (gain from investment – cost of investment) / cost of investment

While you measure the ROI of design similarly, it’s a little more complex than the standard measurement. You must financially separate:

• The gain from UX.

• The gain from all other efforts – for example, the development of new features.

One of the challenges when calculating these gains is that stakeholders might perceive these calculations as biased or that you’re cherry-picking the most favorable results.

ROI of Design Examples

Here are some ROI of design examples:

• Increase sales/conversions

• Reduced tech support calls

• Customer loyalty

• Customer satisfaction

• Customer retention

• Reduced time-to-market (how this impacts design & development)

• Reduced rework or errors

• Employee retention

• Labor cost savings

Choosing a KPI

When talking about ROI, another acronym we often see is KPI (key performance indicators). KPI is also a performance measurement but relates to the benchmarks or milestones that track progress towards the desired goal.

Examples of KPIs include:

• Profit

• Cost

• Time

• Customer Lifetime Value (CLU)

• Employee-Turnover Rate (ETR)

• Employee productivity

How to estimate the ROI of design work

Designers are biased towards actions, and it makes sense for us to do the latter. However, there’s a hurdle designers face: We try to explain design’s impact through qualitative thinking: empathy, aesthetics, and user experience, for example. While these are important factors, they’re not what business people understand, nor are they what drives business people towards action. Instead, we need to be able to speak the language of business—or quantitative thinking—and help translate design’s impact through numbers, metrics, and strategic arguments.

So, how can we start speaking the language of business? Start with quantifying your design work.

The three step method for quantifying design work

Whenever I mention “quantifying” to our designers at the d.MBA, I hear them say: “I am not a numbers person.” Luckily, you don’t have to be. For estimating design’s business impact, you just need basic math.

The whole process comes down to three simple steps:

• Define a business lever.

• Estimate the financial impact.

• Communicate with hypotheses.

Conclusion

If you want to convince a business leader, figure out where the potential business value is. Draw a profit tree and identify which lever will improve.

Once you identify the impact, figure out which other teams would also benefit. Go talk to them and make them your project partners. They can help you find the right metrics and assumptions. For example, Hannah found a strong ally in the CTO who leads a development team. He saw a great benefit to streamline his team’s process, so he advocated for her.

Using hypotheses and numbers is a great way to demonstrate design’s business value. But don’t forget who we are. As designers, we should still focus on user experience, brand, and empathy. But tying our work to four fundamental business levers can elevate our conversation with business people and improve our positions within companies.

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Metrics

If standards are going to be meaningful, we must have a way of expressing fairly precisely the quality level we expect, and a way of measuring the system's performance against the standards laid down. Informal measurement is better than no measurement, but being able to measure something numerically is a great advantage. Numerical measures of the products and processes of software development are called software metrics. Within the overall software project, there are many kinds of metrics that may be useful, let's go and have a look.

Once something can be measured numerically, you move away from the world of opinion and intuition - "I like using this interface but I don't know why" - to a precise word of facts and figures - "It took me 5 minutes longer to perform the task using the old system than it does use this new one". However, we should issue a word of warning: figures can be misleading if not interpreted properly, or if the wrong measurements are taken. Even if the correct measures are taken, they can still be misleading if interpreted incorrectly.

People are keenly affected by their surroundings, both physically and mentally, so it is important to make sure that measurement takes place in a context that is as close as possible to the target environment.

Various kinds of metrics can be devised to measure the design at different stages of development; these include: analytic, performance, and psychometrics.

Analytic metrics are generally applicable when only a paper-based product specification is available. There are many different performance-related measures that can be taken: how long it takes to modify a sentence, how many errors are made in an hour, how many times the mouse button is clicked, how many cups of coffee the user drinks in a day, and so on. These kinds of measures are at the heart of usability engineering, and when systematically recorded in a usability specification they provide designers with information about acceptable levels of usability. There are four main kinds of performance metrics: duration measures, count measures, proportion of task completed, and quality of output:

• Duration metrics measure how much time is spent doing a particular thing, for example, how much time is spent looking at online help screens.

• Count measures simply count how many times an event happens, or how many discrete activities are performed, for example, how many errors are made.

• It is not easy to measure how much of a task has been completed; however, it can be achieved by carefully setting the task goals, and then counting how many have been completed after a certain time. the final result could be expressed as a numerical percentage of the original task goals.

• Again, it is not easy to provide an absolute measure of quality, although it is usually not difficult to identify good or bad quality output.

Psychometrics can only be applied once an operational prototype has been built towards the end of the design. Users complete questionnaires designed to ascertain their attitude to the system after using it for a number of hours. These measures include control, helpfulness, likeability, learnability, and efficiency. Let's have a look at them individually:

• Control refers to the user's feeling that the software is responding in a normal and consistent way to commands and input.

• Helpfulness refers to the user's perception that the software communicates in a helpful way and assists in the resolution of operational problems.

• Affect refers to whether the user feels good, warm, happy or disgruntled when using the system.

• Learnability refers to whether users find the software easy to learn, and the documentation easy to use.

• Efficiency refers to the user's feeling that the software is enabling the task(s) to be performed in a quick, effective, and economical manner or is hindering performance.

At least ten users should complete the questionnaire if the results are to be significant.

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KPIs (Key Performance Indicators)

UX design plays a vital role in the overall success of your product. These days companies put a large number of resources into developing UX that is highly functional and innovative. However, how do you know if you’re seeing a positive return on investment (ROI) when it comes to your investments in UX? The answer can be found through the measurements of key performance indicators (KPIs).

After something is made, after people using your product, you are looking back and you are trying to find how effective what you have done is and how the product is performing. This last research allows you to learn about the effectiveness of your UX efforts also in terms of sales, conversion rates. KPIs translate the success factors of your project, product, or company into numbers, bringing successes and failures to light.

User experience metrics are a bit different than metrics used in sales, marketing or finance because they reflect human behavior and attitude. This kind of information is a bit difficult to turn into numbers, but on the other hand, UX KPIs provide great insight into the size and magnitude of usability issues and help easily track their changes through time.

Types of KPI’s

KPI broadly divided into categories such as:

• Behavioral: How users interact with your product or website, what they are effectively doing.

• Attitudinal: How users feel, what they say before, during, or after using your product, and how this affects brand perception.

6 UX KPIs You Need To Track

KPIs are a great way to showcase the progress to shareholders and team members who are not necessarily UX professionals and numerical data is more comprehensible and easy to digest. While there are many KPIs you can track, these are the 6 important KPI's that stand above all.

Behavioral:

• Time-on-task: A measure of how long it takes a user to complete a specific task. This is a great way to measure User Experience when being able to complete a task quickly is important to users. Helps you analyze how effective your product is at helping user complete their desired goals.

• Task success rate: A measure of how many users are able to successfully complete a task. Calculated by dividing the number of successfully completed tasks by the number of attempts.

• User error rate: This is the number of times a user makes a wrong entry. The UER (User error rate) gives you an idea of how clear and user-friendly your website is.

Attitudinal:

• System Usability Scale (SUS): This is a tool with which you can measure the usability of the product. The scale consists of a 10-point questionnaire with five possible answers each, ranging from strongly agree to strongly disagree.

• Customer satisfaction (CSAT): With this tool helps you to expresses customer satisfaction in a convenient metric. Users/testers are asked: How satisfied are you with (website, product, service, etc.)? The scale usually includes five rating options, ranging from very dissatisfied to very satisfied.

• Net Promoter Score (NPS): Helps you to measure overall customer loyalty for your brand, products, or services. This works on a scale of 1- 10. If the user selects form 9–10, then they are loyal enthusiasts who would recommend your product. 7–8 are called passive. 0–6 are unhappy people who don’t want to see your product ever again.

KPI and ROI – what’s the difference?

Using ROI and KPI, companies can measure how successful they have been in achieving a particular goal.

The ROI (return on investment) is a purely financial indicator and quantifies how successful a project was in relation to its investment. For example, if a company invests EUR 10,000 in UX activities to improve its online shop and then generates EUR 25,000 more revenue in the following year, this corresponds to an ROI of 150%.

On the other hand, KPIs, are key figures that you can choose or define yourself which translate the success of a project – however, it may be defined – into tangible figures.

While ROI is only a financial indicator, KPIs are relevant for almost all employees of an organization – from call center employees to CEOs – and can be applied to a variety of processes.

Conclusion

UX design processes require constant iterations and improvement. KPIs are tools for UX designers to communicate, research, understand, criticize, and influence. Without KPIs, it is difficult to produce a relevant user experience that serves business goals.

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