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:
Reduced tech support calls
Reduced time-to-market (how this impacts design & development)
Reduced rework or errors
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:
Customer Lifetime Value (CLU)
Employee-Turnover Rate (ETR)
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.
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.