How do you calculate the ROI of user research?

1 Define your goals

The first step to calculate the ROI of user research is to define your goals and objectives. What are you trying to achieve with your product? How do you measure success? What are the key metrics and indicators that reflect your desired outcomes? For example, you might want to increase user engagement, retention, conversion, satisfaction, or loyalty. You should also consider the costs and risks associated with not doing user research, such as poor user feedback, low adoption, high churn, or negative reviews.

2 Estimate the value

The next step is to estimate the value of your goals and objectives. How much are they worth to your business or organization? How much revenue, profit, or savings can you generate or expect by achieving them? You can use different methods to estimate the value, such as market research, benchmarking, forecasting, or modeling. For example, you might estimate the value of increasing user retention by calculating the lifetime value (LTV) of your customers, or the value of improving user satisfaction by measuring the net promoter score (NPS) of your product.

3 Calculate the costs

The third step is to calculate the costs of your user research. How much do you spend or plan to spend on conducting user research activities and methods? You should include both direct and indirect costs, such as salaries, equipment, tools, incentives, travel, overheads, or opportunity costs. For example, you might calculate the costs of doing user interviews by adding the hours of work, the price of the software, the amount of the incentives, and the lost revenue from other tasks.

4 Compare the value and the costs

The final step is to compare the value and the costs of your user research, and calculate the ROI. The ROI is the ratio of the net value (value minus costs) to the costs, expressed as a percentage. A positive ROI means that your user research generates more value than it costs, and a negative ROI means the opposite. For example, if your user research costs $10,000 and generates $50,000 of value, your ROI is 400%. You can use this formula to calculate the ROI:

ROI = (value - costs) / costs * 100%

5 Communicate the results

Once you have calculated the ROI of your user research, you should communicate the results to your stakeholders and clients, and use them to inform your product decisions and strategy. You should explain how you defined your goals, estimated the value, calculated the costs, and compared them. You should also highlight the benefits and impact of your user research, such as increased user satisfaction, loyalty, or advocacy. You should also acknowledge the limitations and assumptions of your calculation, and suggest ways to improve it in the future.

6 Use a framework

Calculating the ROI of user research can be challenging and complex, but it can also be rewarding and useful. To make it easier and more consistent, you can use a framework or a tool that guides you through the steps and helps you collect and analyze the data. For example, you can use the User Research ROI Calculator by UserZoom, which is a free online tool that allows you to enter your goals, value, costs, and results, and generates a report with your ROI and recommendations. You can also use the User Research Value Framework by Nielsen Norman Group, which is a comprehensive guide that covers the principles, methods, and examples of calculating the ROI of user research.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?