How to Calculate the ROI of UX Design
Kate Kolody
Principal Product Designer | Data-Driven UX Specialist | Balancing Creativity & Analytics for Scalable Digital Solutions
How to Calculate the ROI of UX Design? In this article, we'll explore the benefits of investing in UX design for small and medium-sized businesses and how to calculate the potential savings or earnings from these investments.
My Experience and Approach
Since 2014, I’ve been designing user interfaces. At our agency, ZAYATS, we focus on UX consulting for small and medium-sized businesses and the digital transformation of offline companies. We use a scientific approach to design, helping our clients create a seamless customer experience (CX) at every stage of interaction with potential customers.
Over the years, we've gained enough experience to explain why companies invest in UX and how it impacts their profitability. Here, I'll share some insights.
What does UX design actually do?
Simply put, UX design is about the interaction between users and products. Elizabeth Gerber from the University of California San Diego gives a great example: Imagine you’re at a gas station trying to refuel your car while entertaining your crying three-month-old baby. You need to fill up your tank and figure out how to pay. Do you need to go inside, or can you pay at the pump?
Often, we go through experiences without much thought. Trying to complete a simple task involves a series of events. First, you turn off the car, then figure out the payment system. Can you use your credit card at the pump, or do you need to pay inside? If you pay with cash, you have to go inside. Then, you enter all the necessary information on the screen and start refueling. But wait, you dropped the gas cap. Haven’t we all done that a million times?
After picking up the cap, you might place it back and, knowing you'll soon hold your baby, use hand sanitizer from the car’s side door. Notice the sequence of events. Refueling isn’t as simple as it seems. Many other things happen simultaneously.
The goal of UX design is to understand these details and think carefully about how we can simplify the experience. The entire process, from researching and understanding the problem to creating a system that improves the customer experience, is UX design.
What Does ROI Mean in the Context of UX Design?
ROI (Return on Investment) measures the profitability of an investment. It helps determine how well a company’s investments in areas like advertising, production, construction, or design are paying off. ROI helps decide what to develop and what to abandon. You might also have heard of Return on marketing investment (ROMI), but for this article, we’ll use more classic and conservative analytical tools.
Depending on the goal of UX design, profitability is calculated differently. It's essential to define the business objective and align it with UX metrics.
For example, a company wants to reduce spending on tech support by enabling users to solve most of their problems via an app or website. Savings can be calculated through metrics like "number of support requests" and "duration of calls and service interactions." We can compare current support requests to the projected number after the app is developed. Tech support often deals with recurring issues that need a platform where users can diagnose or find information about potential problems independently.
With two figures in hand, we can estimate the savings. We save employee time, reduce the number of support staff needed, and save money by shifting some processes to the interface.
In the next article, I will explain how to formulate a business objective and choose appropriate metrics, supported by specific examples.
Why Do Companies Invest in UX?
People love products that quickly and easily meet their needs. These products provide a positive user experience, sell more easily, require less advertising spend, and scale faster.
Your clients appreciate when you consider details like the gas cap falling during refueling or improving the payment process for gasoline. Although we often don't think about how UX works in everyday life, it makes a significant difference. For example, you'd much prefer going to a bank where the staff knows your name.
Companies that don't invest in developing their UX face rising costs for acquiring and retaining customers. Many of these are offline businesses clinging to outdated methods. However, the benefits of investing in UX are clear.
Here are the top 4 reasons
Increased Conversion and Sales
As competition grows, users don't want to spend time figuring out interfaces. Almost every American is familiar with the “3-second rule” on a website—you have just three seconds to grab a visitor’s attention. Over time, this window has shortened, and the number of interactions has increased.
For example, ten years ago, a simple landing page and a small Google Ads budget could attract many clients. Fifty years ago, a sign reading "Milk for sale here" was enough to get customers.
Airbnb increased its bookings by 300% after improving the UX of its website, focusing on simplifying the booking process and enhancing the user interface.
Improved Customer Loyalty and Retention
If someone solves their problem using your product, a well-designed user journey will help retain them and encourage repeat purchases. For instance, you wouldn't want to change your accountant if they've been doing a great job for five years, or switch dentists if they've successfully treated three of your teeth. UX design directly impacts the Customer Lifetime Value (CLV or CLTV). Customers who experience positive purchasing scenarios multiple times are more likely to leave positive reviews and less likely to switch to competitors.
If you consistently focus on the user's needs and desires, their likelihood of spending money with you increases by 14.4%, their likelihood of recommending your product rises by 16.6%, and their desire to switch to a competitor decreases by 15.8%.
Experience Matters Research
Reduced Customer Acquisition Costs
Reduced customer acquisition costs are a natural result of high CLTV (life-time value). Loyal customers have long-term relationships with the company. They are satisfied with the product, make repeat purchases, and recommend it to friends. But eventually, recommendations run out. The question is: What to do when all acquaintances, friends, and family have already bought your product? Where to find new customers and how much will it cost? Investing in UX helps reduce the costs of acquiring new customers by creating customer journey maps (CJM) that best stimulate purchases from people who are hearing about you for the first time. UX interacts with them at every stage, helping solve problems and building loyalty with each interaction. Research helps you pinpoint exactly where in the interaction with potential customers you have issues and how to fix them. This saves a lot of money on both marketing and internal company resources.
Lower Development Costs
Addressing UX at the start reduces errors during product launch. User research, building CJMs, creating and testing prototypes—all help identify problems when they are still inexpensive and not yet obvious. UX helps startups develop both the project and its user-centric design. This brings 100% clarity to the project and how it will work, reducing costs on developers and saving a lot of stress. Trust me, you'll need those nerves later.
For example, if you decided to prevent users from leaving negative reviews for providers on your platform, but testing revealed that negative reviews help providers showcase their ability to handle objections. Essentially, by removing the option to leave negative reviews, you took away a chance for your providers to demonstrate their competence in challenging situations.
Solving a problem during development costs at least 10 times more than during the design phase. And if a company tries to fix an issue in a released product, the cost multiplies to 100 times.
How to Calculate the ROI of User Experience Investments?
Here's a step-by-step guide to calculating the return on investment (ROI) for UX design:
Step 1: Identify Business Metrics
Choose the metrics most important for your business at the moment, considering your strategy and short-term goals, including financial targets.
Other business metrics affected by UX might include:
Once you've identified the business metrics you want to impact, set a goal for how much you want to increase or decrease these metrics. This will be your objective.
Step 2: Gather and Analyze UX Metrics
When you know your business goal, you need to organize your current UX metrics. Collecting this data can provide insights into your current users and highlight obvious gaps in user journeys. Every business has its own UX metrics, but for a comprehensive view, consider these data sources:
Support Data:
Web Analytics:
Sales Data:
Customer Surveys:
Step 3: Translate Business Goals into UX Metrics
Finally, link your business goals with UX metrics and calculate how changes in these metrics will directly benefit the business.
Example Calculation:
Goal: Reduce customer support costs
Current Metrics:
Total monthly support cost:
6,000?queries×$500?per?query=$3,000,000
Projected Improvement:
New total monthly support cost:
2,500?queries×$500?per?query=$1,250,000
Savings:
$3,000,000?$1,250,000=$1,750,000 (Monthly)
Useful Resource: ROI Calculators for UX
Human Factors International has developed six ROI calculators to help entrepreneurs and product managers better predict the payback of UX solutions. You just need to input data for three scenarios.
These calculators can help you estimate the profit and ROI of various improvements, such as reducing dependence on support, increasing conversion rates, decreasing bounce rates, and enhancing user interaction efficiency.
By following these steps and using the available tools, you can effectively link UX improvements to tangible business benefits, making it clear how UX investments contribute to the overall success and profitability of your business.
Understanding the ROI of UX Design: A Guide for U.S. Businesses
Knowing the potential return on investment from user interfaces, user habits, or interactions with potential clients can help you calculate the benefits of improving your customer experience.
From an investment perspective, UX design is just as important as any other business development expense. It requires justification. When you know the potential of your idea, expressed in monetary terms, you can forecast profits and calculate potential losses from the lack of UX. This article will help you understand whether it's worth allocating resources to UX development in your case.
Tip: When forecasting ROI, consider that UX solutions have a cumulative effect. Improved UX can bring profit this year and twice as much next year. Therefore, it’s better to calculate ROI over 2-5 years.
Consider deviations
For example, with support savings, will we really save $1.75M? Not necessarily. External conditions may change, or more likely, conditions in neighboring business units. Remember, not only UX affects business metrics. You may perfectly implement a solution, but at the same time, change the company's pricing policy, which will cause a decrease in inquiries. Growth strategy never works in isolation.
And remember, we primarily use ROI as a decision criterion to start work. It’s normal for actual data to eventually differ.
Conclusion: What is important to know about the ROI of UX design? ROI in design is an assessment that shows the impact of UX design on your company's business goals and the quality of interaction with your customers. Businesses should invest in UX because it brings money and directly influences profit. Through increased user retention, repeat purchases, reduced development costs, and attracting new customers.
If you need a comprehensive approach to UX and professional advice, drop me a line for a free 15-min consultation.