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What’s the business value of user experience (UX)?

Many companies invest in UX, but what is really the business value of user experience? What is the ROI of investing your money into it? And lastly, what is the risk of not calculating it? We answer all these questions in this article.

Calculating the benefit of user experience is often seen as too hard and obscure. For this reason many teams incur higher costs, miss sales chances and, in general, put their whole project at risk because they allocate too little resources to UX.

To help you make informed decisions we researched the most reputable sources and collected accurate data into this article.

 

The business value of user experience: what are we talking about

User experience (UX) is a strategic activity for the success of any digital company. Its essence is to understand the needs of users and translate them into a product or service

User experience is more than just design. It’s a process that starts by planning and researching and that in its execution phase involves designing and testing. It latches onto different disciplines, from marketing to development.

User experience is not to be confused with usability. Usability is only a part of UX and is more narrow. It studies how to improve the ease and effectiveness with which users perform certain tasks.

In this article we focus on the ROI (return on investment) of user experience. You can download the full infographic here.

 

What you are missing when you don’t invest in UX

There’s an easy answer to why you should invest in UX. It’s because not doing so costs you money! Having a poor customer experience means that many of your users will decide to buy from a competitor rather than you. Not doing UX activities also means a higher risk of failure.

Consider this:

  • 89% of consumers purchased from a competitor following a poor customer experience.
  • Investing in UX also de-risks your project, with 70% of projects failing because they fail to meet users’ needs.

So the very first aspect to consider when calculating the business value of UX is that not investing in UX it’s a cost and a risk.

Aside from these two general reasons, the main reasons to invest in UX can be grouped into: saving on costs and increasing revenue.

Let’s analyze them separately.

 

Invest in UX to reduce costs

What is the cost-saving associated with UX and what kind of costs can you expect to optimize?

Investing in UX reduces the waste of resources. In particular, UX reduces:

  • Waste in development
  • Time for development and decision-making
  • Costs of support (including customer care, training, documentation)
  • Acquisition and retention cost of users
the business value of ux
As for waste in development, the general rule is the 1:10:100 rule. Every €1 (or dollar) spent in the research phase saves you €10 of changing something in the design phase and €100 for a change that needs to be done in the development phase.

With regard to development time, UX research helps improve decision making and prioritization of development tasks, reducing time by 33-50%.

Considering support costs, the business case from MacAfee shows companies can save up to 90% of their support costs by improving UX.

Lastly, Time reduced its bounce rate by 15% when they introduced the continuous scroll feature for their articles.

In e-commerce the data are even more impressive. It has been calculated that sub-standard UX costs companies roughly a fourth of their profits, with 44% of customers abandoning goods at the checkout due to poor user experience.

The business value of UX to improve your business performance

Next to reducing costs, investing in UX increases ROI by improving the overall business performance.

  • Investing in UX from the start increases by 4x on average the success of a new project
  • A generalized improved performance on the business KPI of +83%
  • UX leads to increased conversion and engagement
  • Great UX determines a higher perceived value of the product or service
the business value of ux
Companies that optimize their conversion rate can expect an overall increase in conversion of 83% when spending 10% of their development budget in UX. Investing in Conversion Rate Optimization (CRO) yields an average ROI of 223%. NN Group has calculated that the average e-commerce site could increase its current sales by 79% with good UX.

As for the increase in the perceived value, PWC has calculated that in general, 42% of users would pay more for a satisfactory user experience. How much more users are willing to pay varies from one industry to another, with around 7% more in car insurance to 16% more for coffee.

 

What part of your budget should you spend in UX?

The budget should be defined according to your business priorities. A good rule of thumb is to spend around 10-12% of your development budget in UX.

the business value of ux

Where can you find business cases on UX?

Here you can read use cases about the business value of UX for companies that have used it to lower their costs or increase their KPIs.

  • MacAfee lowered the costs of their support calls by 90% thanks to UX improvement (here).
  • In the first year of Amazon Jeff Bezos funded UX over marketing 100:0. Amazon still spends large amounts in UX (here).
  • Virgin America increased by 3x the conversion of their mobile app and reduced by 20% the amount of web-related support calls (here).
  • HubSpot more than doubled their sales by re-designing the website (here).

 

One last piece of advice

When it comes to the business value of user experience don’t overthink! A meaningful ROI is easy to calculate and its impact on KPIs must be extremely clear.

Ask yourself the following: what KPI do I want to improve? Can I measure the improvement and what does this improvement mean for the rest of the business? Does it save development costs, or improve the Net Promoter Score (NPS)? Or again, does it increase the volume of sales?

What other meaningful metric can you adopt to assess the business value of UX? This is what defines your business case.

Do you want to download the infographic with all the data from this article? Click here.

 

How can you calculate your return for UX?

If you want to assess the value of a UX project for your company feel free to get in touch here.

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