How To Calculate the Return on Investment [ROI] for User Experience Activities [UX Activities]
Return on investment (ROI) is a ratio between net profit (over a period) and the cost of financing (resulting from an investment of some resources at a point in time). A high ROI means the investment’s gains compare favourably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the capabilities of several different investments. In economic terms, it is one way of relating profits to capital invested.
Three user experience metrics to help you measure the ROI of your UX efforts and optimize your conversion funnel
The conversion rate is the number of conversions divided by the total number of visitors. For example, if an ecommerce site receives 200 visitors in a month and has 50 sales, the conversion rate would be 50 divided by 200, or 25%. A conversion can refer to any desired action that you want the user to take.
You can measure the relative impact that UX has on your key performance indicators (KPIs) by calculating the conversion rate. For example, say we want to find out how many of the people who visited our blog subscribed to our newsletter. To do this, we need to track the Number of people who navigated to our blog and then the Number of resulting subscriptions (conversions).
Our conversion rate will be the Number of blog subscriptions divided by the Number of those who had the opportunity to subscribe.
Subscriptions / Potential subscriptions x 100 = Conversion Rate (%)
So, if 1500 people reached our blog, and 150 of them subscribed, that means that 1 in 10 visitors subscribed. Our conversion rate is the percentage of this proportion (10%).
Because we’re measuring what’s happening directly on our site, UX significantly affects conversion rates. Branding, usability and accessibility within the conversion funnel are all related to our UX strategy. In user research, we use randomized controlled A/B tests to calculate the return on investment of UX. It is the most persuasive case you can make for UX ROI because it allows you to understand why specific components of your UX impact user behaviour, as well as show causation (the relationship between the effort and the actual result). Randomized controlled A/B tests can be performed with several usability testing tools, such as UserTesting.
Drop Off Rate
his percentage is called the drop off rate: the percentage of people that doesn’t do what you like them to do, but do stay on your website. As you can see, these percentages are quite far apart. The exit rate at step 1 is only 7%, but the drop off rate (how many people don’t proceed to step 2?) is a whopping 75%
Drop off rates measure the number of visitors who left the conversion funnel without completing it (without buying, in our example), but don’t necessarily blow your site. It is essential to measure your drop rate to identify the steps in the funnel that are causing visitors to ‘drop off’. Once you’ve got your drop off rate calculated, you can set about analyzing the design and usability of your conversion funnel and make the necessary improvements to the user experience to optimize conversion.
To calculate your drop off rate, you’ll need to use Google Analytics. Create segments for each step in the conversion funnel and let Google Analytics do the numbers. Your drop off rate is the Number of users divided by the Number of unique users in each segment.
Number of users /Number of unique users in each segment x 100 = Drop off rate (%)
Single Usability Metric (SUM) To Record Errors
SUM is a standardized, summated and single usability metric. It was developed to represent the majority of variation in four standard usability metrics used in summative usability tests: task completion rates, task time, satisfaction and error count.
Implementing poor UX choices can lead to user interface design problems and can affect your users’ ability to move through the conversion funnel. While analytics tell you where and how many of your customers are dropping off the tube, they do not tell you what the problem is. Measuring errors in your UX process help you gain a deeper understanding of the types of mistakes you’re making and how to avoid them.
One of the most effective ways of measuring errors is with the single usability metric (SUM). SUM is a standardized, summated and single usability metric that measures task completion rates, task time, and satisfaction and error count. The SUM calculator takes the raw usability metrics on a task-by-task basis and converts them into a SUM score with confidence intervals. SUM will automatically calculate the maximum acceptable task time.
Task completion time is but one metric that goes towards understanding and therefore avoiding UX errors. There are plenty of other ways to improve your usability and eliminate friction in your design process. Spend some time analyzing your UX errors to optimize your conversion funnel.
Fewer UX errors = fewer conversion drop-offs