WHITE PAPER Return On Investment Lee Farabaugh, MS-HCI MSHI Chief Experience Officer User Experience Best Practices in Technology Projects January 2011 The Challenge: Is There a Return? How Much? What s the Math? Have you rolled out a new software application, mobile app, patient portal or a product like a personal health record and few, if any, people use it, or they use it at first, and then quit? Why? It s likely that end user experience with the product wasn t at the center of the design and development process, because User Experience (UX) best practice research and design methods weren t used. One more time why? Most often you can point a finger at an unclear or misunderstood return on investment (ROI) in using UX resources and methods. Product Managers make sure the application or product has the right functions and features. Developers make sure those work well and the application plays well with others. Architects ensure the right technologies are used and it all hangs together. Project Managers keep things on track and within budget. These skills and expertise are always included in a development project. Their ROI is assumed. So why isn t UX defacto included? We often hear in our industry and from clients that the return is hard to get your arms around. If you are in that camp then this White Paper is for you. It will address, and hopefully inform you, of several methods or approaches to understand and calculate value when including UX methods in a development effort. Let s get started with the following thesis by applying UX research and design in the development of an application, product or platform, you will create exceptional value with one or more of the following: Differentiating your company Lowering your costs Improving end user adoption that drives growth or other benefits 2013 PointClear Solutions. 1
Different Strokes Different Folks In our work we have noticed two consistent points of view when attempting to calculate the benefits of using UX practices. Some companies see UX as a no-brainer and don t mind the benefits being intangible or hard to quantify. A rich and rewarding user experience for their customers is imbedded in their business model and culture. They inherently drive this into everything they do, including technology projects that touch customers and partners. Others feel UX is important but struggle for a way to justify investment in it without some evidence of a return using our three value propositions above. The CIO, project manager or product manager wants to quantify in some way the reasons to include experienced UX resources on the development team. Both approaches are fine depending on your situation. For the latter camp, we provide below a framework, in the form of a two-by-two matrix, that will help you better understand the differing ways to look at ROI for UX. The framework has two dimensions: Quantitative vs. Qualitative and Macroscopic vs. Microscopic. Quantitative vs. Qualitative is the approach of measuring value. Macroscopic vs. Microscopic really just means big picture versus little picture. 2013 PointClear Solutions. 2
ROI Approaches When Using UX Practices 2013 PointClear Solutions. 3
Methods Macro-Qual This method appeals to executives who say I can t provide an exact measurement of why, but our customers sure do love us. They argue that returns are best measured at macro levels and that customer satisfaction and loyalty is driven by exceptional user experiences. Customers love the company s technology products, which ultimately result in real business performance. For example, in 2006, investor Jon Lax tested this hypothesis by creating the UX Fund, composed only of companies known for delivering outstanding user experiences. Choices were based on four criteria: demonstrated care in product and website design; history of innovation; loyal customer base; and positive business-to-business experience. Over one year, the portfolio s value increased by 39.37%, outperforming all major U.S. indices (NASDAQ 18.09%, S+P 9.47%, NASDAQ 100 26.81%, NYSE 14.67%). Macro-Quant Commonly known as the we have a hard dollar ROI calculation crowd, studies have shown that for every $1 invested in UX design for a particular project it leads to between $2 and $100 in return. That s a high variation indeed but a really good return at even the lowest end of the range. How? Dollars invested result in decreased development costs, revenue growth and speed to market, according to UX Business Impacts and ROI, an SDS Consulting special report from their IT Leadership Series. Micro-Qual This method applies intangible things like satisfaction in order to try to measure ROI. Human Factors International has developed several calculators that measure these less tangible attributes to determine the return on improving UX. The calculators measure benefits such as increases in productivity and conversion rates, reducing usage of help desks, need for formal training, and drop- off rates and learning curves. These kinds of benefits can all be aligned with satisfaction levels. Micro-Quant Finally, the Micro-Quant method takes another approach and argues that the direct costs of using UX in a particular software development effort can be calculated. This approach is the most need to see it to believe it method. A specific example of this would be to look at a software development project without UX involved and compare the costs to another similar project with UX involved. It requires looking at the lifecycle past the initial production release. The theory is that the really large expense is finding out that people don t like or use the software now in production and it must be redesigned. Measuring the cost of that redesign compared to using UX up front is the ROI calculation people are trying to obtain. But, as you might guess, this is not always straightforward. 2013 PointClear Solutions. 4
A Few Examples User-centered research and design practices imbedded in technology development not only drive the benefits and value we are describing, but can also drive brand and equity value in your company. Examples are some of the biggest brand names in business today including: Apple, Google, and Amazon. Not only are these companies successful, but their names are almost synonymous with a rich and rewarding customer experience with their offerings. Another way to look at it: iphone is to flip phone as Nordstrom is to Walmart. The positive user or customer experience wins the day and drives real value for everyone. At a micro level, McAfee calculates that a redesign of the User Interface of its core products saved the company 90% in support costs. While specific ROI metrics are not available, another company that recently upped its UX investment is PeopleSoft. Recognizing a market opportunity for more usable software, the company has been organizing meetings where customers can discuss problems with a view of improving the user s experience with their products in future releases. PointClear s Perspective Some companies will be satisfied with a qualitative proposition that using UX methods in product development results in increased customer satisfaction and loyalty, which will make a lot of good things happen, like customer acquisition, revenue growth and market share leadership. On the other hand, some will continue to take a more quantitative approach that requires hard math to support a decision to invest in UX. As noted, both of these approaches are overlaid by what we call the big versus little picture. The struggle that most people have is that they see these approaches as mutually exclusive. They select one approach, offer one solution and argue its validity. We believe you should take a situational approach to the ROI decision, meaning: why not use any of the four methods depending on the specific project under consideration, investment required, market conditions and your company culture. In fact, you might use more than one. 2013 PointClear Solutions. 5
The table below offers a mapping of typical questions our clients ask to one of the four methods: Question Will our company have more satisfied customers if we incorporate UX into the culture? Method Macro-Qual: Present data drawn from a set of industry-related companies, such as product satisfaction numbers. If those numbers are not readily available, PointClear can assist in assembling them. Does our company have better profits as a whole when embracing UX methods? Macro-Quant: Focus on data that supports how companies that invested in UX outperformed the market. Do our software development efforts produce higher satisfaction rates using UX practitioners on projects? Micro-Qual: Consider inputting internal numbers into one or more of the project- specific UX to ROI calculators developed by HFI. To satisfy the qualitative perspective, customize your approach to your specific customers corporate cultures and unique needs and desires for usability. Do we avoid reconstruction costs by incorporating UX resources on our projects? Micro-Quant: Here, an ROI calculator will be even more critical in gaining a commitment; but be sure to emphasize hard dollar numbers rather than more qualitative customer culture statements or generalizations about UX s impact on ROI. Another approach may be a costbenefits analysis. In Summary There are three core business benefits to using UX best practices and resources in technology development projects, whether it is a software application, a mobile app or products like electronic and personal health records, e-prescribing, patient portals, etc. They are: Differentiating your company Lowering your costs Improving end-user adoption that drives growth or other benefits There is high-level evidence of these benefits: think Apple, Zappos, Netflix, Amazon, 2013 PointClear Solutions. 6
Facebook, Southwest Airlines and ebay. Their brands are rock solid driven by rich and rewarding user experiences with their products, storefronts, and networks. For those wanting more tactical evidence of return on investment consider using the ROI for UX Framework in this White Paper. Use the four methods on a case-by-case basis depending on the project in question and related goals and conditions. For more information, contact: Lee Farabaugh, Chief Experience Officer lee.farabaugh@pointclearsolutions.com (404) 630-2633 2013 PointClear Solutions. 7