ROI of user research

Return on Investment (ROI) has long been a fundamental tool for businesses, helping them navigate the ever-changing landscape of investments and financial outcomes. However, quantifying the tangible benefits of UX research is a common challenge for businesses and organizations alike, igniting a fervent conversation around ROI.

ROI of user research ventures into the realm of insights, feedback, and understanding users, making the process of quantifying its value both intricate and difficult to measure.

In this blog post, we’ve called upon industry experts to share their knowledge and offer real-world examples of how they measure ROI in user research. We also explore why ROI matters, the metrics used, and how to measure the impact of your user experience research effectively.

What value does user research bring in terms of ROI?

ROI is an important metric for evaluating the efficiency and effectiveness of an investment, whether it's a marketing campaign, a software tool, or a design project. 

When we talk about the ROI of user research, we’re talking about the returns that organizations gain from dedicating resources to enhancing the user experience of their products, services, or platforms. It quantifies the financial benefits reaped from improving user satisfaction, usability, and overall user interaction. 

Calculating ROI on UX involves measuring the gains in revenue, cost savings, or other financial metrics against the investments made in UX research, design, and improvements. It's a key factor for justifying and prioritizing UX-related initiatives and making sure that user-centric strategies align with business goals.

As seasoned product designer and UX mentor Samy Vahdat points out, “Not all ROI calculations are created equal, and some common misconceptions can lead to inaccurate or misleading results.” 

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The 5 biggest myths about calculating the ROI of user research

In all the talk about measuring the value of user research, some common misconceptions have cropped up that can make things confusing. So, we talked to some UX experts to clear up the five most common myths about the ROI of user research.

Myth #1: ROI is a simple formula that can be applied to any situation

“This myth assumes that ROI is a universal and objective measure that can be easily calculated and compared across different scenarios,” states Samy. In reality, ROI depends on various factors, including objectives, costs, benefits, and the time frame of the investment. Different investments may have distinct goals that can't always be measured in monetary terms, such as increasing brand awareness, generating leads, improving customer satisfaction, or reducing churn.

Myth #2: Usability metrics prove ROI 

UX researchers often lean towards their natural inclination to judge an interface or approach by its usability, using standardized usability metrics such as System Usability Score (SUS), Single Ease Question (SEQ), and the Usability Metric for User Experience - Lite (UMUX-Lite). At the end of the day, this isn’t necessarily what businesses care about. 

Anna Loparev, Senior User Experience Researcher at New Relic, emphasizes that businesses prioritize one ultimate metric: profit.

“They want to know, given how much they pay for researchers, participants, and tooling, how much more money does the business make (through additional sales or being able to charge more per customer).

“An increase in usability does not equate to an increase in profits – a lot of other factors also play a role, such as advertising efforts, documentation clarity, customer support quality, load times, and, of course, price,” adds Anna .

Myth #3: ROI is only about short-term results 

The belief that the ROI of user research is solely tied to short-term results is a myth. In reality, user research can provide valuable insights that not only enhance immediate product performance, but also contribute to long-term success by informing strategic decisions and building customer loyalty over time.

According to Samy, this myth “ignores the long-term and intangible benefits that may not be captured by conventional metrics, such as customer loyalty, brand reputation, innovation potential, or employee engagement.”

Myth #4: ROI is impossible to calculate for upstream functions like UX research

Anna highlights that assessing ROI for elements of product development that are distant from the final product, like UX research, can be a challenging task. But it’s not impossible.

While it's relatively straightforward to measure the ROI of engineering, which directly contributes to product creation, the relationship between UX and profitability is more intricate. Anna points out that, in the short term, businesses might consider forgoing UX design and research to reduce expenses, potentially achieving a passable ROI by saving on these costs. 

“This is not how you become a market leader, but if you’re maintaining a pre-existing design, entering a space where you’re the first to release a product, or following an established trend but improving on something code-based such as load times, it may be enough for the short term.” 

Competitors with dedicated UX teams are likely to outperform in quality and market appeal. “In the long term, a competitor with a research team will figure out how to better design and market their version of your product, and you will potentially lose market share.”

“Is it possible to measure ROI for UX design and research? Yes, but it’s harder than for things like engineering, sales, and marketing. The impact is not as direct, so there’s a series of conversions that need to happen first,” Anna concludes. 

Myth #5: ROI is the only measure that matters

Lastly, it's unwise to make ROI the only factor in decision-making. “This can lead to a narrow and short-sighted view that overlooks the bigger picture and the trade-offs involved in any investment,” shares Samy. 

“For example, a high ROI may come at the expense of quality, customer satisfaction, or ethical standards. ROI is not the only measure that matters, but one of many factors that need to be considered holistically.”

Why should you calculate the ROI of user research? 

As Anna shares, “Businesses care about profits. If there's no measure of ROI for a function, then that function is costing the business money but doesn't have a validated value proposition – there's no justification for listening to that function or even keeping that function, especially when times get tough like during a recession.“

Anna emphasizes that without an ROI calculation, businesses may not see the value in investing in UX. While designers and researchers appreciate usability and creating user-friendly products, businesses primarily focus on profitability, making it challenging to allocate funds for initiatives based on altruism.

Beyond demonstrating the value of user research, there are several other key reasons why calculating the ROI of user research is important. It helps to:

• Encourage continuous improve­ment: “Organizations can refine their design strategies and make­ ongoing enhancements by quantifying the­ impact of UX change,” shares Adebayo Samson, an edtech UX researcher and Founder of Academicful. This process involves collaborating with stakeholders, fostering interdepartmental cooperation, and promoting a comprehensive approach to product development.

• Justify decisions: ROI provides evidence to justify decisions and prioritize actions based on data, rather than relying solely on intuition or assumptions. Samy adds, ”We can make informed and rational choices that are aligned with the objectives and expectations of our stakeholders.”

• Communicate effectively: By using financial metrics that stakeholders understand, “we can build trust and credibility with our audience and persuade them to take action on our suggestions,” Samy adds. ROI helps to make sure UX work is aligned with the business goals and delivers value to both users and the organization.

• Motivate extra investment: When you have concrete evidence of a positive ROI, you can, according to Adebayo, “persuade stakeholders, decision-makers, and budget holde­rs to allocate resources for UX improvements and help prioritize initiatives effectively.”

How UX affects business revenue

UX plays a pivotal role in influencing business revenue. It enhances customer satisfaction, loyalty, retention, and conversion rates while reducing costs and usability issues. According to Samy, “A better UX design can increase conversion rates by up to 400% and create positive word-of-mouth referrals.” Additionally, it can save costs by improving design efficiency and avoiding customer complaints or churn.

Business longevity and customer satisfaction go hand-in-hand, according to Daniel Zimmer, UX Researcher at Van Lanschot Kempen. “Investing in improving client satisfaction is the only way to bring sustainable revenue for your company. When the customer satisfaction is high, they will reuse your products.”

How do you measure the ROI of user research?

Now we understand why it’s important, let's turn our attention to the question, "how do you measure the ROI of user research?". Below, we explore the methodologies, metrics, and real-world examples of how UX professionals measure ROI to prove the significance and effectiveness of their work.

Metrics to measure ROI of user research

Calculating the ROI of user research isn’t easy, and after chatting with various UX experts, it’s clear that different methods vary depending on the company, project type, and goals.

According to Samy, there are four factors to consider:

• Customer satisfaction: The degree to which users are satisfied with a product or service.

• Customer loyalty and retention: Identifying users who remain loyal over time, fostering lasting relationships.

• Conversion rate: The percentage of users completing desired actions, such as signing up or purchasing.

• Cost reduction: The amount of money saved through improved UX design by reducing errors, waste, support, or maintenance costs.

The formula Samy uses to calculate ROI is: ROI = (Benefit - Cost) / Cost * 100, “where the benefit is the income generated or cost saved by improving the UX design, and the cost is the investment made in UX research and design.”

Daniel uses the Net Promoter Score (NPS) as a primary metric to measure ROI. This score assesses loyalty by determining a customer’s inclination to recommend a company's products or services, and is typically measured on a scale from 0 to 10.

It holds significant importance for Daniel and his team. Daniel explains, "It provides an objective means for us to measure client satisfaction, including all the non-digital steps in the process as well."

According to Anna, the primary role of UX research in product development is to offer insights and suggestions that enhance or validate product design, ultimately leading to increased profits. 

“The validation side is tricky because, while it’s possible to prove the failure of a validation or the impact of ignoring a validation, it’s hard to prove the success of a validation.” 

Failure, in this context, refers to sales falling short of expectations due to design, which can serve as a persuasive tool to encourage a company to perform validations, “but it will only highlight UX research failures if there’s already buy-in into the process.” 

Successful validation implies smoother product releases and increased sales, but it's tough to attribute these solely to validation without pilot studies. According to Anna, to demonstrate the value of UX research, it's better to focus on showcasing research-driven improvements.

“What is a measure of 'good' improvement? It can’t just be usability – that doesn’t always equate to more money. As researchers, we need to convert that improvement in usability to improvement in sales.” 

To address this, one method Anna suggests is connecting research recommendations to developer backlogs using tools like Jira. “For example, if your developers use Jira to track backlog items, as a UX research team, also keep track of studies via Jira, including recommendations. Then, when developers (or designers) are ready to implement a recommendation, use dependencies in Jira to programmatically connect your recommendation with the product release that included the change.” 

Anna continues, “Now you know what percentage of the release came from research, and ideally there’s some distinction on the developer backlog for front-end and back-end work, in which case you can also determine what percentage of the design came from research.”

Combine this information with sales and profit data to assess the impact on sales. Determine the overall revenue generated, and adjust it based on the proportion attributed to UX research input, “i.e. (UX research ROI) = (percentage of update/design based on UX research) * (uptick in profit from new release).”

This approach helps connect UX research input and ROI, however other factors like marketing may also influence results. To mitigate this, Anna suggests looking at the continued impact post-marketing campaign to try to rule out that factor. 

Measuring ROI for user research: Where insights meet impact, and data drives design excellence

In summary, ROI of user research isn't just a metric; it's a critical tool for aligning UX efforts with business goals, demonstrating value, and ensuring that UX design delivers value to both users and organizations. As organizations strive for excellence in user experience, understanding and effectively measuring ROI become invaluable components of success.

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