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Math behind the money

Opinion

Math behind the money

 

During my two and a half years at RBBi and throughout my 15-year career before that, I have seen that several clients tend to skip the most important phases of product development – be it for a website, mobile app, consumer product or service design – let alone the usability and user experience (UX) practices, usually in attempts to save time and money. However, if clients can understand these practices and the return incremental investments that their digital products will generate, I bet they would happily make them.

While better UX can be achieved through the infusion of simple usability practices when building a digital product or planning a serviced design, it needs usability testing – and changes based on this testing – when the product already exists. This, of course, entails an increase in spend, which typically stands at 10 percent to 15 percent of a project’s overall cost.

Considering the state of the market in this region, it only makes sense for clients to incur additional costs on such practices if their business leads and bottom lines are linked to their digital presence. Take a recent global user and usability research that we undertook for the Ritz- Carlton and Marriott websites as an example; when asked about the motivation behind the huge investment that the client made into those websites, he said that, based on his data, he estimated his online sales in the first year to amount to 10 times that investment. Another usability study we undertook for a well-known regional news portal set KPIs (key performance indicators) such as increased page views, time spent and efficiency; these were business goals that would ultimately result in actual revenue. Determining one ‘correct’ formula to calculate ROI (return on investment) can be a bit tough, since its components change for every company and project. That said, ROI is always calculated in terms of increase or decrease of a key variable. These increases and decreases usually fall into one of six categories:

Decreased call center queries

Websites have become the first point of information and interaction for most businesses these days. For example, we were recently assigned a task to re-design a dashboard of a self-serving advertising platform. The client used to receive approximately 20 to 25 calls a day to get help on the platform. After the re-design, those calls dropped to four to five calls a day.

Increased sales and revenues

These metrics, typically measured by revenue from add-ons or conversion rates – which often gets mixed up with website conversions – are usually provided by the sales and finance departments. If you are an e-commerce player, airline, hotel or any other business that has direct sales and leads from your online channels, converting online visitors to customers should be the highest priority. You can easily increase the conversion rate by optimizing your website, instead of spending your valuable money in getting more people to visit it. Digital, in this part of the world, has always been about media and marketing. But have clients ever explored the benefits of spending on usability tests and optimization for their websites as much as they would on one online campaign? If you get 200 people to your site and three end up buying from it, the conversion rate would stand 1.5 percent. If you spend on usability testing and optimization, rather than on marketing and media, you could increase that rate to two percent and, using a fraction of your campaign budget, you could achieve 25 percent to 30 percent increase in sales.

Increased productivity

Most often, relevant and large pools of employees complete certain repetitive tasks on famous ERP (enterprise resource planning) software. Metrics to measure their productivity are found in operations, HR, and finance. For example, if you optimize the usability on a series of screens so that what was once a five-minute task is now a four-minute task, then you’ve increased a person’s productivity by 25 percent. That’s huge. If it’s a call center that employs ten employees with an average salary of AED15,000 – and is charged undetermined overhead costs – you could either release those employees or reassign them to other activities, saving AED 37,500 per month. If it’s a customer service desk, where software is used to transact for and cater to customers, imagine the impact of optimization on the number of customers that can be simultaneously served.

Increased customer satisfaction and loyalty

This variable is extremely difficult to measure and should be used as a primary cost justification only in extreme cases. That said, one method of measuring customer loyalty is customer retention – especially in organizations that know when their customers are most likely to defect to a competitor or a more mature product offering. The calcula- tion of this variable takes into account the cost of new customer acquisition and amortizes the cost over the average customer retention period. Increasing average customer retention equals cost savings for the company and can justify UX and usability work related to customer loyalty.

Decreased training and support costs

If customers generate calls, support tickets or other uncompensated overhead costs for the business, then those costs should be measured. In this regard, clients can follow airlines’ methodology; when a passenger, for example, calls a travel agent to check on his or her flight status, the airline knows how long that call will last. Based on the aver- age costs per minute for phone agents (including salary, benefits and overheads, such as the phone line, office space and electricity), the airline can assign a monetary value to the cost of the call. Because airlines handle large volumes of calls every day, if there is an increase of 2,500 flight status check calls a day at a cost of $2 per call, then uncompensated support costs would rise by $5,000 for the same duration. If the airline were to do a $50,000 eye tracking usability study to get that number down to 1,225 calls a day – assuming a clean 50 percent improvement – then that usability study would pay for itself in 20 days.

Decreased development and maintenance costs

Measured, validated and clearer KPIs defined by user experience processes result in more precise development times, thus reducing the duration of and efforts into changing and re-developing the product. It also leads to more informed decisions, so owners know expected results, as these would be already tested and validated with users.

Bad UX is often a reflection of poor design and complexity in the underlying product. A hallmark of a good UX is the elimination of unnecessary or marginal features. This reduces the complexity of the code base, making it more robust and less buggy. As a wise man once said: “There are no bugs in a code you don’t write.”

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