4 Factors That Will Make a Rock Solid Business Case for Return on Usability

Posted by Greg Hammond on April 10, 2012 in Featured, Web strategy insight | 1 comment

The decision makers’ primary language is the one of money. Whether you’re pitching for a project with a client or asking for funds to do usability improvements on your web site, you need to know how to create and present a credible business case.

Economics doesn’t necessarily come as easy as understanding user needs for web experts, so to help you out we’re sharing some of our methods for creating a rock solid business case. We’ve put together some easy-to-follow calculations with examples based on factors that provide return on usability which we’ve used with great success in our projects.

1. Increase in user productivity

Customer efficiency and Net Promoter Score are two of the most popular ways to measure customer experience, so increase in user productivity lets you tie usability with increase in customer satisfaction.

The benefit of customer efficiency is that it’s pretty easy to measure through these questions:

“How efficient is our web and what is it worth to us if a user can perform his or her tasks more efficiently?”

From a usability perspective, you can measure efficiency in shape of reduced time spent on a web page, on a specific function or through a flow of pages. Here’s how you calculate it:

Example: Increasing user productivity by 3 seconds

• Number of users: 1 500
• Uses per day: 30 times
• Avg user annual salary: 32 000
• Increase in efficiency: 3 seconds
• Cost to improve: 20 000
• Work days per year: 230 (1840 hours)

Increased User Productivity Return on Investment = (1 500 x 30 x 230 x ( 32 000 / 1840 ) x 0.0008) – 20 000 = 124 000

2. Increase in digital self-service

For many organizations, digital self-service is meant to be a cost efficient substitute for other service channels. A perfectly good example here is how digital banking has effectively reduced the tellers in the bank offices. In essence, this is all about moving users from one channel to another, and usability improvements will help aid this transition and shape user preference.

Return on investment for increase in digital-self service can be calculated with these two methods: Call Center Call Reduction % and Reduced Learning Curve

Example: Reducing call center volume by 20 %

• Number of annual calls to call center: 4 500 000
• Call volume reduction: 20 %
• Avg call desk staff annual salary: 32 000
• Avg length of calls: 4 minutes (0.07 hours)
• Cost to improve: 75 000
• Work days per year: 230 (1840 hours)

Reduced call center volume Return on Investment = (4 500 000 x 0.2) x 0.07 x ( 32 000 / 1 840 ) – 75 000 = 1 020 652

Example: Reduce time taken to learn by 4 hours

• Number of users: 2 500
• Change in time taken to learn: 5.5 hours
• Avg trainer annual salary: 35 000
• Cost to improve: 30 000

Reduced learning curve Return on Investment = (2 500 x (35 000 / 1 840) x 5.5) – 30 000 = 231 549

3. Increase in online sales

Usability impact on sales are most commonly measured through conversion rate. We’ve seen money being taken from the marketing budget to fund usability projects when we’ve argued that if you fix the bottom part of the funnel, you’re allowing more users to complete their purchases, while if you spend money on pouring in more users on the top of the funnel the return on investment will be significantly lower.

If you need something to compare against, use typical industry standard conversion rates to make your case.

Example: Increasing conversion rate by 2.5 %

• Annual site profit: 1 200 000
• Current conversion rate: 10 %
• Improved conversion rate: 15 %
• Cost to improve: 125 000

Increased conversion rate Return on Investment = ((1 200 000 x (15/10)) – 1 200 000) – 125 000 = 475 000

For e-commerce sites we recommend using the open wallet conversion rate which is the step putting items into the basket and proceeding to checkout as a point of measurement: imagine a customer standing at the counter with an open wallet, ready to pay – would be bad for us if he started walking away before taking out his money.

Example: Increasing open wallet conversion by 20 %

• Annual site profit: 1 200 000
• Current basket to checkout %: 20 %
• Improved basket to checkout %: 40 %
• Cost to improve: 150 000

Increased conversion rate Return on Investment = ((1 200 000 x (40/20)) – 1 200 000) – 150 000 = 1 050 000

Example: Reducing drop-off on the check out page

• Pre design drop-off rate: 75 %
• post design drop-off rate: 50 %
• Views on checkout page per month: 120 000 views
• Average order size: 45
• Profit per order: 20 %
• Cost to improve: 525 000

Change in monthly drop-off rate = ((0.75 – 0.50) x 120 000) = 30 000

Reducing drop-off rate Return on Investment = 30 000 x 50 x 0.25 x 12 = 4 500 000

4. Return on Nothing

When we present our business case, this is where it goes from nodding heads to sparking a real conversation: The bottom line, the business impact.

The concept Return on nothing is how you tie it all together by using the argument:

“What are we missing out on if we don’t do this?”

Combine your business case calculations into two categories: Increasing Profit and Reducing Costs. Both of these should be easily transferable to the company strategic goals, making it easier for them to prioritize usability in line with other budget activities.

That’s it

And there you have it – a rock solid business case for usability. To make it easier for yourself, create a baseline and measure before and after the usability improvements have been deployed.

This way you can report on the actual return on investment, reinforcing the power in web usability and increasing the likelihood for management support next time you need funding for usability projects.

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