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How to Calculate ROI for Customer Experience

Posted by Tony Quin on November 8th, 2013 at 9:45 am

How to Calculate ROI Customer Experience

If you’re a marketer, you hear the term customer experience a lot. It’s a convenient catch phrase for all the experiences that a consumer has with a brand from awareness to advocacy and it’s the product of user experience design (UX) work, which focuses on creating superior customer experiences.

While many people intuitively understand that customer experience is pretty important, however, they don’t always see the value of user experience design. Value is the keyword here because at some point you are probably going to have to justify an investment in UX.

For example, the ROI (return on investment) of the user experience for a website has been a comparatively easy to figure out in the digital world. You can value and compare the conversion rate before you redesign a website using UX and also afterwards. Improvements in simplicity and relevance invariably deliver better results, which can be easily measured. The calculation gets harder when a brand has to consider investing in a unified customer experience strategy and execution, however.

Since people hop from channel to channel so quickly and frequently today, a brand can’t have a good experience in one place and a lousy experience in another, especially when all it takes is one difficult, inconsistent experience to damage all your good work.

A friend recently went into Home Depot looking for a sawhorse. After looking in vain and not finding anyone to help him, he went to Lowe’s and used a prominently displayed Product Finder to quickly find it. He then posted to Facebook that he was done with Home Depot and Lowes was his company. He has over 200 friends, so what’s the cost of that customer experience faux pas?

As Forrester says:

“A good user experience builds brand equity with every interaction, but a bad one can completely erode that equity on all levels. Worse, it can cause a customer to leave you for a competitor, never to return again.”

What brands clearly need is a unified experience that reflects an in-depth understanding of what the consumer is trying to accomplish while clearly differentiating the brand. The good news is that consumers still want relationships with brands; the bad news is that their standards are so much higher than ever before, and they do not have patience for brands that don’t do their homework.

The work of User Experience results in the design of all the interactions that a brand has with consumers. That includes interactions on websites, mobile apps, social channels, the telephone or in the store. Its purpose is to design experiences that not only succeed in their purpose, but reinforce the brand promise and identity. UX must therefore be based on a comprehensive understanding of the consumer, the context and the category. That means starting with research, journey mapping, competitive analysis, content strategy and all the other foundational work that informs UX design.

It’s not cheap and it’s tempting to skip it, but according to numerous studies it costs 50-100 times the original investment to fix an experience that’s not working, to say nothing of the cost of repairing a broken brand perception.

Many would argue that the field of battle between brands now is customer experience. But seeing the relationship between a better customer experience and the UX work required getting there isn’t always clear.

A few of the numerous benefits great UX delivers includes more consumer engagement through increased conversion rates, ease of use, higher satisfaction and higher comprehension, better ROI from larger transactions, more lead identification, improved brand equity, higher customer retention, reduced costs from fewer redesigns, fewer errors, less maintenance and support.

Of course it would be terrific to have an easy ROI calculation that makes the business case for investments in UX. Some organizations claim that every dollar invested in UX delivers a return of 2-100 times, but in the end it is a very difficult calculation.

It’s akin to asking the value of a great advertising campaign versus one that’s just OK. We all know intuitively it can be huge, but how do you measure its value in advance?

The bottom line is that in a world where consumers rule, great customer experience is table stakes for any serious player. That means taking a serious, systematic, scientific approach to getting there, which requires great UX.

One Response to “How to Calculate ROI for Customer Experience”

  1. Very interesting piece Tony. One area of customer experience which is completely measurable is with mobile apps where data analytics (in some cases) can log time engagement plus geo locational mapping e.g. measuring their activities in-store whilst on their mobile. With more consumers using mobile for more and more everyday tasks, it is a platform which will become the premium marketing channel in the future.

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