Return on Investment (ROI)

Your constantly-updated definition of Return on Investment (ROI) and collection of topical content and literature

What is Return on Investment (ROI)?

Return on investment (ROI) is a financial metric used to analyze the efficiency of an investment. ROI = profit from an investment / investment cost, and is usually expressed as a percentage. For instance, if you invest $1,000 in creating a website and it increases your sales by $1,500, then the ROI = (1,500 - 1,000)/1,000 = 50%.

ROI is used more broadly in design to describe the effect of an investment in a design-related area—e.g., investments in design, usability, or user research. When used in this way, ROI cannot be calculated as simply as in finance, because the investment is not always measured in the same unit as the benefit, and the effect is not always direct. In design projects, an investment is often money or time, but the benefit could be increased user satisfaction, improved user efficiency, or the reduction of user error—all of which will probably lead to an indirect increase in profits.

While calculating the ROI of design efforts is difficult, some organizations have attempted to do so by analyzing the net effect that a focus on design has on the overall profitability of a company. The Design Management Institute, for instance, has found that design-centric companies (such as Apple, Coca-Cola, and IBM) outperformed the S&P index (which indicates the industry’s average performance) by 228% over a 10-year period from 2003 to 2013. Thus, having a solid grasp of ROI and an appreciation for how they can translate the dynamics involved to the user experience will give designers a powerful advantage. With an enhanced scope when determining what features a design needs versus those which may be superfluous, a designer can concentrate on how the value of convenience the user will place on it will reflect the financial health of the work after rollout.

Literature on Return on Investment (ROI)

Here’s the entire UX literature on Return on Investment (ROI) by the Interaction Design Foundation, collated in one place:

Learn more about Return on Investment (ROI)

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In this course, taught by your instructor, Don Norman, you’ll learn how designers can improve the world, how you can apply human-centered design to solve complex global challenges, and what 21st century skills you’ll need to make a difference in the world. Each lesson will build upon another to expand your knowledge of human-centered design and provide you with practical skills to make a difference in the world.

“The challenge is to use the principles of human-centered design to produce positive results, products that enhance lives and add to our pleasure and enjoyment. The goal is to produce a great product, one that is successful, and that customers love. It can be done.”

— Don Norman

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