Return on Investment (ROI) User Experience (UX) topic overview/definition


Return on Investment (ROI): Concept Definition

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.

For your convenience, we’ve collected all UX literature that deals with Return on Investment (ROI). Here’s the full list: