Sep 19 - Nielsen, Usability ROI Declining, But Still Strong (Alerbox)

Usability ROI Declining, But Still Strong

Summary: The average business metrics improvement after a usability redesign is now 83%. This is substantially less than 6 years ago, but ROI remains high because usability is still cheap relative to gains.


Six years ago, we conducted a survey of design projects and found that, after redesigning for usability, the average improvement in key performance indicators (KPI) was 135%. We've recently completed a new survey, and this time the average improvement was 83%. The return on investment (ROI) for usability is now smaller, since the cost has remained approximately constant, as the benefits have decreased.
About 12% of projects get such huge improvements, but to be conservative, I focus on the majority of projects with smaller (but still substantial) gains.

Typical business metrics include:
* Conversion rates, such as sales or lead generation
* Traffic numbers, such as page view statistics
* User performance, such as the time needed to perform key tasks
* Target feature usage, such as the number of users who click a link to crucial information

Why Usability Is Improving Less

The expected improvement from usability is smaller than it used to be for two reasons:
* We have now harvested most of the low-hanging fruit from the truly horrible websites that dominated the lost decade of Web usability (approximately 1993–2003). In those early years, Web design was abominable — think splash screens, search that didn't find anything, bloated graphics everywhere. The only good thing about these early designs was that they were so bad that it was easy for usability people to be heroes: even the smallest study would inevitably reveal several immense opportunities for improvement.
* Usability budgets have not increased substantially, even as the Web has gotten better. As the full report discusses in detail, during the last decade, the share of project resources allocated to usability has held steady at around 10% in those enlightened companies that include usability in their design lifecycle. Yes, many more companies do usability now than ever before. However, individual projects don't see much more funding, even though they're now challenged with identifying a higher level of design improvements.

At the height of the first dot-com bubble, a common conversion rate was 1%. Today, 2% is a common conversion rate. So, across the Web, this — the #1 usability metric — has indeed doubled in a decade.
Can we double again and take expected conversion rates to 4%? Most likely, yes. Some sites already achieve this, just as some well-designed e-commerce sites were getting 2% conversion rates and better back in 2000.
Once we reach 4%, can we double again? Probably. It should be feasible to reach the state where a well-designed site has an 8% expected conversion rate, and the very best sites get a bit more. Going from 2 to 4 to 8 percent might take another decade for each doubling.
It's doubtful that average conversion rates will go much beyond 10%, for the simple reason that Internet users like to compare multiple sites before they buy.

The Loyalty Decade

The formula for website success is:

B = V × C × L
Where
B = amount of business done by the site
V = unique visitors coming to the site
C = conversion rate (the percentage of visitors who become customers); note that the concept of conversion applies not only to ecommerce sites, but to any site where there is something you want users to do
L = loyalty rate (the degree to which customers return to conduct repeat business)

Thus, to double a site's business, you can double the number of unique visitors. However, this would be very expensive, requiring that you more than double the advertising budget (assuming you're already advertising under the most-promising keywords, and thus need to buy traffic from less promising or more expensive sources).
Alternatively, you can double the conversion rate and achieve the same business improvement. It's still fairly cheap to double conversion rates, though it's not as cheap as it was, say, in 2000. According to our survey, spending 10% of your development budget on usability should improve your conversion rate by 83%. You can probably double the conversion rate by spending less than 15% of your development budget. In most cases, it's far cheaper to use 15% of your development budget than to more than double your advertising budget.

..current usability ROI is so stupendously big (spend 10% to gain 83%) that it can decrease much more and still be a favorable proposition for business executives.

source:
Jakob Nielsen's Alertbox, January 22, 2008:
Usability ROI Declining, But Still Strong
http://www.useit.com/alertbox/roi.html
Usability ROI Declining, But Still Strong (Jakob Nielsen's Alertbox)