Creating a mobile application for a business is an investment. If you’re running a business, trying to make sensible investments, or reporting to your boss on business performance, you know the importance of your Return On Investment (ROI). When it comes to the ROI for your app, there’s a good chance you’re focused heavily on its feature set. That is important, but I would argue that its User Interface (UI) and User Experience (UX) is even more important. This assertion forces us to examine design ROI in detail.
Why should you even care about this? Because the ROI on design equates to a ton of money. We’ll even point you to a case where “changing a button” improved annual revenue for one lucky company by $300 million. It’s usually not that simple, and that’s not going to happen for most mid-sized businesses, but it helps to show how mobile apps scale up so well.
First and foremost, good UI/UX is about bringing simplicity, sense and order to something that is complex, chaotic and disordered. Your app might have the coolest features in the world. But, if people find your app difficult or cumbersome to use, very few of them will use it. This issue – poor UI/UX – ranks in the Top 3 Reasons Why Mobile Apps Fail.
Mobile Apps, Design ROI, and Scale
Say you sell hamburgers. There’s a big difference in your cost to make one, a hundred or a thousand burgers. Your mobile app, being software, costs roughly the same to develop whether it ends up with one user or a million users. On this basis, of all of today’s business models and technologies, mobile applications are the easiest with which to create an economy of scale. Moreover, the larger your business, the more you stand to benefit from having a mobile app. Fundamentally, a business with 1 million users will inherently see a better ROI than one with 100,000.
There are millions of apps on the market, but the vast majority of them fall into three categories. The first involves apps mostly for internal business use which, one way or another, aim to improve efficiency. The second involves commercial apps aimed at generating and increasing revenue. For the third, check out Big Data and the Data Economy. Today, we’ll cover the first two.
Before we get into some examples, In his article Yes Alan, There is an ROI for UX Design, prominent designer Jared Spool notes:
The value that comes from good design is incremental. Thousands of small decisions, thoughtfully made, with a focus on the users’ experience is what makes design valuable.
As we get into some of the metrics that impact mobile app ROI, this should become quite clear. Though there are cases where changing a button size can have a major impact, design is frequently concerned with lots of little – almost micro-improvements. If nothing else, with smaller displays on mobile phones and tablets, every pixel counts.
ROI Scenario 1: Improving Your Efficiency with UI/UX
Let’s take the case of a mobile app for a mid-sized business supporting 100 sales agents with average wages of $65,000 per year. That’s $6.5 million a year. The company already has a mobile app for these sales agents but wants to improve it to increase agent productivity.
It hires a design agency for $100,000. After examination, the agency reduces the number of interactions (taps, clicks, swipes, key entries) needed for sales agents to access their most commonly used screens. The agency also reworks screen designs to improve on what and how much information is displayed, as well as improve access to related data.
Increasing productivity or efficiency by 10% has a direct value of $650,000.
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
$650,000 – $100,000 / $100,000 = 5.5 or 550%
That’s like handing someone $1 and they hand it back to you with an extra five bucks and change. That’s a great deal, but… it’s possible to do even better.
ROI Scenario 2: Increasing Your Revenue with UI/UX
In this scenario, your business has an app that is available through Google Play and other app stores. You sell stuff – physical products, services, digital goods… And, you want to sell more. Many of the same UI and UX elements that go into making an app to help people be more productive apply here, too — but in support of many, many more metrics, some of which do overlap.
We’ll take a simple case involving improving In-App Conversion Rate and Average Purchase Value. Let’s presume you already have 300,000 monthly active users with a 3% In-App Purchase Conversion rate each month on an average purchase value of $5.00. That’s $540,000 yearly.
Now, you go and hire a design agency for $200,000 for a year.
The agency improves In-App Conversion Rate to 5% by reducing the number of screens and user interactions, improving error handling, and reducing order transparency issues. The agency also helps you identify ways you can diversify the products/services in your in-app store – like with our 13 monetization options. Thanks to clever design changes that improve your placement, appearance, description and other details, you effectively triple your Average Purchase Value from $5 to $15.
With these improvements, your monthly revenue jumps to $225,000 or $2,700,000 per year. Discounting the $540,000 you were already making annually from mobile sales, you net a direct increase of $2,160,000!
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
$2,160,000 – $200,000 / $200,000 = 9.8 or 980%
That’s a pretty great design ROI, especially considering you only improved just two of a dozen design-related metrics. If your company had 3 million monthly active users, the case is basically made for a 10,000% ROI. It’s not all exactly this simple, but it shows that while it helps to have a large business, you don’t have to be an Uber, Airbnb, Amazon or Farmville to achieve awesome levels of ROI.
Metrics Influenced by UI and UX
All of the following metrics directly or indirectly impact the performance of commercial applications. Each deserves an explanation of the role design plays along with its impact on the ROI of your design investment. We will return to do so in considerable depth, with lots of statistics, in the near future.
Metric / Definition:
- Cost per Acquisition – Average cost to acquire each registered user. Marketing and sales costs divided by the number of new registered users.
- Store Download Conversion Rate – Percentage of page views of your app on Google Play (or other app stores) who proceed to download your app.
- App Registration Conversion Rate – Percentage of those who download your app and complete your app registration process.
- The frequency of App Use – How frequently those who have downloaded and registered your app use it.
- Daily Average Users – Average number of people who use your app daily.
- Longevity of App Use – How long after downloading your app, people continue to use it.
- Monthly Average Users – Average number of people who use your app monthly.
- In-App Purchase Conversion Rate – Percentage of users who make an in-app purchase.
- In-App Purchase Frequency – Percentage of logins that lead to an in-app purchase.
- Average Purchase Value – Total value of all in-app purchases divided by the total number of transactions.
- Average Value per Login – Total value of all in-app purchases divided by the number of logins.
- Social Sharing Rate – Average number of friends to whom your users share your app via in-app social sharing buttons.
- Social Sharing Conversion Rate – Percentage of friends that users have shared your app to who download and complete registration.
- Average Customer Lifetime Value – The aggregate total value of your average registered user.
Improvement across several metrics has a compounding, multiplicative effect. Everyone likes to talk about conversion rates, but there can be 4 or more conversion metrics to track. The following table takes a look at very typical conversion rates and what a good design team could accomplish relatively rapidly.
Cumulative Impact of Improving Conversion Rates
|Present Rate||Present Funnel||Improved Rate||Improved Funnel|
|App Store Views||10,000||10,000|
|Store Download Conversion Rate|
|App Registration Conv. Rate||30%||600 registered users||40%||1200 registered users|
|In-App Purchase Conv. Rate||4%||24 paying customers||6%||72 paying customers|
|Social Sharing Rate||10%||App shared with 60 friends||20%||App shared with 240 friends|
|Social Sharing Conv. Rate||5%||2 friends register||10%||24 friends register|
A 300% Increase in Paying Customers!
Continuous Product Development
If you are in retail, you already know how much effort is involved in improving the performance of your e-commerce site. Nearly all of the same factors apply to mobile apps, only mobile apps are even more complex and difficult. With mobile, you need to design for many more devices with much smaller screen sizes. There’s the additional burden of making sure all of your registered user’s apps are updated and getting new versions into the app stores. As you probably know, there is a lot more involved, too – like covering the backend, security, and adherence to privacy laws like GDPR.
Reinvently’s customized Continuous Product Development packages make improving the performance of your mobile app simple. We perform everything for you. Our Product Management focus in Continuous Product Development works to improve all of your app’s metrics in a structured process of iteration over time. Our aim: to compound your ROI. We also handle all of your frontend and backend product support, define and manage your mobile product roadmap, and implement new features while thoroughly testing and regularly rolling out new versions to customers and app stores.
Good Designers are Hard to Find
According to Michael Mahmood, our Head of User Design, “It’s hard to find a good designer in the present market. While most candidates have experience with color palettes and fonts, more advanced skill sets are lacking. The market demand for good designers is so high now that they all have a good-paying job if they want one, say nothing of GREAT designers!” Michael’s assessment is shared by others:
- Justin Baker, Lead Production Designer at Auction.com notes, “Companies are looking for experienced designers who can hit the ground running and typically do not have enough experienced talent to mentor junior designers.” His article on Medium goes into a lot of depth on designer wages at different levels across the United States.
- Patrick Faller, Award-Winning Journalist for Adobe, writes, “Eighty-seven percent of managers said hiring more UX designers is the top priority for their organization: higher than graphic designers (76%) and product managers (74%), and tied with software engineers for the top spot.” Patrick would also like you to check out an Infographic of Adobe’s recent designer report #MadeWithAdobeXD by designer Wen Tong.
- Robert Walters, and Twenty Recruitment – both are global, specialist professional recruiters and consultants. Both talk about the recent raises in wages for designers.
We have several awesome designers with years of product design so you don’t need to find one on your own. Michael, for example, has led multidisciplinary teams at both Intuit and LinkedIn to launch several successful products impacting users worldwide while generating hundreds of millions in revenue.
A Great Designer is Like Having your own Federal Reserve
A great UI/UX designer literally PRINTS money when working on a scaled initiative. Try calculating Design ROI on your own, seriously. Even with far more modest improvements, you can still see crazy-high ROI numbers. If you find a good UI/UX person, give them the freedom to do what they want, as large of a problem as possible, pay them well so they’re never poached, and sit back while they print money for YOU! User experience increases retention and referrals, which, in turn, increases lifetime customer value.
And About that $300,000,000 Button…
Design impacts metrics and performance in a big way. Usually, design ROI comes through lots of little changes. But, if you pay very close attention to your metrics, your customers are telling you what’s wrong and what you need to fix. Metrics for customer registrations and repeat customers played a very major role in Jared Spool’s case of the $300,000,000 button! That might be a grandiose figure for many businesses, but “generating 45% more paying customers” should also be a major attention-getter for everyone.
Want more insights about UI and UX Design to help boost your mobile business ROI?