The business of user experience: how good UX directly impacts on company performance

User experience (UX) focuses on enhancing user satisfaction by improving how we interact with the websites, applications and devices in our lives. It all about how a person feels when interfacing with these systems – does this website give me value? Is it easy and pleasant to use?

The term 'user experience' was coined by Dr. Donald Norman in the mid 1990’s, a cognitive science researcher who was also the first to describe the importance of user-centered design – the notion that design decisions should be based on the needs and wants of users.

In recent years there’s been growing recognition of the role UX plays in both user acquisition and retention. If you build something that’s easy to use, more people will want to use it – and importantly keep using it.

This element of customer retention is becoming increasingly important in a digital world, where competition – and access to competition – is growing rapidly.

There’s been an elevation of the UX discipline as more and more organisations realise the value it can leverage in delivering more engaging, personalised and meaningful interactions. UX professionals are being given more responsibility within digital teams and higher profiles within corporate structures.

As the market has increasingly demanded more 'scientific' methodologies and techniques for managing UX, the discipline itself has also evolved and matured. UX has adapted from being limited in terms of research size and results to being able to obtain and analyse large scale quantitative data that can be used to develop UX KPIs.

As a result, UX has thrived as it has been able to demonstrate significant impact on business performance and justify its seat at the boardroom table.

Age of the customer

According to Forrester, we’re entering the age of the customer where empowered consumers are shaping business strategy. There is an expectation of consistent and high-value in-person and digital experiences.

Customers don't care if building these experiences is hard or requires a complex, multifunction approach from across your business. They want immediate value and will go elsewhere if you can't provide it.

Whether business-to-consumer (B2C) or business-to-business (B2B) – or product-or service-focused – every company in every industry can leverage great customer experiences for business gain.

Customer experience (CX) has always been important. It is now mission-critical. And, in the age of the customer, the lines between UX and CX are blurring as UX plays a greater role in both customer acquisition and retention.

Even within the UX community itself, there’s a blurring of job roles and functions. In particular, UX research, which involves the practice of obtaining user feedback, is becoming a critical part of the UX, and even the design process as a whole.

> See also: Five tips to improving the user experience of web forms 

This only serves to increase the importance of the customer in the workings and considerations of organisations.

The business case for user experience

Demonstrating Return on Investment (ROI) is one particular form of measurement used to assess the business impact of user experience.

Numerous studies have found that every dollar spent on UX brings in between $2 and $100 dollars in return. Forrester revealed that 'implementing a focus on customers’ experience increases their willingness to pay by 14.4 %, reduces their reluctance to switch brands by 15.8 %, and boosts their likelihood to recommend your product by 16.6 %'.

There’s plenty of evidence that UX research and testing, when done correctly, delivers excellent ROI but this must be communicated clearly within organisations to ensure teams are provided with the budgets they require.

UX and stock performance

There have also been a variety of studies focussing on whether UX has an impact on stock market performance. One of the first was the UX Fund, a year-long experiment in 2006 which was created to test the belief that companies who deliver a great user experience will see it reflected in their stock price.

On November 1, 2006, two UX designers, Geoff Teehan and Jon Lax, tracked 10 companies in their UX Fund and invested $50,000 in the fund.

The companies, which included Apple, Target, Electronic Arts, Research in Motion (RIM), Progressive Insurance and JetBlue Airways, among others, performed well. These companies were judged to have met the following criteria: care in the design of their products and web site, a history of innovation, inspired loyalty in their customer base, and doing business with them is a positive experience

The report concluded: 'It’s clear that the fund did well from a performance perspective, beating out all of the major indices. Even though the impact that UX has on a companies stock price is but one of many factors, we feel confident that it was a major contributor to the UX Fund’s success.'

After one year the UX Fund matured 39.3%, outperforming NASDAQS&P 500 and NYSE, while after four and a half years the UX Fund matured 101.8%.

The UK Design Council is cited as inspiration for the UX Fund, after creating a Design Index and tracking the performance of design-led companies on the London Stock Exchange between 1995 and 2004. The report found that the design-aware companies analysed outperformed FTSE 10 and FTSE All Shares indexes by more than 200%.

'We’ve tracked the share prices of the biggest hitters in corporate Britain and the evidence is unequivocal: Design-led companies have produced dramatically better share-price performance for their investors, not just for a few weeks or months but consistently over a solid decade … their share prices have outrun key stock market indices by a full 200%.'

UK Design Council told us in 2013 that design is linked to profit, and that for every £1 spent on design, businesses see a £4 increase in net operating profit. In addition, businesses reported boosts to confidence, strategic thinking, brand and business identity.

Another study to focus on the link between UX and stock market performance is a stock portfolio of Forrester’s Customer Experience Index (CXi) leaders. It had a cumulative 43% gain in performance over a six-year period (2007 to 2012), compared with a 14.5% increase for the S&P 500 Index and a 33.9% decrease for a portfolio of customer experience laggards.

Brand differentiators

There’s no argument that discovering what customers really want, then delivering it through fantastic customer experiences, is a hallmark of strong brands. 

In the age of the customer, customers know more, and expect more. User experience will overtake price and product as the key brand differentiator. That brand differentiation, driven by UX, is one of the most valuable and defensible competitive advantages that a company can create for itself.

It’s no coincidence that the rise of UX has happened as technology has enabled companies to undertake more and more research. In the past UX research was mainly done in lab based test settings with a moderator overseeing the user conduct tasks.

Advances in technology then enabled remote, facilitated testing where a human facilitator and participant interact via web conference.

> See also: Five ways businesses need to rethink UX in 2016

Today, companies are increasingly using automated, un-facilitated testing. These are unmoderated studies conducted online via web-based applications where there is no human facilitator. Remote automated usability testing has enabled organisations to do more quantitative research, quicker and at a reduced cost than ever before.

For design teams testing wireframes and prototypes, for example, these tools help projects 'fail fast' because conducting this type of research quickly enables designers to quickly weed out approaches that don’t work.

This approach allows companies to collect and process huge amounts of data that can be used to define UX KPIs (such as ease of use and user satisfaction) which can then be directly correlated with financial business KPIs and revenues.

In this way, it becomes possible to take decisions that are backed up by data, placing user insight at the heart of everything you do.

As the pace of innovation continues to accelerate, companies will put more emphasis on the experiences they deliver to customers to create a competitive advantage. The impact of UX on business performance will continue to grow and grow and the discipline will be at the centre of boardroom decision making across the globe for many years to come.

Sourced from Arthur Moan, UK MD, UserZoom

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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