Whether you sell to other businesses or directly to consumers, providing a seamless digital experience is essential for the success of your business. Investing in experience design (not to be confused with graphic or visual design) can lead to improved customer satisfaction, increased conversions, and ultimately higher revenue. However, as with any investment, it’s critical to measure the return on investment (ROI) to ensure that the efforts put into experience design are delivering tangible results. Let’s explore how to measure ROI when investing in experience design to optimize your eCommerce website.
Start by Defining Measurable Business Goals
Before embarking on a digital commerce project, it is vital to establish clear and measurable goals. These goals should align with the overall business objectives of the eCommerce website.
For example, goals could include reducing cart abandonment rates, increasing average order value, improving customer retention, or enhancing overall user satisfaction. Outcomes can also reflect internal improvements such as: enabling self-service, gaining operational efficiencies, and more. Defining these goals provide a basis for evaluating the effectiveness of the experience design investment.
In order to successfully measure your eventual outcomes, all business goals must define a baseline prior to initiating any experience design. For existing sites being improved upon, you simply capture current state insights and use those as a starting point.
For new experiences, it’s best to rely on industry standards as a baseline. However, you’ll want to be careful not to aggressively expect to meet those standards out of the gate. A successful user experience needs to live in the wild a bit in order to fully optimize the experience. Typically, 6 months post launch is the right time to start confidently measuring the performance of a new site.
A Few Ways to Measure Outcomes
When it comes to measuring your Return on Investment (ROI) of experience design, several key factors can be considered. Here's a few conceptual frameworks for an ROI model tailored to eCommerce experience design:
- Conversion Rate Optimization (CRO): Improving the user experience through thoughtful design can lead to higher conversion rates. By tracking and analyzing key metrics such as click-through rates, add-to-cart rates, and checkout completion rates, you can identify the impact of experience design on conversion. A higher conversion rate means more customers making purchases, directly impacting your revenue. Here are a few examples for how you can calculate CRO:
- Conversion Rate = (Number of Completed Conversions / Total Number of Visitors) * 100 Increase in Conversion Rate = (New Conversion Rate - Old Conversion Rate) / Old Conversion Rate * 100
- Revenue Impact = Increase in Conversion Rate * Average Order Value * Total Number of Visitors
- Average Order Value (AOV) Enhancement: Experience design can influence user behavior and encourage customers to spend more during each transaction. By implementing persuasive design elements, personalized recommendations, or upselling strategies, you can increase the Average Order Value. Tracking the AOV over time will help gauge the effectiveness of these design enhancements. In order to calculate improvements in AOV, you can use these equations:
- AOV = Total Revenue / Number of Orders
- Increase in AOV = (New AOV - Old AOV) / Old AOV * 100
- Revenue Impact = Average Order Value Increase * Total Number of Orders
- Customer Retention and Loyalty: Providing exceptional experiences can foster customer loyalty and drive repeat purchases. By focusing on building trust, optimizing post-purchase experiences, and offering personalized recommendations, you can strengthen customer relationships. Tracking metrics such as customer lifetime value (CLTV) and repeat purchase rate will demonstrate the long-term impact of experience design on customer retention. Not to mention that earning a new customer is three times more costly than keeping an existing one. To calculate the financial gains from loyal customers, you can calculate the following:
- Customer Lifetime Value (CLTV) = Average Order Value * Average Purchase Frequency * Average Customer Lifespan
- Increase in CLTV = (New CLTV - Old CLTV) / Old CLTV * 100
- Reduction in Cart Abandonment: A well-designed eCommerce experience can help alleviate common pain points that lead to cart abandonment. By identifying and addressing usability issues, streamlining the checkout process, and improving trust signals (e.g return and exchange policy), you can minimize cart abandonment rates. Monitoring the decrease in abandoned carts can directly contribute to revenue growth. Here’s a good way to calculate the impact of improvements to abandonment:
- Cart Abandonment Rate = (Number of Abandoned Carts / Number of Started Checkouts) * 100
- Decrease in Cart Abandonment Rate = (Old Cart Abandonment Rate - New Cart Abandonment Rate) / Old Cart Abandonment Rate * 100
- Brand Perception and Customer Satisfaction: Many see a brand as a set of colors or a logo, but a brand is defined by the experience it delivers. Positive experiences foster customer satisfaction and contribute to a favorable brand perception. Implementing user-centric design principles and incorporating accessibility considerations can enhance user satisfaction and promote positive word-of-mouth referrals. Surveys, customer feedback, and online reviews can help gauge improvements in brand perception and customer satisfaction.
Remember, while ROI can be quantitatively measured through metrics and financial gains, it's also important to consider qualitative aspects such as improved user satisfaction, brand loyalty, and market differentiation. By combining these factors in your ROI model, you can create a comprehensive assessment of the impact of experience design on eCommerce success. Investing in experience design is a continuous process, and regular measurement and analysis is critical in helping to continuously optimize your digital channels.
