August 6, 2020
In my previous post, I shared two ways that you can raise awareness and promote UX in your company. One of the methods was to start talking about the ROI of UX Design and how it can make the company thrive.
Today, I'm going to share a simple case study about how a trivial user experience problem was costing us a small fortune in hidden costs each year if we chose not to fix it.
Just an FYI, I've simplified and changed the numbers for the sake of this case study. I'm not allowed to share that kind of stuff; I'm pretty sure that would get me fired.
We previously had a lot of complex systems that were a little outdated and did stuff in a particular way. A way that seemed strange to new people but was the norm to everyone else.
One of these so-called "norms" was when a new user purchased a product; there was a delay in activating their account. Sometimes this delay could be an hour or two, but in some exceptional cases, it could be over 24 hours. The crazy thing is this had always been the way, it was just the way the systems worked, and no one batted an eyelid at it.
The design team became aware of this during a user testing another feature and talking with a customer about something completely unrelated. Performing user research and spending time to just chat with your users is always worth it!
So we decided to do a little research and see how many users were affected by the issue.
It turned out to be a lot of users, and there was a ton of costs associated with this issue such as a decrease in customer lifetime value, an increase in customer support costs, cancellation charges, etc. etc.
We decided to break down the cost of this poor customer experience so that we could demonstrate to the team, the impact a poor user experience has on our business.
So let us imagine the following:
That each month we have 100 customers that cancel their purchase because of the issue.
And that the cost per acquiring (CPA) a new customer is somewhere around $50.
Also, we need to pay credit card transaction fees, so let us say the customer is purchasing a product worth $50 and that the payment provider takes a 2% transaction fee. This means we have to pay $1 in credit card transaction fees for each customer.
And lastly, lets image that 50 of these customers contact our customer support before they cancel. And let us say that customer support costs us around $7 for each customer call they handle.
Then the costs would look something like the following:
Cost Per Acquisition: $5,000 ($50 x 100)
Credit card fees: $100 ($1 x 100)
Customer Support: $350 ($7 x 50)
This scenario would cost our company $5,450 per month and a whopping $65,400 per year. That is what it costs to leave things as they are, which is insane.
Plus I haven't mentioned anything about the costs of handling queries for customers that don't cancel but contact customer support about the problem.
This is a straightforward example of the hidden costs of poor user experience. And I'm sure my maths is probably terrible, this is purely for demonstration purposes only. I'm sure if you take a look at your own company, there are tons of areas that can be improved on which will help it grow and succeed. Or at least stop throwing money away.
Needless to say, we solved the problem pretty quickly and now we invest in heavily in improving the user experience of our products and services.
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