There is a huge cost to the business when we are guessing our decisions in CX/UX development and not involving our customers.
However, we as human centered practitioners suck at demonstrating the value of our work. For the business it doesn’t mean much if you say that 4 out of 5 user interviews liked the new improvement.
Let's change that. Below is an easy formula you can use to articulate the value of user collaboration and testing in your business.
The Guessing Game
First, Imagine a scenario where your CX/UX decisions are essentially guesses. The typical outcome of your decisions without user involvement could look like this:
- 1/3 of decisions improve customer experience
- 1/3 have no real impact (mediocre decision)
- 1/3 negatively impact CX
So out of every guessed decision you have 33.3% chances of making a good decision. 66.6% changes that you are not.
Now, consider making 3 major guesses through the discovery, concept, and release phases without any user input.
Your chances of making 3 solid golden decisions in a row? You can use a simple probability formula to calculate this. 33.33% x 33.33% x 33.33% = a mere 3.7% chance to win and 93.3% chance that you lose your bet. So there you go, now you know why Casinos win at the end.
The Power of User Collaboration
Now, let's bring the users into the process. Let's assume that if we work with users we can:
- Reduce bad decisions by 90%.
- Improve mediocre decisions by 50% so they would have a positive impact too.
The new user centric formula:
33.33% + (33.33% x 150%) - (33.33% x 10%) = 80% chance of making the right decision every single time!
Consider this now over three phases: 80% x 80% x 80% = 51.2% chance of success.
This translates to a whopping 13.8X improvement over guesswork (51.2%/3.7%). So now you have a solid fighting chance to win Casino!
The Financial Impact
Now this is where things get hot! Let's translate this into numbers. Assume that the thing you are working on has potentially 5% improvement on your churn. Assume your business could look like this:
- B2C focus
- Customer base: 200,000
- Current churn: 15% per year
- Average Revenue Per User (ARPU): €250/year
First impact? By reducing churn to 14.25%, you're saving the company €375,000 annually (0.75%x200 000x250).
And the big impact? Your Lifetime Revenue per customer (LTR) increases as a result of lower churn.
So you are now making 88 euros more revenue from each of your customers (LTR before 250/15% = 1666 eur. LTR after 250/14.25%=1754 eur).
Multiple this by your 200 000 customers and you just made €17.6 million euros more revenue to your business. That is money to pay for new staff, bonuses, invest in new business or perhaps go for a proper company retreat!
The Million-Euro Question
Would you rather pursue a nearly €20 million opportunity with a 3.7% chance of success, or with a 51% chance?
Now you can enter the company's vault. And feel like Danny Ocean!
Want more? Please follow me on LinkedIn or reach out to me through a contact request!
Written by Ville Österlund, CEO, Leanlab
