Key takeaways from this article:
- To calculate return on investment, you need to know the problem and the business need behind it. You then set a goal that the website changes are aimed at achieving.
- When assessing whether a project is worth pursuing, draw on similar projects, research and existing data.
- Always define the metrics by which you will measure the success of the solution and calculate the return on investment.
You need to know the business need from the start
Before you can talk about return on investment, you need to know why you are working and with what goal in mind. So when a client comes to you with any request — from a graphic update to a minor website tweak to a complete redesign — we recommend following Simon Sinek's framework. Ask why the client wants to change the website — what they expect from it. You may well discover that the problem bothering the client will not be solved by their proposed change. And you suggest a different approach.
For example, a client came to us requesting several minor website changes, including adding a search button. Instead of simply fulfilling the brief, we started asking questions — what were the motivations and why did the client want these changes.
It turned out the client was dealing with several internal problems and assumed some could be addressed by website changes. Their customer support, for example, did not have technical product documentation available, so when technical queries came in on the support line, operators would search for information directly on the e-shop — where they could not find answers.
Instead of addressing the root cause of the problem (customers were overwhelming customer support with queries, and support had no resources to resolve them), the client assumed that adding a search box to the website would solve it.
Further sessions revealed that in response to internal problems and challenges, the client was also planning a change in their business model. This change had an impact not only on the website, but on the entire service design and marketing. We therefore prepared user research, which among other things mapped the existing service journey and its pain points. Only based on this research and analytical data could we jointly design a new service design — including a new website.
Start of project: estimating ROI based on historical data and experience
This example illustrates that until you understand the client's business need, you cannot estimate the return on the planned investment. And even when you know the need, estimating ROI at the start of a project will be quite difficult.
We therefore recommend that, based on typologically similar past projects, data from external research and studies, and your own experience, you:
- assess whether and under what conditions it makes sense to take on the project (sometimes a client has unrealistic expectations where you can immediately see the investment will never pay off; other times the client is asking for too little and you can see that the potential is greater),
- and then recommend the appropriate approach — whether modifications or a complete redesign.
"You cannot say with certainty that the conversion rate will increase by 30%, or that the investment will pay off in 5 months. That would be crystal ball gazing. But you can say that, based on a range of indicators, this solution will most likely work better than the current website and certain results can be expected from it."
After launch: metrics for evaluating results
For every project, it is important to define metrics with which to retrospectively measure the actual success of the solution.
"Results cannot be judged by whether the client likes them or not — they must be judged by data. Real performance data should be what interests the client most."
For e-shops and lead-generation websites, we most commonly use conversion rate, revenue or profit as metrics, with supplementary indicators such as bounce rate, traffic or engagement with the website.
For example, with Nazuby.cz, our redesign achieved such performance optimisation that the entire project paid for itself within six months, despite costing several million CZK.
We calculated the return on investment for this project as follows:
- we chose metrics (conversion rate, revenue, profit),
- we adjusted the data to remove the average growth that would likely have occurred even without the redesign, based on the prior trend,
- profit was calculated using gross margin based on financial statements,
- we used precise sales data from the e-shop's internal database (not the less accurate data from, say, Google Analytics),
- costs included all our invoiced work from the first meetings through to fine-tuning and bug-fixing on the live website.
We spent over 7,000 hours on the project and the cost was in the millions of CZK. However, thanks to the redesign, the e-shop's profitability increased by 24% and the payback period was under 8 months — meaning the entire project paid for itself in less than 8 months.
Data helps you better assess the realism and value of projects
Data from completed projects can be used to calculate ROI and serves not only as a reference, but also for more accurate evaluation of future projects. Instead of assumptions, you can tell clients — based on solid data — that your actions led to such-and-such results, which can be expected with a certain degree of probability for their project too.
"ROI is an absolutely essential indicator of meaningfulness and efficiency. If you have no idea what the ROI of your project is, you should be concerned. Choose a web provider who can at least provide a preliminary estimate of ROI — and comprehensively demonstrate it once the project is complete."
