Monday, November 05, 2007

High-Cost Usability Sometimes Makes Sense

Calculating the cost of usability ...

"Computing the net present value (NPV) lets you estimate the most profitable level of usability investment. For big projects, expensive usability can pay off.

I typically advocate "discount usability engineering" — that is, cheap and fast methods to immediately improve your user interface. But in some cases, it makes sense to invest more to get more.

When assessing your usability options, you'll often find two alternatives with drastically different costs, such as:

* Testing solely with domestic users vs. including users from one or more foreign countries to assess international usability issues
* Lab-based user testing vs. field studies at customer locations
* Testing only your own design vs. including 2-3 competitors' designs ($28K vs. $45K on our price list)
* Paper prototyping vs. a more fully implemented prototype
* Hiring usability professionals at different skill levels (and thus different salaries: $55K vs. $80K for entry-level vs. somewhat experienced staff, respectively)

To decide which option to choose, you have to combine 4 parameters:

1. The project's expected value
2. The cost of the usability alternatives
3. The estimated difference in outcome for the alternatives
4. The rate at which you discount future money streams to account for uncertainty

Example Calculation
As an example, we'll plug some sample values into the spreadsheet. First, let's say our project has an expected value of $1M. It might be an e-commerce site with expected sales of $5M per year and a 20% profit margin, or an intranet redesign that's expected to increase the productivity of 10,000 employees by $100 per employee per year.

Note: I'm only considering the value realized during the first year after launch. This might be unfair, since projects often have a longer lifetime. For example, the average time between intranet redesigns is 3 years. If you expect your project to live for more than a year, you should obviously add the subsequent years' value (after reducing those values by your chosen discount rate to account for the added uncertainty of future time periods). Here, for simplicity's sake, I'll only look at the first year.

Next, let's estimate the difference in cost and outcome for the two usability alternatives. Let's say that the cheap approach costs $10K and that the expensive approach costs $40K.

Conservatively, we'll then assume that we expect the expensive approach to generate only 20% better results than the cheap approach. Because usability tends to double a design project's value, we'll estimate that the cheap approach will increase use by 90% and the expensive approach will increase use by 110% to bracket the expected outcome.

A 20% difference in outcome is typical when you go from domestic to international user testing, for example. Even though you learn more by testing in more countries, most findings are the same everywhere. So, if a 20% gain is going to cost you 300% more, you might think that it's a no-brainer to go with the cheap approach — but you should read on."    (Continued via Jakob Nielsen's Alertbox)    [Usability Resources]

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