What Drives the Highest ROI When Developing Tech Products?
A common question clients ask is, “I have a certain chunk of funds available, which is not enough to do everything that sounds like a worthy idea. How do we choose the highest ROI pieces to invest that in?”
I’m not breaking any new ground by mentioning that there are essentially two ways to increase ROI: lower expenses or increase revenue. Therefore, any tech investment that expects a return on investment ought to be able to trace a path to one or both of those things. Generally, decreasing expenses is more predictable and increasing revenue is more enjoyable and does more to increase your influence. I’m going to give you some specific investment categories to think about, as well as some guidelines for how to think through what will work for you. Let’s dive in.
Lowering expenses
Internal efficiency
Internal efficiency, assuming you know your numbers, can be a pretty safe bet. If you can make people more efficient, you could theoretically reduce your workforce and do the same amount of work at a lower labor cost. It’s also often popular with the internal team in a way – it’s likely the time saved with these sorts of efficiency gains is time that would have been spent doing tedious tasks people are eager to give up – if they get to keep their job. However, it’s not universally high-ROI. After all, the ROI has to come from reduced labor expense. This works well for some businesses with flexible staffing models. However, you’ve got to be honest with yourself. If you don’t intend to reduce your workforce, this is only a win if you have other revenue-producing or expense-lowering work to occupy team members’ newly freed-up time. If I have a cashier in a convenience store who’s idle 60% of the time waiting for patrons to show up and need to check out, making what they do more efficient is probably not a big win unless I have huge lines at peak times and people are walking out in frustration. If not, well, it might feel good, but it’s not a high ROI.
Reducing expensive friction
Sometimes you can also lower expenses by reducing some sort of expensive friction. For example, most credit card processors charge a transaction fee. Depending on the nature of your business, it may be to your advantage to reduce the count of transactions by bundling multiple service items into a single charge. For example, we once worked with a client who had a product with a lot of small in-app upgrades that could be purchased. Someone might have 10 in a day, and therefore we intentionally bundled them into a single charge at the end of the day to reduce the cost (and the risk of false fraud reports from multiple identical transactions). There are a lot of factors to this, and it takes some careful study, but it can be a win.
Reducing mistakes
Another slightly harder-to-quantify, but often higher-gain opportunity to improve ROI is by reducing mistakes. Mistakes are costly in virtually every business. If you can avoid them, by validating inputs, stopping people from making selections that don’t make sense, or making it easy to catch common mistakes, you can net a hefty ROI, both in hard costs and in customer confidence (in the event the mistakes are the kinds that customers can see – and you’d be surprised how many are, either directly or in terms of slower timelines and confusing communications). A typical error rate for manual data entry is assumed to be around 1% (though it’s higher if the user base is less trained) and the average error costs $50 - $150 (1). Gartner surveyed U.S. businesses and found that by their own estimates, they lose about $15 million annually to bad data (2). Samsung even famously lost $300 million to one particularly costly data entry mistake (3).
That’s pretty much it for opportunities to reduce expenses. As you can see, they are limited, but can be useful when all of the right conditions align. But beware attempting when any of the conditions is not met. This is a predictable formula, and ROI will not spontaneously appear if an element is missing.
Increasing revenues
Investments that increase revenue tend to be the higher risk, but also higher-reward. The reason they are higher risk is you are trying to change an external party’s behavior to make them buy more, to get more people to buy, to reduce churn, or some combination of the above. Other people are notoriously difficult to predict and even harder to control. This is where a strategic investment in your product’s user experience improves your odds at guiding the behaviors you want.
Upcharge Opportunities
This works for both companies who are charging for their tech, and those who are not. I’ll share a SaaS example first, but then elaborate on how it can work for those who don’t in B2B especially.
I’ll never forget the day we upgraded our Trello account from the Super Cheap starter plan to the You’re a Real Business Now intermediate plan. It was because of a single feature: the ability to remove an employee who had left from all boards. Suddenly, the 2x cost was worth it for that one feature.
I mention this because of an important point: if you want to use a freemium or premium model, you don’t have to make this terribly complicated with dozens of features categorized by tier. You can single out just a few high-value features to make them upgrades.
However, even if you are not charging for your tech access today (maybe it’s a value add for your customer base), you can single out specific features that provide a great deal of value and offer them for an upcharge. For the non-SaaS offering, these are often structured as one-time setup fees vs. ongoing fees but it can work either way if the access is ongoing.
Here are a few examples of potential upper-tier offerings (you’d pick no more than 5 or you will have trouble explaining it clearly):
B2B
Export options or API access (this makes sense because you are enabling integrations with other tools)
Pre-built integrations with specific outside tools that your customers are likely to use - anything from email and calendar to accounting programs
More granular permissions for the team (see Trello example)
A specific time-saving feature, such as an AI-enabled suggestion (this needs to be very good if it’s an upcharge: the novelty won’t overcome a lack of value if it doesn’t produce usable output)
Specific legal agreements, such as signing a BAA or negotiating specific terms of the agreement
How long data is retained
Detailed analytics/reporting
Specific invoicing terms
Anything customized or branded for them
Attractive notification options (SMS, daily/weekly/monthly digest, etc)
B2C
More access: credits, volume, minutes, etc.
More people on the plan (be careful with this to ensure users don’t have an incentive to game the system)
More customization opportunities
Opportunities for them to earn money
These can be high-ROI, but be sure you have evidence that your customer base has willingness to pay for these items. Be careful with this determination. I’ve seen leaders turn very flimsy evidence (“I talked to one person who said they’d definitely pay”) into an ironclad mandate to develop a pet feature. This is a good place to pull in objectivity so you don’t fall victim to your own confirmation bias. A good UX consultant can help you do that.
Onboarding
This could be the topic of an article in itself – it’s that important to a lot of products. Many companies get this at least partially wrong. They think the key is to flood a bunch of leads into the top of the funnel with paid ads. While that may be part of the solution, if you haven’t thought through what is going to make the product connect with the client, and how that impacts your first interactions with the user, you will miss the mark, have high churn, and general user annoyance.
This matters even if your tech product is not what people directly pay for. Let’s say you are a healthcare provider and you tell patients to download your app to see their test results. You are asking that patient to take an action. Yes, that action may ultimately allow you to give them better service, but you’re still requiring something of them. But the experience is clunky and unfriendly, and when they land in the app it’s just a sea of a dozen or so options, none of which is obviously what they’re looking for. That experience magnifies any user stress at that moment, and reflects negatively on their experience with your brand.
This doesn’t yield as much direct ROI if your product is something internal that your employees are required to use. I’m not saying it has no value — it sets a tone for how new employees will perceive things coming in, and that can be worth investing in. For example, this year we’re investing in working on our own internal software and employee onboarding for exactly that reason. But it would not be accurate to expect that investment to have high ROI. It may still be a great idea for other reasons, just don’t expect to see it in your bottom line.
Competitive Advantages
This one I almost didn’t list, because I see it abused so often. Many of the things people think are a competitive advantage simply are not. A competitive advantage, in the way we mean it for ROI purposes, must help you sell more or retain more customers.
It is not a competitive advantage just because:
You have it and another company doesn’t.
You think it’s really cool.
You do a small thing better than average.
It is only a competitive advantage if it makes the customer see you as better aligned to get them where they want to be.
Most buying decisions come down to relatively few decision points. There’s something the customer needs or wants and you and your competitors can probably all deliver that, at least on paper. There are differences in the tertiary benefits, but those don’t sway decisions.
What does?
Confidence. If the minimum threshold is met for value, customers will choose the product they feel is most likely to give them what they want. What they want is most often a feeling wrapped in some tangible items. And the best way to achieve that is to have features that offer emotional connection.
That means you’re looking for a feature that is not just cool, but cool in a way that is relevant and aligns with how you want customers to see you. For example, adding a widget that shows the weather forecast to a banking app might seem interesting, but it’s not likely to have a positive ROI. It doesn’t relate to how most banks position themselves with the customer, and therefore it doesn’t further the connection. On the other hand, adding a feature that tracks a pending customer service request (presuming that is resolved in under 8 hours) and shows status changes as a Live Activity on the iOS lock screen – that’s both cool and deepens the connection with the user because it makes the bank appear more responsive.
UX Audit
Sometimes the answer to achieving ROI isn’t a particular feature, but taking steps that allow users to feel differently when using your product. This can feel like a scary thing to invest in but it has some of the highest ROI. Why? Because you’re doing something that changes how users view and connect with your product. In fact, this is a bit of an extension of the item above in the sense that it follows the same principles: your experience should draw attention to the connection points with the user with language, graphics and flow design.
This sort of improvement works. We’ve had clients see results like 2x engagement, 4x conversions and 10x referrals.
A good audit can involve quite a few components, and I’ll briefly touch on my top 5 but please know that each could be the topic of an entire article. We go pretty deep on these with our clients but this should give you a starting point to think about it.
Aesthetics: UX is about a lot more than looks, but I’ll start with this because it’s perhaps the easiest to visualize. There’s a law called the Aesthetic-Usability effect which states that people will notice fewer problems, and judge the app less harshly when problems do arise, if they find it aesthetically pleasing. By contrast, if the interface looks dated, it’s inevitably the first thing people will notice (and comment on). I can’t tell you how often I hear people in the wild apologizing for their user interface with something like “It looks like it’s from 2007 but it works.” Imagine for a moment what that does to your sales team’s ability to succeed. All other things being equal, an app that looks nice will get higher ratings, fewer customer service complaints, and look better in screenshots in your RFPs and sales pages. A 2023 Frontiers in Psychology study backs this up, finding that aesthetic smartphone apps increased both subjective user experience and objective performance, reinforcing positive impressions and trust (4).
Onboarding: As many as 71% of users churn in the first 90 days (5), and a big cause is failure to invest in the onboarding experience. What does the sign-up process feel like? How many steps are there? Can people stop and come back? Where are the high-risk moments such as asking for a credit card or any information a user has to look up? Are we forcing them to answer ‘preference’ questions immediately or sprinkling them in to be handled at the user’s convenience? Once they’re signed up, how do they know what do? Do we have thoughtful ‘empty’ states (when a given screen is empty, such as the inbox when the user hasn’t received any messages yet)? All of these questions heavily influence churn, which is one of the biggest hidden costs in your product. Reduce churn and you increase ROI.
Notifications: At the risk of coming across a little hyperbolic, this element almost singlehandedly controls how ‘alive’ your app feels. How and when users are notified (and how much control they have over that) are crucial to building engagement and stickiness. Think about it: when do you engage with an app? Often, when you get some kind of notification to do so. But notify too much, and you’ll irritate people. This could also be a complete article in itself and is something with a lot of nuance. SMS? Push notifications? Email notifications? Immediately or aggregated? Smart leaders plan to invest in a well thought-out strategy for this up front and continue refining as the app evolves and they gather more information about their user base.
Landing Pages: For products that involve a landing page, what you say on your landing page has a huge impact on how many people will sign up, and how happy they will be with your product when they do. It needs to be concise but compelling, make users feel seen, build trust, and make the case for the value the product provides, all in 1-2 screen lengths. That’s a tall order, and it takes some dedicated investment of time and resources to refine that to the point that it works. This is incredibly powerful though. We’ve had clients achieve conversion rates as high as 4x the industry average.
User Dashboards: The internal dashboard is a great place to invest resources because it helps user loyalty and sales. This is most often the screen that helps users see the value of what they’re doing in your product and feel more connected to the app. It should provide timely, personalized information. That’s sometimes about graphs and charts, but not always. The solution depends on the specific use case. Regardless of the details, a well-executed dashboard does something else that’s powerful: it gives your sales team something highly visual to put in RFPs, on landing pages (see above) and in app store listings if you have a phone app. Of course, it’s not as simple as throwing some donut charts on a screen and walking away either. Take the necessary care to provide information, not just data. It needs to not only be useful but also tell a story. That’s not easy, but if you nail it, you’ll have higher customer satisfaction, retention, and referrals in addition to the enticing sales collateral.
If you need help applying this to your specific app or web product, UX Audits are a service we provide at People-Friendly Tech.
You don’t have to build it all
This is by no means an exhaustive list of every high-ROI investment for those looking to develop a killer tech product, but it’s a compilation of some of the most consistent and attainable options. The common thread is that any investment needs to relate back to your unique promise to the client. There are lots of shiny objects that you could build. Saying no to the distractions and yes to the investments that will move you forward will accelerate your velocity. You don’t have to build everything. You succeed by building a few things really well.
Onward & upward.
Notes
https://conexiom.com/blog/whats-a-good-data-entry-error-rate-benchmarks-how-to-reduce-yours
https://www.gartner.com/smarterwithgartner/how-to-create-a-business-case-for-data-quality-improvement
https://www.frontiersin.org/journals/psychology/articles/10.3389/fpsyg.2023.1113842/full