In tough times do you want to know what’s happening or why?

Businesses are spending millions on understanding what is happening but how much are they investing to understand why?

I recently interviewed one of my clients following an engagement we had just completed with them. I asked him what he would say to anybody considering doing UX Research and he told me:

“I think it’s so important. These days most digital marketers will use data, and they will be data-driven and it’s really important to constantly check on things like conversion rates. But I think it’s very important to sit down with the customer and to understand how a customer feels. You really understand things that you would have to test and test and test to get to that point.”

There is no definitive data that compares what companies spend on marketing technology versus what they spend on UX research, as it can vary greatly depending on the company size, industry, and specific priorities. However, some recent surveys and reports can provide some insights.

For example, a survey conducted by Forrester in 2020 found that companies spent an average of 26% of their overall marketing budgets on marketing technology. This includes tools for advertising, content management, analytics, and other areas. In comparison, the same survey found that companies spent an average of 5% of their marketing budgets on user research and testing.

Another survey by UserTesting in 2021 found that companies spent an average of 7.2% of their UX budgets on research and discovery, which includes user research and testing, while 33.7% of their UX budgets were spent on design and prototyping.

UserTesting is of course part of that tech-stack, albeit supplying a platform for research. Although repeatedly we meet customers that have invested in unmoderated user research tools like this, but often have untrained people using them. Do they have untrained people using analytics I wonder?

I’ll leave you to figure out which of these is more dangerous:

Making critical business decisions based on an inaccurate understanding of what is happening.

Or

Making critical business decisions based on an inaccurate understanding of why it’s happening.

This is a problem that takes on a slightly different form for product owners who invest considerable time and effort in testing various hypotheses to solve a product or feature problem, rather than finding out what the cause is. But that’s for another post.

Why is investing in understanding is important?

The surveys above suggest that companies tend to spend more on marketing technology than UX research. However, there is considerable evidence that investing in UX research and testing can lead to more effective marketing strategies and better customer experiences, ultimately driving business growth and revenue. For example:

According to a report by Forrester, companies that invest in customer experience (CX) see higher revenue growth compared to those that do not. The report found that companies that excel at CX grew revenue 5.1 times faster than those that lag. UX research and testing is an integral part of creating a great customer experience.

Also, a study by the Nielsen Norman Group found that a focus on user-centered design can lead to a significant return on investment. They found that for every $1 invested in usability testing, there was a return of $100 in sales.

And a study by McKinsey found that customer experience leaders outperform their peers in terms of revenue growth. They found that companies that focused on customer experience had a 5.7x greater increase in revenue over three years compared to those that did not prioritize it.

Overall, these studies and reports show that investing in UX research and testing can have a significant impact on business growth and revenue. By improving the user experience, companies can build better relationships with their customers, increase customer loyalty, and ultimately drive more sales.

So why the investment imbalance?

I joined the UX industry in year 2000, and this one is a bit of a mystery to me. The hook at the time was that the industry was very young and the business case for UX research was so strong, it seemed like the market would rocket. And in relative terms it did. We were one of a number of agencies that experienced rapid growth as organizations became educated to the benefits.

Now, more than 20 years there are many more organizations that “get it” but the number of times there is an education job to be done astounds me. The evidence suggests that imbalance between investment in marketing technology and UX research can be attributed to numerous factors, such as:

· a lack of understanding of the value of UX research

· a focus on short-term gains

· competing priorities within organizations

Worryingly, a survey by UserTesting in 2021 found that the top barriers to UX research and testing are a lack of budget (44%), a lack of time (39%), and a lack of executive buy-in (33%). All three are inextricably linked and suggest that companies may not fully understand the value of UX research and its impact on business growth.

Of course, we are all too aware of the economic pressures on businesses today following four turbulent years of global pandemic, war and recession. Is it any wonder then that a study by Google found that companies tend to prioritize short-term gains over long-term investments in user experience. Although the study also reported that companies who focus on short-term tactics, such as optimizing conversion rates, tend to perform worse in the long run compared to those that prioritize user experience.

Given the wave of redundancies in the global tech sector over the past 12 months, I suspect things are not going to get better any time soon. A survey by Econsultancy found that competing priorities within organizations can hinder investment in UX research. The survey found that 43% of respondents identified organizational structures and silos as a barrier to delivering a great customer experience.

There are certainly competing priorities now and a focus on short-term gains, with little opportunity for uneducated CEOs to become better informed. I suspect the rapid improvement we have seen in customer experience may plateau; it may already have. Based on the evidence above, organizations may suffer over the long term but ironically it also their customers who will pay the price.