This chapter is from the book
This chapter is from the book
This chapter is from the book
Setting Metrics: Cost/Benefit Analysis
Cost/Benefit Analysis (CBA) is another measurement tool, used to determine the financial ramifications of undertaking new projects, implementing new processes, and making purchases and/or staffing decisions.
Whereas ROI is summative, CBA is a formative tool, used to determine the feasibility of a project before it begins. CBA helps determine objectives and set metrics for how to measure success.
Creative teams may be especially interested in the concept of Cost/Benefit Analysis, as this form of measurement attempts to quantify elements of “soft value” by assigning financial representation to intangibles (can we measure emotion?). It also seeks to assign dollar values to things that don’t usually have them (can we estimate the financial value of a single website visit?). The use of a common unit of measure, like money, helps the entire project team, regardless of discipline, share information. When it’s well informed, CBA is a useful exercise to aid decision making and to predict the profitability of an undertaking. The CBA formula is simple:
- Positive Factors – Negative Factors = Project Viability
or it can be expressed as:
- Benefits – Costs = Profitability
Comprehensive and accurate information gathering is crucial to the success of this exercise. The steps are seemingly simple, but require detective work to source accurate and vetted numbers.
Step One
Generate a list of all hard and soft costs associated with the project.
For example, if you are hired to produce a mobile application to improve a patient experience, hard costs might include flat fees associated with conducting user research, design and development, and distribution. Soft costs might involve estimating expenditures to health-care staff on effective use of the app in patient interactions, or measuring the time needed for the user to adopt new tools. As you might imagine, establishing numbers for hard costs is a much easier exercise than for soft. Determining appropriate estimates for soft costs requires creative investigation. In the case of training staff you could gather data about how many billable hours were spent in past training exercises. In the case of the user adoption rates, you might reference academic studies on technology adaptation rates to inform your projection.
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Before developing the prototype for Medley, a patient information system for mobile devices, the design team at Artefact had to consider all of the costs and potential benefits.
For example: The team knew that almost 75% of health-care professionals owned iPhones and iPads, presenting an opportunity for a mobile solution.
However, most hospitals have already purchased expensive electronic medical records systems—the cost of which is prohibitive to the adoption of new tools. Therefore, Medley would need to integrate seamlessly with existing systems.
Step Two
Identify all project benefits and associated remuneration.
In our new mobile application example, hard benefits may take the shape of increased patient satisfaction (work with the medical team to gather these estimates; if the proposed project is a major paradigm shift, you may have to engage external sources). Soft benefits might include increased perceptions of satisfaction, credibility, or competence (ask your client to share the current process for determining levels of patient satisfaction). Collaborative detective work is essential when forecasting benefits.
Step Three
Subtract costs from benefits and analyze the results.
Once you have an informed estimation of hard and soft costs and benefits, you can formulate a project’s profitability—or “viability” if you don’t want to be as locked to the numbers. If the benefits outweigh the costs, then theoretically, your proposal merits serious consideration.
There are numerous considerations when determining the relationship between costs and benefits. Include some of the following questions as you weigh the results of the information you’ve gathered: What would happen if your client did nothing? Does the cost of the client’s investment in the project outweigh inactivity (are there short-term and long-term answers to this question)? What would be lost if the project failed to meet objectives? How long will it take to earn back the investment in the project—or, how many sales will have to be closed to make back the initial design investment? Determining how fast investments are returned can persuade decision makers to greenlight your project.
To track financial data, clients and designers must be willing to work together, sharing and evaluating numbers at the start and completion of a project. All too often, creative teams walk away after artwork has been delivered and aren’t involved with the work’s applied use. In this scenario, designers never get to see the results of their efforts, leaving the framing of the outcome entirely to the client’s perspective. This also creates a calendar-based service relationship. (“Hi Bob, it’s that time of year again to start thinking about producing the annual.”)
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Product benefits include: visualizations of patient data for caregivers (easier to process than lengthy written descriptions); tools that help prioritize patient care; and the promotion of more efficient collaboration amongst health-care team members.
If you’re going to use metrics to establish impact, your client must view you as a partner. And remaining involved and responsive after the artifact has dropped positions you as an invested strategist. (“Sally, what if we use the message from the annual to drive all of this year’s investor-relations materials? Let’s see if we can put together a survey to determine how that message is resonating with key stakeholders.”)
Remember, not everyone is comfortable talking about money (this is a universal truth, from awkward family dinners, to dating mishaps and marital spats, to one of the top indicators that a prospective client is a future nightmare). Do you have a client who will share his or her sales projections? Or does the client treat any internal financial information as state secrets? If the corporate culture doesn’t allow for collaboration, none of these tools are available (and it’s probably an indicator that reciprocal partnerships aren’t either).
Build a relationship with your clients so that they understand how the work you’re creating is being used and what effects it has on their business, and then connect it to monetary impact. Help them recognize that they’re as responsible for actively engaging the collateral they’ve commissioned as you are for positioning it to serve them well. (If a marketing kit falls in sales’s desk drawer, does anyone hear it?)
- These concepts, from initial measurement to applied use to tracking, don’t work if you spring them at the conclusion of a project.
Make thoughtfully setting metrics a part of your services agreement at the outset of a project—and a part of the culture of your work. Tracking those outcomes, and the associated revenue earned, connects design to the bottom line.