When is it cost effective to invest in UX?
Customer acquisition cost (CAC) can be mitigated by a sustainable approach using marketing, sales, development, and UX. Why then, do startups often ignore or forget user input to drive products?
As a researcher I have seen all too often, how companies either forget or choose to ignore user insights that do not align with their assumptions. There are many ways to slice this pie — lack of UX expertise on the team, fear of slowing down, switching costs, and such. In this post I’ll focus on some psychological and behavioral reasons behind the lack of user insights driven approach and outline some (UX forward) strategies to mitigate customer acquisition and retention related costs.
The WHY
Let’s peek into the journey of “Greentechtile” - a fictional sustainable athleisure startup.
The Innovation Paradox: Greentechtile like most startups was expected to innovate and create disruptive outcomes. The founders started on the grounds of an ‘awesome’ idea, technology, or the solution to founder’s problem. Investing in understanding the problem space and users, felt like slowing down the business. The missing piece is that user problems are a crucial source of innovative ideas.
The Confidence Paradox: Greentechtile was confident their fabrics would revolutionise athletic wear. This confident vision did not take into account user priorities such as price point, long term durability, and social proof.
The problem was, this confidence got in the way of exploring, evaluating, and validating assumptions with real prospective users. Confidence ideally comes from second order thinking and not blind faith. The founder of unicorn fintech companies in India, Kunal Shah says “Be open to being wrong.”The Resource Allocation Paradox: Under financial pressures, Greentechtile allocated most of their budget towards product delivery and broad Total Addressable Market (TAM) marketing campaigns. They left UX design for later as an input to creating a website and app. An earlier investment in UX could have uncovered critical product usability problems rather than just UI (user interface) problems.
The Speed vs. Quality Paradox: Greentechtile rushed their first product line to market to capitalise on eco-conscious purchasing. However rushing to launch a product without mapping it to user needs led to irrelevant solutions that customers didn’t want. It feels productive and seductive to rapidly build things out of ideas. But the cost of customer trust is high and long lasting.
The User-Centricity Paradox: The founder of Greentechtile, an avid hiker, created clothes he believed perfectly suited all activities. Unfortunately, the garments, did not suit colder climates, which customers in northern regions found disappointing. Founders often replace systematic user research with real users by talking to friends, family and early adopters.
Check ‘Why startups often talk to wrong users’ for more.The Sunk Cost Fallacy: After 6 months, Greentechtile realized their athleisure wear wasn't meeting the broader needs of casual fitness enthusiasts. Acknowledging this is painful and the company was tempted to make only minor adaptations as they did not want to lose the work so far. Pivoting is hard as it has financial and emotional costs. Moreover late stage pivoting is harder than early stage pivoting. By bringing in user insights specialists much later in the game, the company eventually identified user needs and pain points that indicated rethinking the product.
DIY vs. Expertise Paradox: Why do people go to restaurants when they can cook? Why do companies hire developers when there are no code tools available? Why do people professional courses/colleges when the internet and libraries can teach you everything? In some skillsets the difference is more pronounced while in other cases it is more gradual and unrecognisable before it is late. User research is one of those art+science skills.
Although everyone can talk to users, not everyone can design a relatively bias-free investigation, organise, highlight, and prioritise user knowledge.
The Ostrich Effect or fear of finding the truth: This is probably the most human of this list. My mother refuses to go to the doctors very well knowing that they will ask her to cut down on sugar (if she doesn’t hear it from the expert, then it doesn’t have to happen). Often, startups will do the same by investing in actions they are familiar with (e.g. sales) over design thinking, data analysis or user research which uncover uncomfortable truths.
The How (to address)
So what are some UX strategies that can make customer acquisition and retention costs sustainable for the business?1
Understand and bank user insights to fuel product development: Participatory design—Make users part of your entire decision making process. Knowledge library—Store, add to, and harness this body of knowledge regularly. Continuous discovery—By deeply immersing in user research, companies gain a comprehensive and structured understanding of customer needs, pain points, and behaviors. This allows products/services development that directly address real user problems, increasing relevance and desirability, leading to lower costs.
Map user knowledge to stakeholders for stickiness: Define, humanise, and contextualise your customer segments. For example, prospective buyer personas help marketing teams focus efforts on the audiences most likely to convert, rather than wasting resources on irrelevant audiences. User archetypes help design and product teams prioritise 20% outputs that produce 80% outcomes. (ref. the 80-20 rule)
Enhance product/market fit in sustainable manner: Systems and design thinking focus on solving core user needs (in a sustainable context) which results in better product/market fit. If users love your product, you will require less spending on customer education and marketing to drive adoption, thus reducing acquisition costs.
Customer retention is less costly than customer acquisition: Prioritize customer retention strategies to increase customer lifetime value (LTV). By delivering user experiences that directly address needs and painpoints, user experience research and design help increase customer retention and lifetime value (LTV).
Fail Fast but don’t Fail Often: Failure has financial and emotional costs, which the silicon valley anthem “Fail fast and often” doesn’t recognise. Disappointment, fear of failure, self-doubt, etc. are like tiny cracks in the mirror, which can add character but they can also take away the shine.
Investment in UX reduces wasteful expenditure by constantly aligning outputs with real user needs thus creating profitable outcomes.
This approach directly ties to loyalty, inbound lead generation, and continuous growth - all of which lead to lower customer acquisition and retention costs and builds a sustainable business model.
I help startups, scale-ups, and growing product teams gain customer centered value through advising, consulting and partnership in research and design thinking at a low investment cost.
What I’m inspired by recently
Erika Hall’s take on mapping user models and business models on the same ‘page’
Vanta’s journey from starting tech-first to pivoting to user needs
Note: I used Perplexity to fact check and cross check my hypotheses.