If you’ve been in the creative industry since before breakfast, you’ve probably sensed that we’re experiencing more than a few little changes. And these changes likely aren’t cyclical swings in workflow—but tectonic shifts in the relationship of designers and their clients. Like every species known to survive, design firms will either move from or adapt to this environment. But the required adaptation and migration of design firms can best be managed by examining and understanding the current climate for creativity.

The Association of Professional Design Firms (APDF) recently held its annual Exchange conference in Austin, Texas, where participants had the opportunity to explore the forces driving the market for design. The program included the results of the 2005 creative industry study from Seattle’s Phinney/Bischoff Design House (PBDH). (The 2004 study included over 400 North American firms, and was reported in Communication Arts, November 2004.)

The study clearly demonstrates the growing client imperative for measurable business performance from design investments, and presents opportunities for design firms who embrace that responsibility.

But to understand the client community’s drive for business performance—we first need to take a trip to Wal-Mart.

We all work for Wal-Mart
Wal-Mart, with its obsessive drive to wring inefficiency from its business, has significantly contributed to a business culture of assessment and measurement. Put pressure on expenses. Optimize output. Perform or be gone.

Is this an overstatement? A McKinsey study estimates that 12% of the nation’s economic productivity gains in the second half of the 1990s could be attributed to Wal-Mart alone. Wal-Mart—the nation’s largest retailer and employer—does more business than Target, Sears, Kmart, J.C. Penney, Safeway and Kroger combined. It is a force which demands that players in the market account for their costs against their contribution.

To be clear, I am not making a judgment of Wal-Mart, merely an example: Their competitive zeal is envious, but countless other companies headed down this path before Sam Walton. Nonetheless, this culture of scrutiny now permeates nearly every client business. While Wal-Mart “The Company” may not be reviewing your creative portfolio, Wal-Mart “The Mindset” is certainly writing the requests for proposals and examining your invoices.

In Austin, APDF convened a panel of senior purchasers of design services for industry stalwarts, including Microsoft, Hewlett-Packard and Procter & Gamble. Each was emphatic in the need for accountability in the cost of design, as measured against its contributions to business performance.

To maintain their elevation in the client organization, design firms must pursue ways to demonstrate—to prove—the business value of great design.

No easy task
Proving design’s value isn’t such a simple thing. Consumers don’t operate in a vacuum, so isolating the variables that influence their perceptions and purchase behaviors is no small task. But the magnitude of the challenge doesn’t diminish the necessity. Clearly, some firms have begun digging into the hard turf of conventional thinking about design performance. One such firm is Wallace Church, Inc. an accomplished, independent firm based in New York City. “Design firms have long touted design as an investment, but as an industry we’ve continued to approach clients as a product vendor,” said Rob Wallace, managing partner. “We need to change the shape of our engagement with clients to reflect the true investment opportunity that design presents.

“At the highest levels of the client organization, there is an increasing level of understanding and appreciation for design’s ability to influence perceptions, and therefore sales.” Wallace continued, “If a design advantage can add incremental business of even 2%–3%, for many clients that is millions of dollars of sales.” This firm has developed an arsenal of client case studies to illustrate the business value of design performance. These demonstrate, when other marketing variables are held constant—advertising, sales channel, pricing—that changes in design clearly drive market performance.

“Design can’t be purchased like corrugated cardboard or cotton, yet some businesses still approach design as commodity—where price is the primary variable.” Wallace has elevated the conversation with their clients by asking: “What do you expect out of this investment?” Said Wallace, “This invites a conversation about design’s ability to drive market performance. From this stems the realization that great design is exponentially more valuable to their business.”

Graphic and communication designers may benefit by emulating their industrial design peers, who tightly integrate design performance metrics into their development process. Lunar, a celebrated Bay-Area product design firm, has seen firsthand the market force of great design. Developers of the Oral-B CrossAction toothbrush, Lunar conducted 72 consumer studies and interviewed 600 dental professionals, testing multiple design options to create “the world’s best toothbrush,” according to John Edson, Lunar’s president. The research was able to uncover product designs that were comfortable and would communicate value at the point of purchase, at nearly $5 for a manual toothbrush. Within three months of the product launch, it was the largest-selling product in the category, with eleven percent of the total market share. “Our goal was to create a beautifully ergonomic product,” said Edson. “When you can increase total market share by five percent, with a product priced at the highest end of the category, design becomes a compelling value.”

Unfortunately most other agency examples of creative “ROI” fall into a familiar trap. There is an all-too-familiar ring to the ad agency hack who asserts “This brand campaign increased our client’s sales by $20 million,” while failing to reconcile the corresponding costs of sales—slotting fees, price incentives, media costs—to offer a true net indicator of the program.

PBDH, a Seattle-based brand design firm, has developed a “Proof” methodology to look deeper than the coincidence of design and business results, and to examine causation—the ability for design solutions to shape the attitudes and beliefs that inform consumer behaviors.