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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.

A three-stage process
This process requires us to identify a strategy by which design can influence behavior; evaluate design concepts in terms of their fit to that strategy; and then measure changes in customers that are specifically influenced by design.

Diagnostic
Primary research is conducted to explore the current perceptions of the brand, customer attitudes and beliefs, factors of consideration and choice, and competitive differentiation. Scoring these variables provides a benchmark for the brand’s performance.

Prescriptive
Effective creative solutions stem from testing a variety of positioning and design concepts. Using both qualitative and quantitative methods, design concepts are tested for their efficacy in communicating the promise of value and the ability to shape the impressions that distinguish the brand and drive customer intent. Beyond how cool a design looks—how hard does it work?

Evaluative
At intervals following the launch of a design program, we measure the changes in consumer attitudes and beliefs—against the objectives of the design strategy. A number of new research methods have been developed to further isolate the influence of design on consumer behavior, including measures for the sense of attraction, distinctiveness, satisfaction, price tolerance, loyalty and likelihood of referrals.

While there have been some new tools and disciplines developed to facilitate this process, significant strides can be made simply by changing our attitudes about traditional roles. The research, design development and evaluation phases have typically been silo-ed responsibilities, respectively managed by research firms, design firms and the clients. Significant opportunity lies in developing “proof” as an integrated process, linking research and market objectives to each step of the design management process.

In fairness, the “proof” process is in a continuous state of development, and perfect can’t be the enemy of really good. At the very least, demonstrating an interest in business outcomes, and the rigor of thought behind the design solutions, can imbue clients with a greater level of confidence.

The problem with research
With every business cost being squeezed, poked and measured for optimal performance and efficiency, designers are challenged to demonstrate their performance in clear and measurable ways. A number of studies have been authored correlating brand strength as a financial asset, notably by Interbrand. But precious little has been done to correlate the value of design as a business driver. Regretfully, traditional research firms have not offered much innovation in the field of design study.

Advertising research is well established, in large part because the significant cost of media has made optimal creative of greater importance. We’ve found that advertising’s AIDA testing model (attention, interest, desire, action) fails to fully serve the needs of brand design, as it tends to favor the linear, pragmatic decision-making of consumers over the more dynamic decision-making and limbic brain functions that reflect many consumer choices.

However, as design becomes an increasingly significant source of strategic advantage and sustainable differentiation, the value of managing design—with information about its effectiveness—becomes more important.

A significant opportunity awaits the research firm that embraces this challenge.

Creative culture
Increasingly and forever more, marketing professionals are asking for accountability in their design expenditures. But in order to show a change, you must measure, and such stark examination of design doesn’t sit well with everyone. The ethos of many creative studios regards design as a manifest good, a self-evident benefit to branding, to be measured instinctively. Creative types feel it in our gut. And we think the client should too!

But while design culture has remained good-natured and well-meaning, the corporate environment has coarsened. “Instinct” isn’t greeted with an open seat at the budget table, where our marketing clients battle with their colleagues in IT, Administration and Operations, who can monetize the return on their investments. Even when money does accidentally leak into the marketing department, design is challenged by the immediate, quantitative and comparable data afforded by channel and direct marketing programs. In the fight for funding, the gloves are off.

One of the barriers to topple within the design community is the sense that good design will become subordinated to research, and that decisions will be made by focus groups, dumbing-down the solutions to the least common denominator. To be clear: Research should not do the choice-making for us. At best, it should inform the choices we make.

In the end, the rigor with which we plan, develop and execute design against objective information and real market perspectives, will further elevate designers in their role as trusted counselors for brands.

The proof imperative
Every design firm believes they offer an advantage to their clients, though the ability to differentiate firms has diminished. Ultimately, the ability to prove our effectiveness will become indispensable to buyers of design services, with greater scrutiny for “what will this do for my business?”

We may choose to operate design firms as “makers of things”—but there are consequences. Unless our production capabilities are coupled with an ability to identify, understand and drive market opportunities on behalf of our clients, our production offering is likely to be sourced to increasingly lower-cost providers. Cost efficiency can be a great market strategy, provided it is a conscious choice.

The APDF Exchange permitted firm leaders to share their experiences with the changing climate of design. Certainly there is an increased recognition that firms share the business climate with their clients. The age of accountability requires design to have the courage to meet the rigor of examination—proving our performance—which it will ultimately further the professionalism and prosperity of design firms. ca

David C. Miller is a principal, director of brand strategy of Phinney Bischoff Design House (PBDH) in Seattle. He began his marketing career as a copywriter for Brandt Advertising before moving to broadcast media at Surrey Broadcasting. Miller's interest in consumer marketing led him to Radio Hauraki in Auckland, New Zealand, where he worked as a consultant with PRISM Group. An avid surfer, he and his wife Heather are also busy with two young children.
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