Over the last fifteen years or so there has been a steadily increasing desire for design to prove its commercial value, to demonstrate to clients that their investment is tangibly worth it.
This has been driven by a number of factors: the recession of the early 1990s demanded that design stake its claim to straitened budgets; above the line advertising reaches fewer and fewer people, so companies are looking for other routes to achieve a return on marketing investment; and perhaps design is growing up as an industry – recognising itself, and being recognised by clients, as a commercial tool, not just an exercise in beautifying. Other areas of marketing communications already operate on a strictly commercial basis, so why shouldn’t design?
More clients are asking tough commercial questions of their design projects, measuring and assessing as they go. And switched on designers will talk in terms of business objectives right from the outset, maybe before the design brief is actually nailed down. But even so, measuring return on investment (ROI) is notoriously difficult. So why bother?
For designers, understanding the return delivered to clients can help in demonstrating the commercial benefits of using design services. This can establish designers as a credible business service, like the legal, marketing or advertising teams clients already employ.
For businesses, understanding how different investments profit the company is an obvious aid in planning and allocating budgets most effectively. An empirical ROI measure may also help to convince financiers to take a risk and release money for a design and development project.
Even if it is hard to achieve, attempting to gain some measure of ROI in design is of value to both consultancy and client because it creates a mutually supporting commercial framework.
Proving ROI has never been more important. Clients can’t afford not to get things right the first time now says Kate Blandford, founder of Kate Blandford Consulting and former head of packaging design for Sainsbury’s
From a client’s point of view, design is only one of many different areas in which they can invest their money, so designers must prove their value. If a company has £100,000 to spend, it could spend it on design, or it could spend it on a marketing consultant, or a direct mail campaign, or hiring some more vans and drivers, or on any number of other business requirements. So what’s the business case for each?
‘Practicing designers often get caught in the trap of thinking that design is the solution. What they need to realize is that, to a businessperson, design is a solution. Looking at the objectives sought, such as “increased revenue,” it’s clear that there are many approaches to achieve that goal, and design is just one of them,’ writes Peter Merholz, president and a founding partner at experience design consultancy Adaptive Path.
Time and again projects in which design is an integral component, perhaps even the most significant element, achieve great results for companies and organisations. Here are just a few examples:
Design group Seymourpowell’s work with shower company Aqualisa led to the use of digital technology in the bathroom for the first time, with the Quartz and Axis products securing more than £30 million in sales in the four years since launch in 2005. At the same time, the designs halved typical installation times, delivering time and cost benefits to suppliers and installers.
Innocent Drink’s This Water product saw sales rise by 100 per cent and market share increase from 0.4 per cent to 4.1 per cent following a rebrand by packaging design group Pearlfisher.
For an initial design investment of around £5,000 Nottingham brewery Castle Rock saw its barrel sales growth double following branding by The Workroom.
In March 2007, Morrisons’ supermarket launched a visual identity on a design and implementation budget of £100,000. Its declining market share subsequently reversed, with share growing from 11.1 per cent to 11.6 per cent – an increase in revenue of £350 million. This netted Morrisons and design group Landor Associates a gold in the Design Business Association’s Design Effectiveness Awards.
Design group Identica’s packaging redesign for Italian digestif Ramazzotti also included a proposal to change the angle of the glass bottle’s shoulder by around one degree. This made for a more efficient manufacturing process, using less energy and material, and saving drinks company Pernod Ricard 20 per cent in raw materials – a financial and environmental return on investment.
Measuring ROI
Measuring ROI in design is not easy and in many cases is an imperfect science. The examples above all illustrate successful projects in which design has played an integral part, but design is never the only factor, nor are design fees the only investment a company has to make to bring a project to fruition. A packaging project, for example, might involve expenditure on new material, manufacturing processes, distribution logistics and so on. Additionally, there is a range of other marketing communications channels all requiring budgets and themselves influencing the outcome of a project.
This leads to two important questions: firstly, what is ‘return’ and secondly, what is ‘investment’. Defining these at the outset is the most important step in developing a picture of how well changes made to a product or service through a design process have delivered against objectives.
A return might be a hard, definable measure such as sales, footfall or market share; but equally, it might be a ‘softer’ measure such as brand awareness, public perception or even staff morale, if the design project is about internal communications and branding, for example. Often it will be a combination of both types of impact.
The soft measures are hard to quantify but are still measurable using before and after research, which means it’s important to plan early exactly what you want to measure. Here are just a few possible ‘returns’ that a client may want a design project to deliver:
- Rebranding shift, perhaps to change perceptions or to compete with a rival product or service
- Increased visitors or footfall
- Longer dwell time
- Clearer information on forms and leaflets and therefore fewer calls to customer helplines
- Use of more sustainable materials
- Innovation or conceptual research leading to possible new products
- Increased product sales or market share
This short list is illustrative of the range of possible ‘returns’ that might constitute a successful design project. The final one, ‘increased product sales or market share’, is often the ultimate goal. But not always: a company may want to use sustainable materials because of their own, wider benefits even if sales remain static; or a public sector body may wish to improve public understanding of an issue, without gaining any direct revenue.
Similarly, investment can be defined in different ways. Paying a design company’s fees is just part of the cost of a design project. Implementation is an associated and unavoidable cost in most projects, for example, and overall investment includes all sorts of other factors, perhaps including:
- Cost of materials/goods
- Possible changes to manufacturing processes
- Tooling costs
- Engineering costs
- Distributions costs
- Staff time spent on a project
- Write-offs of old materials/products
- Other sales, marketing and promotional activity
So clarity about business aims at the briefing stage is crucial in order to triangulate investment and return with initial objectives. Achieving this clarity is the responsibility of both designers and clients. Clients need to talk to their designers about defined, focused goals, but designers must also speak in a commercial language, at least initially, saving creative discussions for later.
According to Jonathan Davies, director of Butterfly Cannon, a packaging design consultancy with an ROI-based, pay-for-performance business model, clients often begin discussions with designers by saying something like ‘my design is looking a bit tired’; the business objectives, he says, are regularly pushed toward the back end of design briefs.
Designers should embrace a commercial way of talking to clients, We’re not employed just to make things beautiful, but to create value in the object we’re working on so that value can be sold on to consumers. Clients are not investing in the arts [when they commission designers].
Jonathan Davies
Intuitive decisions
Once a design process is underway, designers very often make intuitive decisions about colour, form, texture, functionality and so on. One way to assess these creative intuitions commercially is to set up control tests, where old and new designs are allowed to perform ‘side by side’. This is easier in some sectors and design projects than others and will cost extra time and money, but the pay-off can be an understanding of how design work is performing, without any influence from other factors, such as marketing and advertising.
Retailers, for example, may create pilot stores which are set out with a new design so their performance can be compared to that of existing stores. These allow the ‘returns’, such as increased sales or longer dwell time, to be measured.
‘Clients want to see payback, they’re not throwing money away,’ says Sam D’Lacey, director of retail design group Hart D’Lacey, whose clients include Dolland & Aitchison and Newcastle Building Society. ‘So when you’re working on the strategy stage of a project you have to ask why you’re doing what you’re doing. Then some clients will set up pilot stores, usually between one and six in order to get a good geographic and demographic spread, and they will evaluate them against similar locations which haven’t had any changes.’
A similar approach is recommended by Davies at Butterfly Cannon. He notes that new packaging designs can now be tested in virtual reality aisles, offering clients some ROI indications pre-launch. A more realistic test can be achieved using a ‘measuring store’ and a ‘control store’, each with similar shopper demographics. A two month trial allows the old pack to run in both stores for the first month, after which the new design is released to the ‘measuring store’ for the second month. The relative performance of the new pack can then be attributed solely to design, assuming that competitor products are running the same activity and promotions in each store and that no other marketing activity has been launched.
According to Davies, control trials which isolate design’s effects are suitable whenever there is a tangible product or environment to be measured, so can be used in product design, automotive design and retail design, as well as packaging. Other aspects of design, such as branding and corporate identity or workplace design, may not lend themselves to these kinds of control tests because the old and the new cannot be isolated.
Helen Atkinson, client services director at packaging design group Anthem Worldwide, believes that pinning too much on achieving a perfectly ‘clean’ measure for ROI in design can be counterproductive and that measurements should be approached on a project by project basis. ‘Measuring the return on investment in design is necessary, challenging and in our experience it’s a mixed “data hunt” best tailored to each individual client,’ she says. ‘The difficulties of a “clean” measure for packaging’s impact on sales can, at best, dampen enthusiasm and delay innovation. In my experience it’s best to expect and accept that all other marketing activity, seasonal fluctuations and competitor activity will influence figures. Take a deep breath and use historical data to be prepared and you will have the maths, measures and reasoned arguments required. And a way out of the “it’s too difficult” doldrums is not to make sales your only measure, but to be more specific and holistic across a range of indicators. The key is to identify and set your measures early, be pragmatic and finally, be bold.’
Preparation and clarity are key. With clear objectives at the outset and the relevant measurements taken before and after the launch of new designs, a picture of ROI in design can be constructed. And pinning a commercial imperative to design projects in this way will be to the mutual benefit of designers and industry.
Facts and figures
According to recent Design Council research, the majority of companies surveyed (69 per cent) did not measure their return on design investment. Of those that did, half recovered their investment in one year. A more promising statistic, is that over half of the larger companies questioned said they measure ROI and overall the rates for calculating return on investment are three times higher than three years ago.
The research found that 45% of companies calculate ROI from the percentage rate of return over a fixed time period (usually twelve months or less); 29% calculate a return from the time taken to pay back the investment.
The most commonly reported rate of return from companies calculating a percentage return on design investment was 15%.
Find out more about measuring return on investment and our research into how businesses use design