Measure Design's Contribution To Business Growth
Joanna Seddonon 12 October, 2016 at 04:10
Brand design for business growth
Design matters for businesses. We know that intuitively. It is easy to spot examples of where design has been a major factor in a company’s growth or decline. In 2009, the drop in General Motors’ design standards – from glorious finned and chromed monsters, to dull and dumpy front-wheel drive boxes – was cited as a key contributor to GM’s bankruptcy after 101 years of corporate success. At the beginning of 2015, Apple’s announcement of the largest quarterly profit in corporate history was generally attributed to its excellence in design – design so simple and so elegant, you don’t see the product as technology.
But the impact of design is notoriously difficult to measure. And, as a result, design is not highly regarded by companies. Senior executives regard spending on design as pure cost, an expense, and all too often as an unnecessary indulgence. Corporate identity programmes, for example, are talked about as ‘wasting money to stroke the CEO’s ego’. So, often, companies put off changes to identity, packaging or product design. Bacardi is a family-owned business and the cost of any design upgrades comes straight out of the owners’ pockets. It took 30 years and flat to declining sales to get the company to take the decision to update the bottle and packaging.
The cost implications can tempt the most image-conscious companies to leave a design around so long it becomes old and stale, or even worse, part of the furniture, something that consumers simply don’t see. Coca-Cola recently updated the look of its packaging, stripping it down to its essentials because it had become too familiar, and invisible on the shelf.
The lack of obvious financial returns from design innovation causes a lack of respect for design and designers. Design is regarded as a subject on which anyone can weigh in. CFOs are especially guilty of this. They would never represent themselves as experts on human resources or technology, but they have no such scruples when it comes to design. I have vivid memories of the CFO of a large Canadian financial institution scrutinising the company’s new corporate identity, and insisting that the colour be changed from blue to silver.
The lack of proof of its importance, and consequent lack of respect, means that, if the impact of design is recognised at all, it is only after the fact. Tropicana clearly didn’t examine the potential business consequences of its 2009 North American packaging change before introducing it. The result was a disaster. Consumers confused the packaging with a generic, couldn’t find the product and sales fell 20% or $33m. The company pulled the design after just seven weeks.
Clearly, this situation can’t be allowed to continue. There is an urgent need to transform perceptions of design, by demonstrating its importance to the business. Only when its contribution to business growth is proven, will design get treated with the seriousness it deserves. And only then, will it become possible to get the investment required to take full advantage of the potential of design to create financial value. The objective of this article is to lay out a new framework for measuring ROI from investment in design which can be used to substantiate the investment case and elevate design to a new level. The purpose of this framework is to link design to business financials, in order to show how design drives sales and profit growth. It is inspired by recent work on creating brand value, which advocates turning traditional brand valuation approaches on their head, to make the output actionable.
Seven principles underpin it.
1) No black boxes. Any approach to measuring the value of design must be transparent. There must be no hidden formulae. It must be open to debate. It must also be simple, easy to understand and explain to everyone, from designers to finance managers.
2) Define ‘design’. The methodology should be applicable to different definitions of design, narrower and broader, whether it is a logo or brand identity, or packaging, or product design, or website or retail design, or design of the entire customer experience. The first key step in measuring how design creates value is to define exactly what is meant by ‘design’ in a particular case.
3) Understand how design drives value and drive the methodology from there. The objective is to identify the behavioural impact of design. How does design impact sales and profits? Why will people pay more for a well-designed product than a higher-quality but uglier one?
4) Include design in research. The secret to making measurement of design actionable is to conduct a quick quantitative research study into the drivers of customer purchase, including questions about the impact of design on choice. This is the most critical component of a robust measurement. It will almost always have to be a customised study, as design is usually omitted from both brand health tracking and customer satisfaction research.
5) Link to financial data. Research alone is not enough to convince sceptical financial and other managers of the value of design. Research results must link into a financial model, based on the company’s existing P&L and forecast sales and profit data.
6) Run scenarios. One goal of measurement should be to identify the financial uplift of a design change compared to the current design. It should be possible to compare the sales and profit impact of alternative design solutions, if required.
7) Look over time. To be truly useful, measurement should be conducted not just once, but before and after a design change, to track results and enable ROI to be calculated. The framework itself starts with design as an integral part of brand. Technically, brand has two components: Brand = Reputation + Identity.
Reputation (or Equity): Psychological benefits resulting from a particular set of associations in the mind of customers or other stakeholders. These differentiate it from competitors and create a promise of future performance. By delivering on this promise, reputation is created. It is reputation that is the source of value.
Identity: A clear and simple mark, with concrete and legally defensible attributes. This is how brand originated – from the red-hot iron used to stamp the owner’s name on cattle. For a brand to create sustainable value, it must have an identity that can be protected. The role of identity, however, extends far beyond the logo. Its purpose is not just to identify the brand but also to bring its promise to life, through a powerful design system that communicates the brand idea consistently through every product and at every touchpoint.
Design is, thus, inextricably part of the brand, and the trigger that activates brand associations, leading the consumer to prefer one company’s products or services over competitors’. The secret to measuring the value created by design is to determine how effective design is in creating preference and exactly what role it plays in driving purchase. This requires a piece of market research, which isolates design from other factors to identify its impact on consumer behaviour. The research is structured to uncover the reasons why a consumer buys a particular product or service and the role that design plays in that decision.
This analysis answers two questions: what are the drivers of the purchase decision? And what is the impact of design on these drivers? Different design elements can be separated out – from graphics and colour, to product and service design, to the retail and website experience.
This is an excerpt of the article. To read the full report, click here.