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Design ROI Re-Envisioned

By: Rob Wallace
Brand Identity Infringement, Inc.

Tel: (212) 755-2903

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A new set of design advocates is needed: individuals & organizations who aren't afraid to weigh the costs of design against marketplace results.

The Design Age
We are currently experiencing the onset of design's golden age. Thanks in large part to the successes of design-driven brands and the companies that have built them, design is now gaining the awareness and respect it rightly deserves as a strategic and profitbuilding business tool. Design-driven brands like Apple, Virgin, Starbucks and Target have proven design's paramount value in driving every moment of consumer engagement, and propelling profits as a result.

We also live in a burgeoning age of corporate design heroes, many of whom work within global consumer packaged goods (CPG), a field that is elevating and promoting design's value. Senior VPs of Design, once a rarity, are becoming more prominent and more powerful players within the executive suite. Several forward-acting organizations have invested in the worthy position of CDO-Chief Design Officer. As a result, design is no longer viewed as a "marketing service," but as a true and equal partner with marketing in eOecting change and generating value.

The Age of Accountability
While we live in the design age, we also live in the age of information and accountability. Today every business decision is supported by accurate and timely data. Every effort is scrutinized for its direct impact on the bottom line. The new corporate mantra is, "If you can't measure it, you can't manage it." In the vernacular, management is saying, "Show me the money."

If you are a design manager, my goal in writing this article is to help you do just that.

The Proof
In June of 2001, I wrote an article for the Design Management Journal that has been described as providing "groundbreaking thought leadership" on quantifying design's return on investment. This article represented the culmination of nearly five years of independent research on empirically calculating design's value. It was built on an ROI methodology created by statisticians, and used data from Wallace Church's brand identity/package design assignments plus a handful of additional case studies supplied by major corporate package design departments. The methodology is outlined in the book Measuring Brand Communications ROI by Don E. Schulz and Jeffrey Walters (Association of National Advertisers).

This Design Management Institute article concluded that, on average, every dollar invested in advertising and package design resulted in over $7 in incremental value for the brand. Great news! But even more interesting is the data from case studies where there was no advertising, and package design was the only element that changed. In these cases every dollar spent in brand identity/package design generated over $400 of incremental profit.

The chart at the conclusion of this article outlines how the figure was determined. This process is reviewed in detail in the book by Schultz and Walters, but I'll highlight how it works. Begin by establishing your base market share and profit prior to launching a new communications initiative. Then calculate all your current marketing communications expenses. In this case, the brands tested were losing an average of 4 percent share per year. Now measure sales and expenses after the new communications initiative. Again, in this data set, the only element that changed was new packaging design. Sales increased by 5.3 percent, resulting in an average ROI of $415+ for every dollar spent on design.

This data was based exclusively on package design assignments done for major CPG brands. However, I'm passionately confident that all forms of design can be quantified, and that when this is done, the results will also prove that design generates the greatest ROI of any marketing tool.

New Insights from the Forefront of Design ROI
It has been more than six years since my article's first publication, and I am happy to report that the additional data we have gathered further supports design's high ROI. I'm also happy to report that the greater business community has begun to recognize design's paramount value in brand building. I am, however, disappointed to report that we as an industry have yet to embrace a standardized method for measuring design's direct financial impact. And, as a result, many design managers still have to fight hard to justify the resources required to fund and manage the design process.

ROI Roadblocks: Reluctance, Fear & Disbelief
While most design managers believe that proving our value would greatly benefit the design process, some remain skeptical. To them, it's wrong to extract design from all the other tools that . . . Continue to Full Article

Rob Wallace is managing partner of Wallace Church Inc., a Manhattan-based strategic brand identity consultancy with clients including P&G / Gillette, Nestlè, Coca-Cola, Schering-Plough, Kodak, Brown-Forman, Heinz and Kraft.

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