Economic success by focusing on design
Focusing on design boosts sales
Economic success by focusing on design New study by the German Design Council proves: focusing on design boosts sales
A current survey by the German Design Council conducted amongst its members demonstrates that last year manufacturers that pursued a clear design strategy posted much stronger sales growth than the industry average. While according to the German Federal Statistics Office manufacturing industry turnover grew by an average 7.4 per cent in 2011, over the same period corporations with a clear design focus scored average growth of as much as 18 per cent. In other words, growth was more than twice that of rivals who lacked a discernible design orientation. The survey also reveals a link between the strategic use of design and corporate success. The majority of the design-oriented companies covered by the poll utilize design in a focused manner. In other words they pursue a holistic, brand-oriented design strategy and a resulting uniform and unmistakable design language.
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In the nationwide study the German Design Council conducted in autumn 2011 “Monitor Markenführung 2011” company representatives were polled on the relationship between their brand positioning and the resulting design language. Just under 50% of respondents from the B2C domain stated that they relied on an unmistakable design language for their products in line with their specific brand positioning. The companies now surveyed in terms of their sales growth participated in the study “Monitor Markenführung 2011“ where almost all of them bore out the hypothesis that there is a strong link between brand positioning and a focused emphasis on design. Study design and data collection For the “Monitor Markenführung 2011” study, 838 brand managers responsible for the strategic management of one or several brands were invited to participate by e-mail. The response rate was 16 per cent, generating a sample pool of 131 participants. For the most part, participants were marketing directors and managing directors.
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Fig. 1: Sample composition
35 Head of Marketing
29 General Manager
9 Senior managerial function 7 Head of Communications 7 Head of Marketing and Sales
6 Head of Product Management 5 Head of Design 24 Not specified
5 Head of PR 4 Head of Sales
N = 131, absolute frequency
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In the study, 45 respondents (34.3 per cent) market consumer goods, 65with the remaining 65.7 per cent distributed fairly evenly amongst the service, fMcg, automotive, healthcare, chemical and financial services sectors. Overall, 39.5 per cent of those surveyed can be assigned exclusively to the B2B sector, while 53.5 per cent said their company was active in both the B2B and B2C segments. The smallest share of the sample, namely only 7 per cent, was accounted for by the B2C sector proper. Given this spread, in this survey no comparative analysis was made of B2B and B2C firms; instead the B2B firms were compared with the entire set of respondents. The annual turnover of the corporation who took part in the survey varied from EUR 5 million to over EUR 5 billion. In the current survey “Additional Brand Value Through Design” the German Design Council concentrates on 2011 sales trends for its manufacturing industry member companies. At the time of the survey the German Design Council had 170 members, 88 of which can be categorized as belonging to the manufacturing industry. Specifically, the automotive, metal, ceramics, electrical, sanitary, furniture, and home fabrics industries and companies from the white goods and other consumer goods sectors are all represented in the German Design Council’s membership. The evaluation was based on random sampling using information provided by the companies voluntarily and gathered by creditreform. The annual sales of firms participating in the survey varies from EUR 5 million to over EUR 500 million. There was a clear concentration on small and medium-sized firms in the manufacturing sector. Members of the automobile industry, which achieved very strong sales in 2011, were not included in the sample. For the purposes of comparison, data from the German Federal Statistics Office on general sales trends in manufacturing in 2011 were employed. Findings from the study “Monitor Markenführung 2011” were used exclusively with respect to finding the overlap between the sets of firms participating in each of the two surveys.
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Focused design strategy drives success The survey “Additional Brand Value Through Design” proves that there is a direct link between a focused design strategy and corporate success if the design strategy is derived from the brand strategy. In other words, focusing on a clear brand and design language can therefore be considered the factor driving success in the manufacturing industry. Participants in the study “Monitor Markenführung 2011” confirmed the great influence brand strategy has on product development and product design. Both the latter fields are likewise driven by strategic brand considerations, with the companies studied revealing that the influence is stronger for product design (78.4 per cent) than for actual product development (69.4 per cent).
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Fig. 2: Influence of brand strategy on respective business units
93,0%
Communications
78,4%
Product Design
74,6% Sales
69,4%
Product Development
Total = 127, top-two-box scores (5-tier scale: (1) no influence at all – (5) very large influence)
55,1%
Customer Service
31,1%
Personnel Marketing
28,1% Buying
27,9%
Personnel Development
14,0%
Major influence
IT
13,8%
Influence
Legal
6,6%
Controlling and Finance
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59,6% No
41,8% No
58,2%
40,4%
Yes
Jes
B2B
Fig. 16: Is there a brand-specific design vocabulary for the company’s product portfolio
Total sample
N= 122, n(B2B) = 47; Figures are percentages
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Asked whether they had a typical brand design language or an overall design concept for their particular product portfolio, 58.2 per cent of all those polled answered “Yes�. For B2B firms the figure was much lower, at just 40 per cent, something that underscores the untapped potential for strategic planning in product design, especially in the B2B segment.
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Design prizes convey design expertise – Corporations with a strong design focus uses prizes strategically
Design prizes are often mentioned when talk turns to brand management and design. Design prizes can act as a powerful quality seal, confirming the high-grade nature of a product and denoting that creative innovation is held in high esteem. They can also serve as a basis for a company to revisit its own measures, from product design to visual communication. Receiving a design prize can be a valuable marketing instrument and benchmark when it comes to the public perception of a brand. A design prize impacts positively on a company’s image, and help secure competitive advantages. The study findings show that this insight has already become the norm among the majority of those firms interviewed. Specifically, 40.3 per cent of the experts polled believe there is a quite obvious link between design prizes and the success of their brand. The firms addressed in the “Additional Brand Value Through Design” survey were all companies that regularly enter and win design prize competitions. i.e., they use the added communications value that an award confers as a strategic tool in their brand communications.
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41,8% Not important
40,3% Very important
17,8% Neutral Fig. 17: Correlation between design awards and brand success
N = 129, top-two-box scores (5-tier scale: (1) not important at all – (5) very important)
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References in the European context Findings of studies on the “Design as a quantifiable factor driving corporate success and innovation” (Great Britain and Denmark)
With its study the German Design Council also shows that a development which in previous years has been proven in studies by the British Design Council or the Danish Design Center for their respective domestic markets also applies in Germany. As early as 2003 the Danish Design Center published its study “The economic effects of design“. The evaluation of the roughly 1,000 interviews of Danish corporations revealed that on average design-oriented firms enjoyed greater economic success then did companies which did not pursue a coherent design strategy. It thus came as no surprise that Danish companies which used design strategically as an integral part of their corporate procedures, maintained in-company design departments or bought in external design services posted a 22 per cent higher increase in gross income over the prior five years than did enterprises which did not invest in design. Moreover, among corporations with a feel for design exports accounted for 33.5 per cent of sales, double the figure for their rivals who failed to recognize design as adding value and driving innovation. The study was updated in 2007 and 2010, respectively.
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The findings from the Danish study were borne out for Great Britain by the study conducted by the British Design Council. In 2004, 2005 and 2007 the British Design Council showed beyond doubt that the value of companies which pursued a sustainable design policy appreciated far more than the market average. Indeed, over longer period of time design-oriented firms boasted higher share prices than comparable competitors. What is more, in some cases shares from these companies outperformed the national stock market index by more than 200 per cent. On average, the strategic use of design secured these firms a 6.3-per-cent improvement in market share. According to the report “Design in Britain“ (2005), which was based on 1,500 interviews with British firms, 44 per cent of respondents said the use of design in their company had triggered a significant rise in sales, had improved their competitive situation and augmented market opportunities (39 per cent). In the “Value of Design Factfinder Report” of 2007 it was shown that in the exemplary firms studied every investment of GBP 100 in design generated sales worth GBP 225. There was also significant evidence of enhanced innovative prowess: While 67 per cent of design-oriented firms brought new products to market over the period of three years surveyed, the figure was only 32 per cent in the comparative group. In summary, it is safe to say that the sustainable integration of design into corporate strategy demonstrably sharpens a company’s competitive edge and also boosts sales and profits, and also support it in entering new markets.
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Andrej Kupetz, General Manager of the German Design Council, underscores the importance of the current study in the European context: “The study not only also proves the business success of design-oriented firms in Germany but also specifies the reasons. Not using design in a strategic or focused manner wastes resources. Business success is all the more pronounced where strategy and design go hand in hand. This holds not only goes for products but also for companies’ design-related communication, for example, by taking part in certain design award competition.�
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Additional Brand Value Through Design – German Design Council The German Design Council supports the business world in all aspects of design in Germany. More than 170 companies from all sectors of the economy and an aggregate payroll in excess of 1.6 million are members of the German Design Council. Of these, 88 firms come under the category of the manufacturing industry. The current survey was directed at this particular group. The German Design Council promotes an awareness of design as a value-adding economic driver. Its activities include providing advice on brand and design, performing brand and design evaluations, hosting conferences and seminars, exhibitions and trade fairs but also conducting design research and knowledge transfer. A key activity of the German Design Council is organizing the German Design Award, an international German design prize, which given the strict selection criteria and the small number of prize-winners places the emphasis squarely on the focused design strategy of the companies taking part. Described as the German Design Council premium prize, the German Design Award is bestowed for top achievements in the areas of product and communications design. Only those products and concepts judged to be of excellent quality are nominated. The findings of the new “Additional Brand Value Through Design” survey will be investigated in spring 2013 with a nationwide survey. The findings will be incorporated into the future gearing of the German Design Award. Andrej Kupetz comments that “the German Design Council represents the interests of design-oriented German industry, and the German Design Award is a measure of their economic performance. The award shows that a company that focuses on design lays the foundations for success.”
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Translation: Promoted by:
Rat f端r Formgebung | German Design Council Stiftung | Foundation Friedrich-Ebert-Anlage 49 60327 Frankfurt am Main Germany T .49 (0) 69 - 74 74 86 0 F .49 (0) 69 - 74 74 86 19 info@german-design-council.de www.german-design-council.de