There’s an old maxim in the marketing industry that when advertising revenues go down, direct marketing revenues go up. This gross generalisation was the basis for differentiating between aboveand below-the-line – now very unfashionable – but there is a grain of truth in it.
Think about it for a moment and it’s easy to see why. Advertising is largely considered to be one of those champagne industries (like design, many would say) that blossoms during boom times and suffers when they wane. It’s hardly surprising when, to steal from Lord Leverhulme, ‘half of my advertising is wasted’.
Direct marketing or customer relationship management, on the other hand, is easier to justify in harder economic times for the simple reason that it is quantifiable. This is great for corporate marketing departments because they can justify their spending a little easier to the board of directors – budget A generates profit B.
Omaid Hiwaizi, founder of communications agency Hubbard Hiwaizi McCann, points out that economic downturns often see marketing budgets cut across the board, but he agrees that, generally, the more targeted projects are more attractive to clients.
‘With regards to CRM, downturns are the time when clients slash budgets in any way they can – and ‘expensive’ ongoing CRM campaigns are often cut as a section of the budget that is very easy to identify and cut.
‘However, in my experience, a downturn is the time to concentrate the value and income from loyal customers – new customers will be hard enough to come by in a recession,’ says Hiwaizi.
‘I would argue that you can’t measure classic advertising in a meaningful way,’ he adds. ‘Tracking studies that ask 100 people on a high street if they remember what brand of instant soup was advertised in the past seven days are about as low-tech as you can get. However, if you put a responsive element into the advertising (a phone number or a dreaded coupon), you can measure the response very accurately, directly or through a retail channel.’
So where does design fit in? Well, as David Jebb, founder of management consultancy David Jebb & Associates has frequently shown, design sector revenues are very responsive to changes in the economic climate. In fact, earlier this year he demonstrated that the sector is an early mover.
According to Jebb: ‘If you look at the profit figures, the design sector started falling off in the last quarter of last year, way before other sectors. It was a shocker. The figures bounced the following quarter, but fell again over the three months up until June, by about 7 per cent.’ But there is a consolation. ‘We would also expect them to rise again ahead of the economy as a whole,’ he adds.
Quite clearly then, it is more important than ever for design consultancies to justify that their work will add to the bottom line. Areas of consultancy work that are demonstrably linked to return on investment can reasonably expect to do very well in the present climate. Anything that is measurable, particularly in financial terms, is likely to do well.
This is already the case in the digital media sector, where since the dotcom fallout, clients have been asking, ‘How will this project benefit our business financially?’ and, ‘What is the ROI for this project?’ Such a backlash is perhaps unsurprising, and the bigger digital media groups have adjusted sharply to the new way of thinking.
Rubus creative lead Steve Potts says that approaching potential digital media projects with more rigorous business criteria has been key to winning projects in these more testing times. Furthermore, the technology is perfectly suited to benchmarking and measuring performance, he says.
‘Many companies have had very soft goals when they say they want to do something on-line. What we have seen over the past four or five months is that clients not only want good value, but they want some mechanism to prove it,’ he explains.
‘As soon as you start to put some objectives around a project you can start to measure the effectiveness of a website redesign,’ adds Potts.
Branding has always made the case for adding value, but never more so than since the development of brand valuation. Since the recent introduction of accounting regulations FRS10 and FRS11, brand values can be included on the company balance sheet. Valuation has proved particularly interesting to brands of new businesses, such as football clubs, which can use it to raise capital. Owing to the growth in demand for brand valuation projects, pioneers in these services such as specialist Brand Finance and Interbrand have been followed into the market by the likes of FutureBrand and Brand Frontier.
Business development director at Brand Frontier, Mark Pinder, says that since economic forecasts became gloomier his consultancy has seen demand for brand valuation work increase.
‘Companies are looking at ways of increasing shareholder value and as a company’s share value falls, brand valuation is seen as just one way of giving value to a company and justifying recent brand acquisitions,’ Pinder says.
‘We have seen a large increase in brand valuations, particularly in the insurance and financial sectors.’
Setting some solid business objectives for a design project may not always be the easiest way to approach client work. But for design consultancies that are keen to add value in the clearest possible way, it is becoming more of a necessity than ever.
Top 10 global brands by brand value
1. Coca-Cola £51.0bn
2. Microsoft £49.4bn
3. IBM £37.4bn
6. General Electric£26.8bn
*Source: Interbrand 2000
Top 5 UK brands by brand value
4. Burger King£1.9bn
*Source: Interbrand 2000