Reports confirm market raiding trend by groups

Lean and mean graphic design groups are winning business at the expense of their competitors as client companies focus on cost rather than creativity, two separate reports released this week confirm.

Research commissioned by design consultancy Beetlenut identifies that companies are asking more groups to pitch for the same business and creativity is losing out to cost.

According to its survey – which included responses from organisations such as Jaguar, the BBC, Prudential, BT and Selfridges – 40 per cent of companies put every project out to creative pitch.

The report also shows that nearly half of all final decisions are made purely on cost. Less than 19 per cent of respondents said the creative idea was instrumental in the decision.

In addition, a report due to be released next week by Plimsoll Publishing highlights 141 design groups it designates ‘market raiders’ which are actively seizing market share from their competitors.

According to the report, this group grew by seven times the industry average last year and will continue to grow in 2003. Other consultancies will need to respond quickly or suffer business losses, says the report.

In particular, it highlights 171 consultancies that suffered from negative growth and lost market share over the past 12 months. Meanwhile, the market raiders captured an additional 14 per cent of the market share in 2002, a shift that Plimsoll senior analyst David Pattison calls ‘severe’.

‘In one year this group has taken 14 per cent of the market from their competitors. There is very little organic growth occurring. Markets are flat and very competitive so these companies are growing at somebody else’s expense,’ says Pattison.

Mandy Merron, partner at accountancy firm Willott Kingston Smith, agrees a 14 per cent shift is ‘significant’. She feels strong management skills are key to success.

‘When times are difficult companies need talented management and a strong product to do well. When times are good everyone can do fairly well, perhaps sometimes without having talented management.’

Anderson Norton is one of the groups identified as a market raider and creative director David Norton confirms the competitive nature of the market.

‘We’ve actively focused on growth this year and broadened our offer into new sectors. We’re also leaner on pricing and offering our clients a broader range of services,’ says Norton.

‘Competition is very stiff. There are big pitch lists and our clients are always being approached by other consultancies trying to get more work.’

Market raiders grew by an average of 53 per cent this year, but Merron counters that this is a trend the industry has seen before.

‘We’ve historically seen successful hot shops like Williams Murray Hamm that do high-profile award-winning work and experience growth.’

Merron also points out that smaller consultancies can be easier to grow.

‘Smaller consultancies are quicker on their feet and can respond more quickly, which is important in this type of market. Larger companies probably have stronger balance sheets to help them weather the storm and smaller ones may have less resource to fall back on,’ she says.