The Eighties image of the design consultancy – richer in cash than ideas, and richer in ideas than practicalities – has been difficult to eradicate. In fact, for years now, competition among consultancies has been taking its toll on margins – and helping to clarify strategy in the process – while consolidation among retailers and brands has fuelled a generally tougher attitude towards suppliers.
Of course, for the agency that gets it right, there are still big bucks to be made through ever-larger contracts. And the bigger names in design are always keen to talk up the idea of a “premier league” that is well-positioned to satisfy client needs, trailed by a host of minor also-rans.
Regardless of a consultancy’s size and profile, if it specialises in fast-moving brands and packaged goods, the chances are that it will be experiencing even leaner times now than it did a few years ago.
For consultancy Elmwood, changes in the market necessitated a painful shedding of staff earlier this year, with eight redundancies on the packaging design side at its Leeds office. Now, however, the company is in the process of opening a new London bureau, and has taken on four new staff members with Web-based expertise. According to chairman Jonathan Sands, further recruitment is to follow.
For Sands, the context is clear, and by no means specific to Elmwood. He quotes “startling figures” from retail analyst Verdict, which forecast a drop in retailer gross margins from around 30 per cent now to approximately 25 per cent by the end of 2004. “This may not seem like a huge reduction, but for many, it could mean the difference between profit and loss,” he says. The proportion of consumer disposable income channelled through conventional retail is expected to plummet from 50 per cent to just 30 per cent over the same period.
Elmwood’s solution has been to beef up its digital capability. “We don’t want to be a design business which is either purely packaging-based or purely online,” says Sands. “It is important to be able to understand a brand across different channels and different media in order to improve the overall experience of it.”
It isn’t only the agencies outside London that are feeling a shift in the business climate. And whatever the new environment, be it ice age or global greenhouse, companies are keen to show that they can evolve to survive.
Design Bridge is typical of consultancies that have diversified and evolved what they offer from pure graphics to corporate and service branding and – within the next 18 months – a separate brand consultancy. “We have adjusted the balance of staff over time, so we have more people in new media and service branding, and fewer in packaging,” says managing director David Rivett.
The kind of change that has taken place at Elmwood in the space of just a few months, Rivett suggests, has been happening more gradually across the industry. Given the seismic shifts that are shaking up the multinational brands themselves, the fact that the design business appears to be handling these adjustments relatively well testifies to its general health, he adds.
However, designers believe that the current focus on brand-based websites is unlikely to be sustained at its present level. “This area has spawned a lot of work, but in many cases it has been a bit of a knee-jerk reaction,” says Rivett. “I think a reappraisal is overdue as to the precise value of these sites.”
But, as the reshaping of the Design Bridge business demonstrates, the company is a long way from dismissing the significance of new media. “There has been a fundamental shift,” Rivett says. “Once you’ve cut through all the hype, what you have is a new distribution channel that’s here for good. Growth will not always be exponential, it will settle into a more conventional business model. But there will be continuing demand for design in this medium.”
Comparisons abound between new media and old media precedents. Look at the way TV advertising complemented, rather than undermined, print media, says
Rivett. Andy Knowles, partner at jkr, likens the idea of the Web killing off conventional design to the Eighties belief that direct mail would take business away from advertising. In fact, the key word is “incremental”.
Knowles believes that agencies which reposition themselves squarely as Web-based design companies risk losing their old customers faster than they gain new ones. And by attempting to cover digital as well as packaging design, consultancies can fall into the “jack of all trades, master of none” trap, he warns. The lesson of the Nineties, in his opinion, is that focus is the key.
Strength in specialisation
Even the way in which Design Bridge is repackaging its services, says Knowles, is an example of commercial opportunism which runs the risk of brand dilution. The term that jkr likes to apply to its own design work is “single-minded”: consultants in related areas of branding may have to be brought in for specific projects, says Knowles, but this leaves the company stronger in its own area of specialisation.
Like Design Bridge, Siebert Head sees the need for a shift among the larger “quality” consultancies towards a game for higher stakes. “It is no longer simply about design – it’s about thinking,” says marketing director Satkar Gidda. The strategic thought that will genuinely differentiate one brand from another, rather than merely echoing category language, is only being offered by a few consultancies, he says.
The issue of consultancy size is a vexed one. Bigger is still often thought of as better; but as in so many disciplines, IT is offering designers the option of maintaining a small hub at the centre of a network that is as large – or small – as it needs to be for a given project.
Paul Foulkes-Arellano left Design Bridge recently to take over as managing director at Wren & Rowe, which he describes as a “medium-sized agency”. “Clients with the bigger consultancies will still often use personalities as points of reference,” he says – which is fine, until the time comes when those personalities are no longer there.
“At Wren & Rowe, I’m taking a completely different approach. It’s still about people, but the idea is that when we use high-profile researchers or designers, they don’t need to be there all the time. In fact, there’s a large pool of talent out there that has become disenchanted with the huge treadmill studios,” he says.
Global reach and expertise
By forging informal links in this way, the agency is able to cover a lot of ground geographically. Although the approach is quite different, Design Bridge underlines the same need – an ability to demonstrate global reach and expertise. Rivett points out that some 65 per cent of the consultancy’s work is for overseas clients. Most would agree that this sort of familiarity with quite different markets is another criterion for success in the evolving design business.
But even where the client is looking for quality and a bulging portfolio, for many pressure on costs remains a key issue. “We have noticed that over the past two years or so, there has been pressure on margins,” says Siebert Head’s Gidda. “And even loyal clients now tend to put new projects out to pitch.”
At Elmwood, Sands admits that the loss of the Asda business (albeit with the promise of more to come in) was the principal reason behind the redundancies. But in general, he says, work for brands is being squeezed just as much as – if not more than – design for retailer own-label. “There are fewer retailers, and in order to be able to drive prices down, each retailer is deciding to stock fewer brands,” he explains. And even where international brands are not being consolidated, they are trying to cut costs by postponing or limiting the number of repackaging projects, says Sands.
Not everyone shares the same view. While some designers complain that they have less influence and smaller budgets to wield – not to mention having to deal with younger brand managers – the experience of jkr has been quite different. “I’m finding that we’re dealing with more senior people and that also – within limits – budget isn’t an issue,” says Knowles. “The added value of good design outweighs the incremental cost.”
Increasingly, packaging design is on the agenda at board level, according to Knowles, and is often appreciated as offering better value for money than high-cost advertising.
Similarly, PI Design International says it is recruiting staff rather than cutting back, and argues that its business has been helped because clients are now seeking greater integration and coherence across the different visual expressions of a given brand. Like Knowles, PI’s executive creative director Don Williams sees the consultancy gaining greater access and influence at senior marketing levels.
Experiences appear mixed, but regardless of how some agencies may want to put a particular gloss on their performance, it seems that times are decidedly tougher for brand design. In this changing environment, the Wren & Rowe model may come into its own: an agency with a wide reach but low overheads. However, brand owners may well want the reassurance of non-virtual offices as well as familiar names.
And for certain brands and projects, they may even be looking for just the sort of mix of traditional pack design and digital expertise that Elmwood is offering.