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Design Value Matters

Design Value Matters

What makes design really matter? Profits. Good design earns good money, because good design is good business. What about welfare

I would like to sincerely apologize for my non-emotional straightforward almost cold response on the value of design being profits. Of course design value is not just about higher profits, good design makes the world a better place by enabling companies, individuals and governments to offer products and services that provide a higher utility, being more efficient, environment friendly, responsible, user friendly and economic as well. Good design is good, it helps you, it cares you, it loves you and it gets loved.
So, I will respond the question from the aspect of society and the aspect of business. However I feel the need to heavily focus on the merits of design for good business because I think many people already talk about social benefits of design, but not many capable people talk about business merits of design (many people do actually talk without proper base theory, sorry but for credibility, you need to support your thesis with the right theory which I will present here), I feel having a good business background, being and economist as well as an advanced designer with a Ph.D. makes me eligible to talk as much as I want about the subject, and as you could understand from this paragraph I am not being humble about it either. I am arrogant indeed, because I need you to read and listen very carefully, and I need you to know that I have no doubt in my theory.
So how does good design benefit business metrics? I initially said increased profits already, but how does good design increase profits? Selling more number of units? Selling at a higher price? Selling to a more number of people with more reach? Does good design increase revenues? You know the answer already, but you are partially wrong, correction, you are missing some points. It is not only about sales, the value of good design is actually also very much about costs reduction. Really good design, decreases costs. It decreases costs of production, cost of maintenance, cost of problems raised due to bad design, it decreases advertisement costs as well. So is that it? No, the truly great and good design decreases costs while increasing revenues, meaning that good design creates a very much difference in cost and revenues, that means really higher profits not just a bit more sales, truly big profits. Good design improves also production possibilities curve by introducing higher efficiency to production system, creating a rightward shift that represents economic growth. I do not feel the need of discussing the merits of economic growth, it just is very positive; creating jobs and opportunities for the whole society.
Design Value Matters
Economic Growth : Good design creates economic growth by shifting the Production Possibilities Curve rightwards outwards. PPC shifts rightwards as good design is more efficient, and good design products require less resources for production (or marketing), providing an opportunity for businesses to produce (or sell) more units with same amount of resources. You will agree that some good design products, do not require less resources and could not shift the curve rightwards from a production point of view, however you will agree that good design could sell for a higher price or for more number of amount, providing more revenues and profits, and these revenues or profits could be turned into more machinery to produce more goods, which could again, help the producer produce more goods faster or cheaper, creating economic growth. This economic growth is of course possible for one company or the whole country, depending on the scope of design integration.
Design Value Matters
I have prepared a series of graphics to explain the microeconomic concepts of supply and demand and how supply and demand economic model for price and quantity determination in a market could be effected by investing in design. Normally, in a competitive market, price of a product settles at a point where the quantity demanded equals the quantity supplied, resulting at economic equilibrium of price and quantity. Basic theory is as follows: If only demand increases, while supply is constant, this shifts the demand curve to right. If only supply increases, while demand is constant, this shifts supply curve to the right. Increase of supply and demand are considered good, as when both supply and demand increases, that benefits the society most.
Design Value Matters
Increased Supply thanks to reduction of production costs. Here we also consider many other production related costs, so we indeed talk about costs of the producer which also includes sales costs, advertising costs, marketing costs, branding costs and any other costs that design could create a difference. We could all agree that good design, being more beautiful, aesthetic or being superior for its functionality, more efficient, energy saving or eco-friendly, being more good and attractive, will be demanded more by the customers. This higher demand, for the good, pulls down advertising costs the following way: Given the same advertising budget, the impact and results of the campaign gets better; with same amount of advertising, the product sells more, that means a reduction in advertising costs per unit. Then good design can pull the transportation costs by making the product space friendly, and costs of defects or number of units broken during transportation can also decrease, also the weight of object could decrease. But these are all for products, for services a good design process can make the process efficient by automating and documenting processes that increase quality as well as speed of service, and as speed of service increases, the same number of people or resources can serve more customers, providing more supply.
Design Value Matters
Now, lets go back to our initial equilibrium, lets imagine that the design is focused more on aesthetics than logistics or any other aspect, and lets assume that the aesthetics do not effect costs of producer as I initially discussed. Now, our superior, more efficient, better looking product is desired by more people, it has higher demand. High demand means people can now pay more for the product, for example they think the product will last ten times longer than the older one, so they are ready to pay extra for this additional duration, or for example they think the service is much more better, so they could choose to spend their money on this designful service by paying a bit extra, regardless of what is being happening, the better service or product starts selling more units, with people happily preferring and buying the designful products. This increases the price for sure, that is good news for producer, it means higher profits, more surplus. But it also makes the consumers more happy and satisfied, instead of buying whatever products, now the consumers are happy with their purchase, they are grateful, they are making emotional bonds with their designful products that make their lives better.
Design Value Matters
What does good design do to make economic surplus, good design creates both higher consumer surplus and higher economic surplus, how does it even possible? My theory, and perhaps you would agree, that good design shifts the demand curve rightwards. Demand shifting right means increased demand; think about it, a better product, more durable, more efficient, more beautiful, more functional, with more aesthetic values, more trendy is most likely to be demanded more. More demand means shifting the demand curve right in economics. When the demand curve shifts right, market price and quantity of products sold both increase, and we can explain it this way: when there is more demand, more people wish to buy products, and therefore sales numbers increase, as sales numbers increase, producers might want to produce more or charge more depending on their capacities, and when producers charge more, the price increases, and in some cases, new producers with higher costs could join the market to provide the great product since now it is possible to cover costs when in the past it would not be. This is how design creates value for society, it can of course increase the sales price of products to some degree and make companies make more money more profits, but it also makes products more valuable and more desirable such that people are happy to pay more for these better and improved products with good design.
Design Value Matters
Now, lets imagine that increased demand has created a new equilibrium thanks to good design, but lets also imagine that this is not just good design but great design, in addition to making the customer and consumer happier by being a good product or service that benefits consumers more, thus capturing their hearts and money thanks to the superiority of designful product being more advanced, sustainable, eco-friendly, energy-efficient etc, lets also remember that great design also costs less to produce and sell, thanks to reduces costs of transportation, warehousing, logistics, as well as publicity, advertising and others. This all shifts the supply curve rightwards, companies are now able to produce or sell more goods thanks to design decreasing their logistics, production, distribution and marketing costs.
Design Value Matters
Another way good design does generate economic surplus is by shifting the supply curve right. Shifting the supply curve right means companies being able to produce more units with same resources, or same number of units at a lower cost, this is where great design does its magic, good design, which could optimize and take into consideration production technologies, materials and new technologies could effectively shift the demand curve right by decreasing production cost of services and products, and this shift means three very good and positive possibilities. Firstly, for the general economy, it would mean prices to go down, making people happier as the population can buy the same goods at lower price. It would also increase the number of goods available in the market, creating abundance and prosperity, making products and goods more accessible. However, for companies, the decrease in production costs means more profits as profits are calculated by revenues minus costs, and revenues minus less costs means more revenues minus the same costs, thus more profits. Of course not all design is great design, but many good designs accomplish this feat, especially when the designer is highly expert.
Design Value Matters
Truly great design however would shift demand right and supply also right, meaning the prices to perhaps stay the same, while the quantity of products consumed by consumers would be higher indicating prosperity and abundance. So truly great design makes both suppliers, companies and factories richer, as well as the population, society, consumers more happier, and if we translate happiness to richness, more richer when you consider being more rich is being able to have more wealth, and wealth is measured by belongings, and with quantities increasing in either case, good design makes the society richer, able to consume a higher quantity when demand increases, able to consume higher quantity when supply increases. The updated producer surplus is bigger than the new producer surplus which is bigger than the initial producer surplus. The updated consumer surplus is bigger than the new consumer surplus which is bigger than the initial consumer surplus.
Design Value Matters
So, we arrive at a new equilibrium where we can consumer more, of course if the technological advancements and strategic design improvements are enough, we would even have a less initial cost for the customers, but in any case, the consumer surplus as well as producer surplus is higher than before, meaning both the consumer and producer benefits significantly from design improvements.
Design Value Matters
Economic Surplus : Good design means higher social utility as well as better profits and money for companies, and happiness for customers. So how this all happens? Basically, let me please introduce ore reintroduce you the basic economic theory about Supply and Demand, normally the market clears itself based on an equilibrium of Price and Quantity. In this equilibrium, we can find consumer surplus and producer surplus. Consumer surplus is the amount, consumers are saving, based on the equilibrium; some consumers are ready to pay more than what the product costs, but they are able to purchase the product at equilibrium price, which is lower than their initial willingness to pay or the price in their minds. Then the producer surplus is sort of like extra profits, it is the difference between the producers asking price in mind with the actual sales price which could be higher if the equilibrium price is higher. When design value is introduced, both consumer and producer surplus gets bigger, this means great improvement in welfare.
Now that we have an economic basis of demand and supply shifting and thus creating value for consumers and suppliers, we could think more on justifying the initial ideas. We should refocus on the questions and answer them to have a good understanding of design value and its potential to fullest. 1) How does good design benefit business metrics by increasing profits? 2) How does good design helps companies sell more number of units? 3) How can good design help companies selling their products at a higher price? 4) How can good design enable companies to reach more buyers? 5) How would good design increase revenues? 6) How does good design decrease costs?
How does good design increase your corporate report numbers to make your balance sheet shiny and happy? Good design does that by increasing revenues and decreasing costs, but also by increasing your market share as well as helping you brand and position your products better, making your products less commoditized, more differentiated, more demanded by customers. Good design takes your whatever product and turns into the product, that customers talk about, clients like and consumers enjoy. It makes your products desirable for consumers, and it makes them desirable for you as well by making them more profitable. Good design in business is the formula for creating cash cows as well as stars that make your balance sheet rock.
Design Value Matters
How does good design help companies sell more number of units? Good design is photogenic, that means good design is advertisement friendly, good design being more attractive to the consumers will result in more sales when the same amount of marketing budget is used. That is obvious. But good design could help you reduce your production costs, and with reduced costs, you could ask a less price, and you could sell an increased number of units as now the consumers would prefer the products that are costing less. Another aspect how good design can help sell more units by increasing the speed of production of goods and services, the speed can be increased directly by better design of the service or product production that is being more efficient, for example requiring less manual intervention, or by reducing overheads elsewhere (such as less costs for transportation, logistics and marketing) so that more budget could be allocated from other business activities to production. Especially when there is a surge in demand seasonally, good design can be very useful to help you supply faster. However sometimes, good design is good inside but looks still almost the same outside, you know, it is like one of your ugly looking but pure in heart friends, or not so handsome looking but brilliant minded introvert geniuses. This is where design awards could play an active role for their marketing. For example, there has been research conducted on the effect of design award winner logos on purchase decisions of customers and it has been found that just placing the award logo to product packaging or service communication does indeed increase sales. A’ Design Award for example, is a good design award program that you could nominate your products and services and you could have a lifetime license to use award winning design logo to promote your designs.
Design Value Matters
How can good design help companies selling their products at a higher price? Good design creates differentiation. Differentiation means your product is not available for sale by the competitor, of course the competitor could have an alternate offering, but this offer is no longer a perfect substitute, your product being differentiated, is no longer a commodity, and you can this way charge a premium over the market price, this is the first thing. Second, of course good design will increase demand for your product, then when the demand increases you have two options; you can either decide to sell more units, and make a higher gross profit or higher revenues in total, or you can decide to increase sales price, and this way you would make a higher profit per product. So the answer is increased demand as well as differentiation that enables you to be able to charge a premium for your good design product or service, or as I told, it could also enable you to sell more units if you would decide to keep the price constant.
Design Value Matters
How can good design enable companies to reach more buyers? Good design is advertising friendly, as I have explained many times in this article, if you use your advertising budget to promote a bad product, you will fail, because business success is also about return consumers as well as the customer referrals and suggestions. When your product is good, it will be referred to other customers by happy and satisfied customers, and even if these customers would not refer your product to others, they could still make return purchases or even buy your products as gifts to others or simply increase the amount of their consumption of your products. Good design is also appealing for press members and gets more coverage and attention from media members and publications, thus good design also reaches more prospects, and this value could further be amplified by joining a good design award program such as the A’ Design Award and Competition which would create and distribute a press kit to thousands of editors, to help disseminate, advertise and publicize your good product design or service.
Design Value Matters
How does good design decrease costs? Good design decreases costs in many levels. First of all, for example it could decrease logistic costs, a better more durable product will be transported easily for sure, but what about stacking products and clever packaging that occupies less space, imagine being able to fit ten times more products to the same container with ten times less broken units during transportation. This is good packaging, and good design engineering combined with a good understanding of materials. Imagine a better design that is designed in such way that the same product could be produced with less material for example thanks to new form that is as strong as previous form but with less materials, it is great for the company and money is saved, and it is great for society as well, imagine less materials means less waste, more eco-friendly products with less carbon footprints. Good design can also decrease legal costs, imagine that your product does not kill any little kids (and unfortunately there are many products that kill little kids), this new product for example with design of kids interactivity in mind, with controls, regulations, or with kid friendly form with smooth edges not only make the world a better and safer place for our little ones, but also save companies from legal costs as well as any issues. Good design also decreases advertising costs. Good design decreases advertising costs by being more word of mouth friendly, being referred to more people, repurchased or loved more by customers, also aesthetic and beautiful design get more press mentions and publications are more likely to feature good design than just design.
Design Value Matters
How would good design increase profits? In summary, good design increases profits by decreasing costs and increasing revenues. Revenues are increased by being able to sell more products, or being able to sell the same products with a higher price. The revenues are increased due to product differentiation as well as increased demand for the better products. Costs are reduced by efficiency in transportation and logistics, decrease in production costs by increase in speeds or decrease in amount of materials or resources required, decrease in marketing costs per product by making the products or services more appealing to the minds of consumers, clients and customers. Finally, good design is good karma. Really good design benefits society because it uses less resources, creates less waste, is more efficient, longer lasting and durable, and in some cases, this could help the product sell more or even government level subsidies or tax reductions could be possible. Good design is good business.

This article was added on Friday, 25th of September, 2015 at 07.27 am by author Onur Cobanli Tags: social welfare, good design, consumer surplus, producer surplus, design value. Read our copyright policy here.




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