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In May this year, we ran a notice about design business research being conducted by LaSalle Communications for CFX Creative and Core77 Design Network. This research has now been completed and we have been given permission by LaSalle Communications to republish the Executive Summary Report for your benefit.

Some key points to bear in mind while reading this material:

• the data is US-centric, but does include other countries
• the data covers multiple design disciplines, with industrial/product designers being the largest group of respondents
• all dollar figures are US$

Having said that, it is a very worthwhile read as it provides you with a basis for comparing your practice to those elsewhere.

Industry Snapshot: Research Summary

Research Report prepared by
Kim LaSalle, LaSalle Communications
September 2002

Executive Summary

Purpose

Agency closings, client reorganizations, mergers, the Dot com fallout, recession - there were many reasons for launching Industry Snapshot. But they all boiled down to one question: How are the fittest design professionals surviving in an unfit economic environment?

While the results of Industry Snapshot aren't antidotal, they may provide preventative medicine to designers who want to be more competitive in the industry.

The study sought to determine:

• Demographics
• Business characteristics and growth strategies
• Best practices

Methodology

Industry Snapshot incorporated methodology pioneered by Georgia Tech Research Corporation in its Web attitudinal studies (Copyright 1999). The measurement tool was a Web-based questionnaire (Appendix A). In addition to questionnaire results, secondary sources of information were consulted to provide a frame of reference for data interpretation. The survey was launched May 15, 2002, and closed on June 21, 2002.

• Total Surveys Completed: 616
• Unusable or duplicate data: 18
• Total Surveys tabulated: 598

A non-probabilistic sampling methodology was used. That is, only individuals who visited the Core77 Web site could participate. In addition, it survey participation relied on self-selection - the user's choice to participate.

Multiple measures were taken to reduce bias in sampling by creating awareness of the study throughout the online design community. A free copy of the comprehensive research report was offered to participants as incentive. The report is otherwise available for $150 US.

Core77 published an article announcing the survey two weeks prior to launch. In addition, an email announcement was sent to all Core77 registered users. An eye-catching graphic on the home page sought to drive awareness and participation of all visitors throughout the survey period.

To encourage participation from designers outside of the Core77 Design community, network staff, CFX Creative, and LaSalle Communications contacted 70 online design sites, professional associations and SIGs throughout the world. Online trade magazines and newsletters were also notified.

Validity of the study is estimated at +/- 4% at the 95% confidence interval for the Core77 Network community. This means we can accurately apply characteristics and information from participants in the sample to all individuals in the Core77 community within 4%. Relying solely on sample size, validity might be estimated at +/- 6% at the 95% confidence interval for the U.S. population of designers. However, we prefer you take a moderate approach to data interpretation. Industrial research like ours is intended to offer qualitative insights about the industry. As the name of the study indicates, this is simply a "snapshot."

Executive Summary: research highlights

Sample demographics

Geographic representation, ethnicity, age, years of experience

• Forty-six countries in eight world regions were represented. Eighty percent of participants were Caucasian or White, the by-product of a study dominated by the U.S. According to the latest census data, 75% of American aged 18 years or older are Caucasian/White.
• Sixty-seven percent of participants were between the ages of 22 and 34. The age distribution correlated to years of professional experience. It also affected how some sample participants responded to questions that were more appropriate for senior staff. Design specializations, gender comparisons
  
• As the Core77 Network tends to be a hub for Industrial Designers, professionals in this area dominated the sample. Twenty-eight percent named Industrial Design as their primary area of expertise. Graphics/Print professionals represented 21% of the sample. Design Management was the third most-mentioned.
• 31% of men listed Industrial Design as their number one area of expertise, but only 17% of women worked in this area. Areas occupied by men and not women were Animation, Fabrication and Manufacturing, Model Making, POP/Retail, and Prototyping. Areas occupied by women and not men were 3D Modelling, Environmental Graphics, Human Factors, Interior Design, and Packaging.

Education, income

• Though some non-degreed individuals work in the design field, a post high-school degree is basic ante for the design profession.
• U.S. designers were very well-educated compared to the U.S. population at large. While about 26% of the U.S. population has a bachelor's degree, 66% of designers were degreed at this level. An additional 15% had a master's or doctorate degree. About 8% had associate level degrees.
• Individuals without college degrees made less than their degreed colleagues. Seventy-three percent of designers with high school diplomas made between - $12,499 to $29,999. Individuals with some college classes, but no degree, fared somewhat better with 40% earning between $30,000 and $49,999.
• Level of degree didn't always mean a higher salary. In fact, people with (occupational) associate degrees made as much as or more than as people with bachelor's or master's degrees.

The business

The largest number of participants (34%) worked in corporate environments. By contrast, individuals in the "academic" or "other" categories represented the smallest sample segment at 7%. Most designers in the study worked in small, intimate settings of from one to five people. Consulting professionals accounted for 31% of the sample; 29% were freelancers.

With the exception of entry level designers, half or more of freelance professionals charged between $50 and $100 an hour. By title, these were:

• 50% of Art Directors
• 55% of Creative/Design Directors
• 71% of Mid Level Designers
• 51% of individuals who simply identified themselves as "freelance/independent"
• 60% of Principals

In consultancies, hourly rates were more tied to job function than in the freelance environment. About 24% of senior agency professionals reported an hourly rate of $250 or more.

Internal referrals and word of mouth were by far the most-used methods for employee recruiting. For designers seeking employment, this translates into one critical watchword when seeking employment: Network.

Among charge backs to clients as part of consulting and/or freelance billing practices:

• Art direction
• Attorney fees
• Client training
• Concept generation
• Design rights
• General overhead calculations added into fee determination
• Liaison function and management for manufacturing
• Out-of-pocket expenses for printing, shipping, couriers and mailing
• Project management
• Research
• Source design files such as stock photos
• Software upgrades and purchases
• Time spent emailing files
• Travel
• Material and publication rights
• Out-of-pocket expenses for printing, shipping, couriers, and mailing

The clients

Quantitative analysis was done to identify current and future business prospects. Industries and practice areas where business was concentrated were perceived as having high market demand. Qualitative analysis was done to ascertain what, if any, prospect qualification strategies appeared to be in place. Participants were asked for:

• The cities and countries where they did most of their business.
• The typical length of client engagements.
• The top three revenue-generating industries.
• Size of their clients as defined by annual revenue.
• Size of their clients as defined by number of employees.
• The top three revenue-generating practice areas.
• The top practice areas of predicted growth.

For consultancies and independents, knowledge of their clients - annual revenue and number of employees - was interpreted as implicit evidence that a prospect or client qualification strategy was in use. Consultancies and in-house professionals appeared to use more sophisticated methods for prospect qualification.

Despite the proliferation of freelance hubs that connect freelancers to contract employers throughout the world, responses indicated the best client prospects are in your own back yard. Few individuals or companies did work outside of their own country. In fact, most designers generated the majority of their business in the city where they had offices.

Consumer Products (Durables) was the number one revenue-generating industry for consultant and in-house designers and the second most lucrative area for freelancers.

Eighteen percent of in-house staff was employed in Consumer Products - Durables. Other industries with high demand for in-house staff were Media, Computer Software and Services, Retail, and Manufacturing.

One-fourth of all consultancy business was concentrated in Consumer Products - Durables. Other industries that trailed in demand for services were Computer Software and Services, Consumer Products - Non-Durables, Health Products & Services, and Electronics & Misc. Technology.

Eighteen percent of freelance business was concentrated in Media. Consumer Products - Durables was a close second at 17%. Other industries that showed high demand for freelance services included Consumer Software & Services, Diversified Services, Electronics & Misc. Technology, and Leisure.

The practice

Practice areas where designers currently did the most business were compared to practice areas of predicted growth (over the next three years). Data analysis tried to ascertain to what designers were able to use a "customer-centric" or "client-centric" model rather than a "product-centric" model to provide design services. In a "product centric" model, a business begins with a product or service - such as design services - and tries to find consumers to buy that service. In a "customer-centric" model, a business begins by identifying customer needs, then fills those needs by supplying appropriate products or services.

Seventeen percent of in-house staff currently concentrate their practice in Graphics and Print. Interaction Design is second at 14%. In-house staff appeared to use a more client-centric business model than consultancies or freelancers. This may the result of greater latitude for staff development and new hires in the corporate environment. For consultancies and freelancers "hiring ahead of business" (that is, acquiring staff to do work that hasn't been sold) typically isn't a viable business strategy.

Thirty-four percent of consultancies currently concentrate their practice in Industrial Design. Product Development is second at 13%. Though there was some tendency to grow business based on current skills, consultancies were moderately "client-centric" in their business model. They appeared to identify growth opportunities through analysis of current practice concentrations and market trends.

Twenty-five percent of freelancers concentrate practice in Graphics/Print. Interaction Design is second at 23%. By necessity, freelancers tended to be "product centric" in their business approach.

Staff development

Surviving in a business environment requires business survival skills that aren't often taught in design classrooms. Questions regarding practical business management practices and professional development tried to identify whether designers were making any progress in honing business skills outside of their creative disciplines.

Few designers appeared to have the interest or opportunity to develop skills in areas such as budget and finance, business development, and marketing. Yet business development and marketing were identified as the two biggest challenges facing design firms over the next five years.

It appears that designers who hope to meet these challenges will either have to be willing to acquire business development and marketing skills themselves, or hire professionals who specialize in these areas.

Greatest challenge

Designers in all categories agreed the biggest challenge for their companies would be business development.

Research Availability

The comprehensive report is available to research participants at no cost. The entire report is available to non-participants for US$150. Designers who wish to purchase the report should contact Stuart Constantine at Core77:

eMail: stucon@core77.com; Ph: 1-888-756-8282.

Acknowledgements

Research Team

Stuart Constantine, Core77 Network

Carly Franklin, CFX Creative

Kim LaSalle, LaSalle Communications

About Core77 (http://www.core77.com)
The Core77 Design Network is an international, web-based community for design enthusiasts seeking trends, information, resources and opportunities. Core77.com contains extensive content features, from calendar listings and links to design news and articles. Coroflot.com supplies ideal creative employment resources, from free portfolios and job opportunities to a firm directory and career advice (including its regular, open salary/compensation survey). The Core77 team contributed to questionnaire content, published and publicized the research study, and gathered information from participants.

About CFX Creative (http://www.cfxcreative.com)
CFX Creative is an independent design firm providing comprehensive creative solutions to businesses in need of graphic design and publishing, illustration, Web-based services, custom programming, and eBusiness solutions. Owned and operated by Carly H. Franklin, the Washington-based design firm has provided award-winning graphic design and Web development services to clients across the country since its inception in 1999. Franklin designed the Industry Snapshot logo, contributed to questionnaire content, and assisted in editing the final research report.

About Kim LaSalle (http://www.lasallecommunications.com)
An independent marketing professional based in St. Louis, Kim LaSalle offers marketing and communications services to mid-sized companies and consultancies. Services include media planning, eBusiness consulting, corporate communications, eMarketing, and market research. LaSalle's public relations practice covers business-to-business communications, employee and media relations, and product/program publicity. LaSalle provided methodology development, contributed to questionnaire content, executed data analysis, and wrote the report and articles related to the study.

References

Office of the United States Trade Representative (USTR), World Regions, http://www.ustr.gov/regions/index.shtml

The Macmillan World Atlas (New York, 1977).

Nua Internet How Many Online, an "educated guess" as to how many people are online worldwide as of February 2002. And the number is 544.2 million. http://www.nua.com/surveys/how_many_online/index.html.

M. Jensen "African Internet Connectivity," World Bank Institute. (Updated February 2002). http://www3.sn.apc.org/africa/

"States Ranked by Population," U.S. Census Bureau, 2000.

"Latest Release from the Labour Force Survey," Statistics Canada. (June 2002) http://www.statcan.ca/english/Subjects/Labour/LFS/lfs-en.htm

"Latest Release from the Labour Force Survey," Statistics Canada. (June 2002) http://www.statcan.ca/english/Subjects/Labour/LFS/lfs-en.htm

"Women In the Labour Force - Women's Participation," (October 2000). Commonwealth Office of the Status of Women - Australia. http://www.osw.dpmc.gov.au/index.html

U.S. Census Bureau, Census 2000 Redistricting Data. Summary File for states.

"Educational Attainment in the United States: March 1999," U.S. Census Bureau.

"I think doing a small business management course and having a mentor scheme for new design businesses would go a long way to remedy the 'gaps'. Design is more than creating a brand, it is about strategic thinking and creativity in business."

"Hello Andrew,
it was interesting to read the benchmarking info from the US, but does similar info yet exist for Australia? Also, the designer who "billed what the work was worth" is a common situation I encounter (and I believe I have the same problem). There is a disparity between what the work is worth (to us) and what it is worth to clients (especially some sectors). After 4 yrs in business, i still don't think I have a decent pricing structure; there is such wild variance between studios, not just on original quotes, but what they actually end up charging the clients for. Australian benchmarking of the deign industry would be enormously useful, not so much salaries etc, but more the client side: typical values of typical job types, variance between quotes and actual charges, etc. regards
Simon"

"An interesting report on designers. Would it be safe to assume that the requirement of designers is to take on greater business management skills?"

Reply

Yes and no.

'Yes' if you believe that designers have significant business management responsibilities and would prefer to make a decent living by addressing the skills gaps that prevent them from doing so. 'No' if you don't believe these things.

By the way, my experience of designers is that many of them may say 'yes', but a fair proportion of those actually mean 'No'.

For example, a designer recently told me that he "billed what the work was worth" TO HIM even though he is making only 50% of what he wants to make each year. How can these two facts be consistent with each other? Either he is under-billing by 50%, or he is only billing half the time he could be working. Since he has been in business for over 6 years now, it would be fairer to assume that he is about as good at selling work as he will be for a while, therefore he is in fact charging half of what he should be charging.

Cheers,

Andrew Lam-Po-Tang | AGDA Site Editor