Adding value through design

The headline

It’s a fact. Adding value to products and services makes businesses more successful. The more value they add to their core products and services, the better they do. But when they use design to add value, they do even better in a whole range of ways, including bigger profit, turnover and market share.

The details

This chart shows, in broad terms, what our figures say about added value and design. If your business adds value to make what it offers more attractive to customers, it’s likely to out-perform businesses which depend wholly on their core product or service. Your prospects are best of all, though, if you combine added value with the use of design or see design as integral to your business.

What is added value and how are businesses doing it?

Increasingly, businesses can’t just rely on their core products and services to compete. They need something extra – added value – to help differentiate themselves from the competition and tempt new customers or keep the ones they’ve already got. In our Added Value Research 2007 we’ve focused on the methods businesses can use to make what they do stand out. We’ve broken added value down into these eight activities:

• The retail experience – the shopping environment, the location and the opening times
• Online services – web-based ordering systems or information on products and services
• Physical services – fitting, installation, technical support or flexible delivery
• Customer relationships – developed through after-sales service or knowledgeable staff
• The design of products or services – improved quality, or customising to meet personal needs
• Finance or insurance options
• Developing a valued and trusted brand
• Bundling products and services to create packages.

The customer relationship is the most common route to added value – 92% of businesses follow it. Not far behind is the design of products and services – 84% of businesses say they add value in this way.

At least half of businesses say they add value in all the ways we asked about, but far fewer actually have a defined strategy for doing so.

Only just over a third of businesses (36%) say they offer a lot of added value, while one in five (21%) say they rely solely on their core product or service.

What benefits do businesses get from adding value?

39% of businesses that add a lot of value have seen turnover grow rapidly in the last year. Only 20% of businesses who just offer their core product or service say the same.

The benefits of adding value are clear. The majority of businesses that add value see some impact across a range of measures. For example, nine out of ten businesses say it has had a positive impact on their competitiveness and 83% say it has boosted their turnover and profits. A significant proportion go further and say adding value has had a great impact on performance – a third say this applies to their competitiveness and nearly as many report a great impact on turnover. Almost a quarter say the same about the effect of added value on market share (24%) and their ability to open up new markets (23%).

Businesses that add the most value get the biggest payback. Of those which add a lot of value, 46% say their competitiveness has improved to a great extent. Two in five (39%) are just as positive about the impact on their turnover. Among businesses who add less value, only 20% say the same. The difference is even bigger when it comes to market share – 38% of businesses which add a lot of value have seen a great impact here, compared to just 12% of those who add less value.

How much is adding value worth to businesses?

To find out how much adding value is worth to businesses, we asked them to quantify its impact on their turnover, market share and profit. The results suggest that businesses which add value get an average 14% increase in turnover and market share, while their profits go up by an average of 11%.

How does design boost the impact of adding value?

34% of businesses that add value through design say this has had a great impact on turnover. Only 21% of businesses who don’t appreciate design’s role say the same.

Businesses get even more benefit from adding value when they use design or a designer. That’s true whether they use design specifically for added value activity or see it as important to the business generally.

34% businesses that see design as integral or significant say added value has had a great impact on their turnover. Where design plays only a limited role, the proportion is just 21%.

There’s also a link between using design and being strategic about adding value. Almost half of businesses that use design are planning to add more value in the future (46%), compared to only 6% of those that don’t use design.

For more on using design to compete, see Competing by adding value.

How does using a designer to add value affect business performance?

43% of businesses who used a designer to add value reported a great impact on competitiveness, compared to 25% of those who didn’t use a designer.

Businesses get most payback from adding value when they use a designer to do so. Those that do are twice as likely as those that don’t to see an impact on turnover and market share.

53% of businesses that use a designer also add a lot of value to their core product or service. In businesses that don’t use a designer only 39% add a lot of value to their core product or service.

Businesses that use a designer to add value are also much more likely to be planning more added value activity in the future – 61% say they’re doing that, compared to only 34% of those which don’t use a designer.

Businesses that employ a designer are even more likely to perform well when it comes to adding value to their core product or service. 69% of businesses which do so have developed a new product or service in the last three years, compared to only 47% of businesses which don’t use a designer.

For more on using design to improve business performance, see What design can do for your figures, What steps to design alert businesses take? And The link between design and better business performance

Why do businesses not add value beyond their core product or service?

38% of businesses which only offer their core product or service don’t think added value would do them any good.

The benefits of adding value are clear, particularly if you use design or a designer to do so. It’s surprising then that just over a fifth of UK businesses are missing out by not adding value.

Businesses that don’t go beyond their core product or service give various reasons for not adding value. Two out of five don’t think it would benefit them and a quarter don’t feel it’s relevant to what they do. Far fewer say they’re prevented from adding value by a lack of resources or because they simply haven’t thought about it.

Businesses that don’t add value are most likely to be small, with between 10 and 49 employees. 62% of these said their product or service meets customers’ needs by itself and that, as a result, they didn’t need to add anything extra. In contrast, bigger businesses seem much more enthusiastic about adding value. Just over half of firms that add a lot value have more than 250 employees. In contrast, 90% of businesses that don’t add value at all are SMEs.

The Design Council’s Designing Demand programme has been specifically developed to help small and medium sized businesses use design to stand out and boost performance. Visit the Designing Demand website for more information.