Company spending on design: survey of UK firms 2008
About the survey
This report was prepared by Finbarr Livesey, Centre for Industry and Government, Institute for Manufacturing, University of Cambridge and Dr James Moultrie, Design Management Group, Institute for Manufacturing, University of Cambridge.
The report presents the results of a survey of company spending on design in the UK, based on 358 survey responses.
The total design spend for the companies surveyed was £92 million, representing 2.1% of turnover.
This survey captures design spend using a model that categorises spending by purpose rather than by a strict definition of design.
This includes design in developing products and services, and design in promoting products or the company.
The researchers defined four categories of design spending:
— Technical: design is used to solve technical issues, for example in mechanical engineering or software design
— User: considers the user experience, user interaction and aesthetics of products and services
— Promotional design: design of advertising and promotional activities for specific products and services
— Identity design: design focused on company identity, including branding
Average Technical Design spend
The highest average spending was in manufacturing, at £698K compared to the next highest average of £171K in wholesale and retail.
The report showed that average spending on technical design varied by size of company and it increased significantly for larger companies.
Technical design spend as a percentage of turnover
In terms of design spend as a percentage of turnover, manufacturing is second to other business activities (2.3% compared to 3.0% of turnover) in this sample. There is surprisingly little technical design spend as a percentage of turnover in construction and a significant element of technical design spending in wholesale.
By size of company, there is an interesting U-shaped pattern, with small (0 – 9 employees) companies’ relative spend at 1.6% of turnover and large companies (more than 250 employees) double that at just over 3% of turnover. In between, companies with 10 to 49 employees had a relative spend of just under 1% and those with 50 to 249 employees had an spend of of 1.3%. This may reflect the need for new young companies to move from a prototype to a working product and for large companies to carry out significant technical design to produce large volumes or complex systems
Average User Design spend
Average spending on user design for the companies surveyed was £11.6K, with a maximum reported of £520K.
The scale difference between this kind of spend and technical design spend is striking, which may reflect the specialised equipment often required to support technical design work.
Other business activities have the highest average spend, with a significant proportion outsourced.
The highest average spend by size of company was for those with 50 – 249 employees at just under £34K.
Small companies spend least on average on user design (£1.3K), and large companies also having a low average spend in this category (£8.3K).
User Design spend as a percentage of turnover
The intensity of spending on user design varies significantly between sectors, with other business services at 0.64% of turnover compared to manufacturing at 0.37% of turnover. The companies in the construction sector again stand out as having a very low relative intensity of user design spend. This may be the nature of the sector but it appears to be a significant difference.
Expectations that manufacturing would have the highest user spending are not fulfilled and wholesale again has a high intensity relative to the other sectors.
Company size appears to have an impact on user design spend. The highest spend as a percentage of turnover is for companies with 10 – 49 employees at 0.3% of turnover. The lowest user design spend is in the largest companies, with just 0.01% of turnover spent in this category.
Average promotional design spend
The average promotional design spend is £28K, with 36% of that spend being outsourced, to the greatest extent in construction.
The sector with the highest average spend was wholesale, with an average spend of £44K, possibly reflecting the nature of competition in the sector.
Companies with over 250 employees have the highest average spend at just over £170K and the average spend appears to increase with company size. This would support a model for promotional spend where the design effort in promotional is proportional to the size of the company, i.e. there is a scale affect that does not plateau.
Promotional design as a percentage of turnover
The promotional design spend as a percentage of turnover is highest for other business activities, with 2.2% of turnover spent in this category, followed by wholesale at 1.3% and manufacturing third at 0.8%.
These results indicate that the relative need for promotion is highest in other business activities, whereas it might be expected that as a competitive differentiator it would be most required in wholesale.
There appears to be little relative spend in construction, again identifying it as a very different sector in terms of design input. The relative promotional spend peaks for companies with between 10 and 49 employees (0.6%).
The other three size categories all have approximately the same spend at around 0.3% of turnover. This may, if company size is strongly linked to age of the company, indicate that as companies grow they go through a period where there is a need for relatively greater design focus on promotion.
Average identity design spend
The average spend on identity design was £9.6K, with almost half (46%) of that spend being outsourced. This level of outsourcing is much higher than the other elements of design.
The highest average sector spend was in the wholesale sector at £14.8K and the lowest was in construction at £8.3K.
In the same way as technical and promotional design spending increases with company size, average spending on identity design increases for companies with greater numbers of employees.
Companies with greater than 250 employees spent on average £43K on identity design, which is in strong contrast to companies with less than 10 employees where the average was £1.2K.
Identity design as a percentage of turnover
Similar to promotional design, the highest average spend as a percentage of turnover is in other business activities (0.63%), with wholesale second (0.40%). Again, construction has a different profile and lower intensity of spend than the other sectors.
The inverted u-shaped pattern for design spending as a percentage of turnover present in promotional and user design is repeated for identity design. For companies with between 10 and 49 employees 0.2% of turnover is spent in this category. This is double the level of companies with between 50 and 249 employees and four times higher than both small and large companies.
So what does this mean for Australian design studios
Past design surveys conducted in the UK have been supported by similar findings here so it is fair to assume that this survey will equally apply.
At least is an indicator of what is spent on design and hence a target to budget for when pitching new clients.
You can help to build our own data by encouraging your clients to complete the dbc Design in Business survey
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me and let me know.