We like to have fun with our designs here at AdEspresso. But that doesn’t mean we don’t take design seriously.
Great design is integral to the AdEspresso experience. We want people to enjoy our site, our ads, and our product.
All our design is in-house, with our full-time designers making sure every piece of design is to the highest quality.
But great design gives more than a great experience. Design increases revenue, increases customers, and decreases costs. Here’s how.
The ROI of Grand Designs
You don’t have to take our word for it. There is plenty of evidence that good design pays.
The Design Value Index tracks the returns of design-centric brands. These are select brands that put design at the forefront of their thinking and customer experience. Think Apple, think Nike, think Coca-Cola.
If you track these brands against the rest of the S&P over the last decade, they have far outclassed their less design-focused opposition:
These brands have outperformed the S&P by 228%. $10k invested in this portfolio in 2003 would have returned almost 4X by 2013. An S&P index tracker would have only netted $17.5k in that time.
This isn’t just a US phenomenon. A Design Council study found similar results in the UK. They found that design-led businesses outperformed the FTSE 100 by more than 200%. Perhaps more important for small business owners, the same Design Council report concluded that “for every £100 a design alert business spends on design, turnover increases by £225.”
So design has at least a 2.25X return on investment.
For design-centric companies, design is a focus in all facets of their business—the product, services, branding, and promotional space:
(Source: Measurable Design)
The benefits can then be across all layers of the company:
- Strategic: strengthening the brand and giving access to a new market
- Tactical: differentiating your product and increasing efficiency
- Operative: improvements to product usability and aesthetics
Companies can see all these benefits of good design through marketing and product design. This then leads to the positive cash-flow effects elsewhere.
By hiring designers and making design a core focus, you can increase cash flow and lower costs.
Bad Design Cascades
These studies relate to all design facets of your company, from product design, through branding, to promotional materials. We think that companies should be thinking about all of this, but what we really want to know is the ROI for advertising, especially on Facebook.
That is what we set out to discover earlier this year. Back in January 2016, we ran a Facebook ad design experiment to look at whether the design was really worth the investment. We wanted to see whether you could use cheap design in your ads and get the same result.
The answer was a resounding NO!!!
Here were some of the issues we ran into with cheap freelance designers:
- Low Quality: Even though we gave the designers a very specific brief, most still turned in designs that missed the brief completely. This meant that they either didn’t conform to Facebook’s guidelines, or missed the mark on our own branding. Others had typos, stock design elements, or elementary design mistakes.
- Slowness: A number of freelancers didn’t complete their designs on time. As freelancers, they might have a number of projects competing for their time, so will let one slide in order to hit the deadline on another. Many freelancers will take on every job that comes their way to maximize revenue potential. Deadlines can also be missed if you have to go back to freelance designers when they have misunderstood the brief and edits need to be made.
There is an old phrase. “Good, fast, cheap. Pick two.”
This is what happens when you choose to save on design. One of your choices is “cheap,” meaning you are going to have to sacrifice either quality or time.
When you have bad design, you end up with the exact opposite of the cash-flow benefits described above. Instead, you have:
- Slower cash flow: Fewer customers coming into your company and spending less money when they do.
- Higher costs: If you hire one designer that does a bad job, you then either take the hit and put out a bad ad, or you have to pay out again for more design (probably from somebody equally terrible).
Good Design Compounds
Let’s see how this flips around when you choose to hire professional designers for your ads.
Only one freelancer came close to the AdEspresso. Taylor from Fiverr read the brief and designed a well-branded ad for our AdEspresso University:
This did well because it is on-brand. Contrast this with the other two freelance designs we received from the highest quality freelancers available:
Who even uses VGA cables anymore?
If we go back to the focus of design from the ROI of Design project, we can see that the Fiverr ad comes closest to fulfilling the two most important foci for advertising:
- Branding: Taylor uses the fonts, colors, and characters from AdEspresso, so that the ad is immediately identifiable as from the brand.
- Space: It is clear from the ad the space the AdEspresso University is filling, with bold, obvious copy about courses, webinars, and experiments.
The other two miss the mark on both of these. They don’t include any branding elements (even getting the name wrong), and the space that the ad is trying to stake a claim to isn’t obvious, with the copy being far too small and dull.
But still, Taylor couldn’t beat our in-house design:
(Source: Facebook Ad examples gallery)
Though we didn’t run this ad as part of the experiment, it is indicative of the type of ad we usually run: on-brand and owning the space.
So far, so qualitative. But what we really want to know is how this pans out quantitatively.
In our study, we looked at the cost per clicks (CPC) for each of our design options (3 freelancers of varying price), and contrasted these to the AdEspresso in-house design:
The Fiverr CPC was close to AdEspresso, but still not good enough.
These might not look like big differences, but when you calculate your customer acquisition costs (CAC) from these CPCs, you can start to see what a big difference a few cents make.
Your CAC is how much you are paying to acquire each paying customer. These are the people who have clicked through your ad, signed up for a trial, and eventually converted to a full subscription. In terms of your costs from paid acquisition, you calculate it like this:
% trial is the percentage of people who sign up for your trial and
% paid is the amount that convert to paying customers.
These numbers obviously aren’t 100%. Only a small proportion of people who click through will trial, and then only a small proportion of those will convert. This is where those few cents difference starts to amount to many dollars difference.
Let’s use some likely conversion rates: 1% of clickthroughs trial the product, of which 50% then sign up (these are actually quite optimistic numbers). If we then use the AdEspresso CPC in the equation, we get this:
With this CPC and these conversion rates, every customer costs $66 to acquire.
What about the freelancers? Using the average CPC ($0.59), we get this:
With the freelance design, each customer costs $118 to acquire. Ouch. This is almost double the CAC from the AdEspresso design.
Just a small change in CPC cascades into massive extra costs for acquiring customers. If each customer was paying $10 per month then the payback periods for each would also be substantially different:
With good design, a customer has paid back their costs in about half a year. With bad design, they are still a net loss to your business for a full year.
That is a six-month profit difference between good design and bad design. Going back to the UK Design Council report, they showed a 2.25x increase in revenue through good design. This tallies almost exactly with our result. You are looking at about double profit from well-designed ads compared with lousy ads.
This is for only one customer. When you take into account many new customers per month that you have to acquire, the advantages of good design quickly compound.
Let’s say this company was acquiring 100 new customers each month. This is what their cash flow would look like:
If you were running those freelancer-designed ads in this scenario, you would be in the red for almost two years. At the bottom of the trough, you would have a negative cash flow of almost $70,000. Even though you have money coming in from these customers, it isn’t enough to offset costs until month 23. This is money you have to find from elsewhere.
With a well-designed ad, this cash flow trough is both shallower and shorter. It bottoms out at only $18k, and you are profitable within a year. Just when your badly designed ads would be showing a profit after two years, the well-designed ads are pulling in over $140,000 in cash and rising.
Paying for Good Design Pays Dividends
Just from this small-scale experiment, the cost of not hiring a designer is massive. $52 per customer, and tens of thousands of dollars in customer acquisition costs over the lifetime of your business. If you are thinking of scrimping on design, these numbers should be your serious pause for thought.
A well-designed ad promotes your brand, attracts customers, and makes you money. A badly-designed one does none of these things. That’s the difference between good design and bad design.