Do you remember when Apple launched the iPod in 2001? Bye-bye, portable antishock (which never fully worked anyway) CD player and unhandy CD case with all your CDs, and hello 1000 songs in your pocket. It was a game-changer. The iPod was not the first portable mp3 player. When it was released, there were already around 50 different mp3 players in the market. However, by 2008, it had captured 48% of the mp3 player market share with its closest competitor, SanDisk’s Sansa, owning only 8% of the market share.
Few would deny that the iPod was a great product, surpassing any other mp3 player offering. But was it six times better? Probably not. So what made the iPod so popular?
The answer is unparalleled design.
The ROI of good design
Product and service design has never been more important than it is in today’s highly competitive business landscape. Yet, many businesses do not make it a priority to invest in design. This may be because it is difficult to measure its value and define it as a business strategy.
However, research shows that if you want to increase your revenue and beat your competitors, you may want to consider investing more money in the design of your products. In an extensive study on how design can unlock business value, McKinsey & Company found a strong correlation between the best design performers across industries and superior business performance. On average, the best design performers increased their revenues and shareholder returns at nearly twice the rate of their industry counterparts.
This leads us to an important question: what is the ROI of design? Just like spending on design varies, so does design’s impact on turnover. However, design-alert businesses (businesses where design has made a direct impact on several aspects of business performance) achieve a 125% return on their design-related investments. In addition, it only takes 20 months, on average, for design projects to pay back the investment.
How design can transform the user experience
When we talk about design, many people instinctively think of how a product looks. But design is more than just eye candy. As Steve Jobs once said, “Design is not just what it looks like and feels like. Design is how it works.”
There are plenty of examples of how design can transform the user experience even though the functionality remains the same. Indoor mapping is one of them.
Indoor mapping has been on the rise for years as buildings are becoming larger and more complex. In addition, indoor maps serve as digital twins for buildings to provide building owners and occupants with an always up-to-date overview of the layout and amenities. However, even with the most detailed 2D map, navigating a large corporate office, a stadium, or a convention center can be difficult. This is because 2D maps do not always give us the sense of space we need to understand the map even though we are on site. 3D maps, on the other hand, are easier for people to decode because the visual appearance of 3D maps provides an improved understanding of sizes, heights, and distances.
If your product or service provides users with an intuitive design that ensures a seamless user experience, engagement and loyalty will go up. This can lead to both increased sales and market share. On average, design-alert businesses increase their market share by 6,3% through using design.
Design as a revenue driver
According to the Design Management Institute, design is what compels us to pay $4 for a cup of coffee at Starbucks or $2,699.00 for a MacBook versus cheaper alternatives. The design creates an “I gotta have it (at any cost)” mentality on the part of customers, which drives both higher sales and margins.
This corresponds with a study on the value of design that found that businesses that see design as integral to operations do not need to compete on price as much as others, “Where design is integral, less than half of businesses compete mainly on price, compared to two-thirds of those who don’t use design.” In addition, over three-quarters of businesses that consider design integral to their operations have reported an increase in their competitiveness and turnover due to design.
In some cases, design can also lead to upselling because customers want the premium version of a product or service or additional sales through add-ons. The iPod is a great example of this. iPod owners could either upload music to iTunes or they could find and buy all the music they loved directly in the iTunes store. In 2008, total sales from iPods reached $9.2 billion, but in addition, the iTunes store brought approximately $3.3 billion in revenue. For every $3 in revenue from iPods, Apple made an additional $1 in music sales, a revenue stream that no other vendor of personal media players could achieve.
To sum up, product and service design should be a key focus area for any business that wants to stand out from its competitors as design enhances both business performance and adds value.
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April 3, 2023
