As a small business owner, I often think about the strategy behind my service offer. I recently revisited the Five Forces for this reason, and thought it might be useful to recall lessons learned in business school while looking at how these competitive forces affect the market of graphic designers servicing small businesses.

---

Note that the Five Forces framework, as well as the following analysis, is simply a starting point in analyzing a complex and changing market. Not all aspects of industry analysis are covered here, but I would be happy to hear your take on what might be missing. I’m looking forward to your emails!

---

My goal here is to introduce some ideas for how both clients and designers can help maintain a healthy industry. I’ll attempt to answer the following questions:

• Graphic Design Clients: What can I do as a client to create and maintain a healthy design culture in business? What can I do to help out my partners in the design industry?
• Graphic Design Providers: What can I do to make sure I have a job in five years? How can I be an advocate for the industry?

Barriers to Entry

Key idea: The harder it is to enter an industry, the better. Fewer entrants means that individual companies have a greater chance at success and profitability (i.e., staying in business and making great design over a long, long time).

I’ll begin with the barriers to entry concept because it is arguably the weakest point in the graphic design industry. There are pretty much no barriers to entry. Anyone on this great wide internet can pirate Photoshop and call themselves a designer. This is terrible. For clients, it means that you cannot easily assess the quality of the designer you are hiring—a designer could be really great at selling a promise but not have the skills to deliver on it. There are also few tools and metrics to analyze whether someone’s design creates a positive ROI. For designers, low barriers to entry mean that we are competing with millions of anonymous, inexperienced “designers” who drastically lower the value of what we are doing and destroying our reputation in the eyes of the business community.

In other industries, barriers to entry are created through four major factors:

• Legal barriers (e.g., certifications, licenses)
• High costs related to opening business that cannot be recovered (e.g., building a specialized machine, R&D)
• Incumbents somehow earning a strong competitive advantage (e.g., having exclusivity contracts in place, patents, economies of scale)
• Incumbents holding a position in which they can use price cutting techniques to drive out new entrants (e.g., they have extra capacity, economies of scale, aggressive leadership)

None of these truly exist in this industry. So, what can we do?

Clients, help the industry! The best thing you could do to champion design is to develop long-term relationships with designers and to remain vigilant about assessing quality of design work. Truly seek a partnership-type relationship with a designer, in which you agree to work with him or her exclusively for a set period of time. Develop your own success metrics for design projects and share them with the designer ahead of time. Insist on signing contracts for each project or service arrangement. Check what tools a designer uses and what communities he or she is an active part of—after all, how much would you trust a designer that uses only pirated software and fonts, and doesn’t hang out with other designers?

Designers, help the industry! Build assets! Gather proof! Legally, dutifully, constantly. Think long and hard about how you could prove the quality of what you do, and continually educate clients about spotting bad design. And no, “looking good” should never be one of the attributes by which design is judged. Design is not art. It’s not about looking nice or expressing your personality—it’s about working efficiently to achieve specific goals. Let’s raise them standards!

Threat of Substitutes

Key idea: The fewer equal substitutes there are, the better. Differentiation and diversity in the market means innovation and better service overall.

If it’s really easy to choose one designer over another, both designers are hurting the health of the industry. This may not be such a big problem these days, since many designers specialize in technology, audience, and/or style. Such diversity is a wonderful and healthy part of the market, and everyone could only benefit if it is amplified. However, there will always be bland generalist designers who try to do everything for everyone, and often do so poorly.

Clients, help the industry! When looking for a designer to work with, be very specific about the results you want to achieve, and look for a unique style, work process, or technical skill set. Please, please, please don’t encourage designers to cut each other’s throats by choosing a designer based on how cheap you can get the work for. And, goodness gracious, don’t participate in SPEC work and ask people to work for you before you pay them.

Designers, help the industry! Work hard to find a unique point of view and a specialized skill set. You’ll burn out if you try to be everyone’s best friend, so breathe deeply and stand up for yourself. Give your clients a reason to stick with you once you’ve been hired—how can you upsell your services? How can you reward loyalty?

Bargaining Power of Buyers

Key idea: The less control buyers have over the prices charged by design providers, the better. This may ruffle a few feathers on the client side, but think about it: heavy price competition means that the designer you work with cannot be profitable in the long term, will have a harder time innovating for your sake, and may not be there as a long-term partner.

Good news, everyone—the graphic design industry is not too shabby when it comes to having a balanced amount of buyer bargaining power. There are many potential buyers hiring many designers for small amounts of work, the products of the industry are somewhat differentiated, and many small business owners are not willing to replace a freelance graphic designer with an in-house hire, so it’s all humming along nicely. And while it’s frustrating to many beginner designers, the fact that prices are often obscured both from clients and other designers (i.e., not published on blogs and portfolio websites) is a great, great thing, as it allows for honest negotiation to take place and lead to a win-win compromise.

Clients, help the industry! When approaching a designer with a work request, lead your inquiry with a budget. I’ve had people approach me with something along the lines of “I don’t really have a budget, but I’m willing to pay for quality.” What does that even mean?! Being vague about your budget at best comes off as lack of planning on your part, and at worst, as a seedy attempt to hide your cards. If you truly do not know what your budget is, perhaps you are not ready to hire a designer at this point in time. If you are ready, however, be honest about your ability to pay and encourage negotiation—don’t be afraid to ask if you can get a different volume of service for the price you can afford.

Designers, help the industry! Don’t set yourself up for a scary dry period by having just one or two major clients who make up your entire revenue stream. Your job is to stay in business! Diversify your offer for many price points and sell to more people overall. Offer bundled services and differentiate from your competition. And, most importantly, avoid publishing your prices. Wait, I stand corrected—avoid discussing your prices with other designers. That’s the most important bit. Because discussing prices with your competition can be considered price-fixing and is illegal in the United States.

Bargaining Power of Suppliers

Key idea: The more control design providers have over their suppliers, the better. Being too invested in one technology or asset source poses a very high risk and may endanger long-term survival.

Well, considering how most designers are stuck in Apple-Adobe quicksand, this one may be a problem. Knowing how to work on a limited number of platforms means that if Apple or Adobe raises their prices, your margins are immediately getting cut into, since you don’t have many substitutes available to you, and the costs of switching are very high. Another issue is that printers often offer design services, so you can get stuck in the tricky space of needing a printer to work with and ending up competing with that same vendor. Luckily, the rise of open-source solutions and the relative ease with which you can find boutique printers and vendors outside of your locality is great for managing the bargaining power of suppliers.

Clients, help the industry! Seek out and reward designers who make an effort to continually educate themselves about new technology and try new tools. Don’t shy away if a designer suggests trying an open-source platform you’ve never heard of. And, of course, don’t judge the quality of a designer by how new and numerous their Apple products are. Oh, and if you notice that a designer is still working only in QuarkXPress, run for the hills.

Designers, help the industry! Learn! Forever learn. Try new things, switch to Windows, and build a database of connections with a variety of vendors both in and out of your local market. As you do, share what you learn with the community and spread the word about cool new tools and vendors who are not well known.

Intensity of Rivalry

Key idea: The less rivalry there is among design providers, the better.

A robust industry has relatively few competitors, each of which has enough room to operate, differentiate, and evolve without being forced to compete on price. For this reason heavy rivalry between design firms and design providers trying to compete on price is a sign of danger—no one is going to come out on top without some heavy damage.

Clients, help the industry! Please, please look for more than just the cheapest quote! Industry is stunted when designers are forced to compete on price, and accelerates when clients reward diversity of offers and styles.

Designers, help the industry! You are the best champion of the industry, the best there can be. Stand up for your prices instead of bending to every whim. Be an advocate for high standards, differentiate your service offer, and work with other design providers to provide complementary services. Or, at the very least, be nice to your fellow designers.

What to Do to Champion Design (a summary)

Clients:

• Develop long-term relationships with designers you hire (find partners)
• Be vigilant about assessing quality of design work
• Be very specific about the results you want to achieve
• Look for a unique style, work process, or technical skill set
• Look for a partner who can help you get results, not the cheapest quote
• Share your budget with the designer up front and invite them to negotiate
• Don’t participate in SPEC work
• Develop your own success metrics for design projects and share them with the designer ahead of time
• Insist on signing contracts for each project or service arrangement (to protect both parties)
• Check what tools a designer uses and what communities he or she is an active part of
• Be open to trying tools and solutions you’ve never heard of
• Don’t judge a designer by the presence of shiny Apple stuff
• Reward diversity and designers who have a spine

 Designers:

• Build assets that will make you a more efficient incumbent over time
• Gather proof about the objective quality of your design and judge your work by the results it achieves
• Educate clients about bad design
• Work hard to find a unique point of view and a specialized skill set
• Stand up for your offer and don’t compete on price
• Give your clients a great reason to be loyal
• Don’t put all your eggs in one basket by working with only a few clients
• Diversify your revenue stream and offer services at different price points
• Offer bundled services
• Do not publish your prices
• Do not discuss your prices with other designers
• Learn new skills, use new tools, and develop new points of view
• Share what you learn about suppliers of tools, tech, and services with the rest of the design community
• Work to build a healthy and kind design community
• Remember that by promoting a healthy industry, you help yourself stay in business. Stay in business!

Here’s a reference image to sum it up:

Writing this was quite cathartic—thinking about the Five Forces helped me define a few things to work on in my own business and strategy. Please reach out with any thoughts. Did any of this change the way you think about working with, or as, a designer? What will you do differently?