Agencies and design studios are increasingly competing for pieces of the same pie.

Smaller advertising agencies may be seeing competition from unexpected quarters – the very design studios that they subcontract work to.

Greg Branson runs the Design Business Council, which helps design studios develop their business knowledge and skills. In his day-to-day work, he mentors design studios, runs workshops, and talks to creative executives in the market. It’s fair to say he has a finger on the pulse of the industry.

According to Greg, design studios are increasingly becoming competitors to ad agencies and marketing consultancies, particularly the smaller ones.

“A lot of the designers I work with have a strategy partner or a senior person in the business that does strategy. Many of them have been recruited by the designer out of the advertising industry, with the intention of taking their business to a higher level and offering a broader range of services,” he explained.

“So in a sense, a lot of design studios are becoming more like agencies.”

Design cost cutting to blame

But why are designers eyeing the advertising/marketing piece of the pie?

“They more or less had to, because the bottom end of their business has been chewed away,” is Greg’s answer.

“The studios who relied on bread and butter design and artwork have come under challenge from things like 99 Designs, Freelancer and Fiver, which crowd-source design and artwork from anywhere in the world,” he explained.

“When you have people from the Philippines who will work for 10 bucks an hour, it isn’t a viable business in Australia anymore. So they have looked around, and explored where they could go in the vertical process.”

The move into strategy makes sense from a designers’ point of view: if you are already helping a corporate client do all their branding and design and advertising materials, it’s not a stretch to pitch for the strategy component as well.

In Greg’s article on DM Zine, titled “Five steps to better client relationships”, he laid out 5 levels of collaboration between designers and clients, from a simple transactional money-for-services arrangement upwards. Towards the higher levels, the designer uses their skill to solve complex business issues for clients, i.e. becoming a strategic partner and consultant.

A mixed bag

Of course, while most design studio sites may claim to do strategy, some are more on the aspirational level, rather than actually offering good strategy services.

But at the same time, a lot of design studios are actually doing strategy – and doing it well, thanks to the migration of highly skilled and experienced ex-agency staff.

What do you think? Have you observed competition from design studios? Are they a credible threat for advertising agencies?