Why ad agencies are launching design units

With a wave of new practices opening, ad agencies increasingly are having designs on design. While it’s always been a crucial component of advertising, design is becoming more prominent as a discrete practice at creative agencies. Shops that recently propped up their existing capabilities or launched new units include Goodby Silverstein & Partners, Gut, Joan, MullenLowe and Lafayette American. There are various reasons why agencies are making these additions. For one, design proved to be rather resilient in a tough economy. These practices also offer shops the potential to get a foot in the door with clients for additional work, especially as marketers look for holistic marketing solutions that can carry into consumer experience work, experiential opportunities and social support. Shops are also trying to expand their capabilities—and win new business—by responding to what they describe as an increase in demand from marketers to implement design thinking in all parts of creative. “You can write the entire history of design and never mention advertising once,” said Brian Collins, co-founder of design consultancy Collins. “You cannot write about advertising without writing about design.” That said, it’s a tough market for newbies, filled with established players such as Collins’ own practice, Landor, JKR and Pentagram, as well as boutique design-focused shops. And while design is still a key component for most marketers, the uncertain economy has caused brands to reduce the amount they spend, according to Natasha Jen, a partner at Pentagram, who said she has seen clients allocate 15%-30% less on marketing and design budgets compared to before the COVID-19 pandemic. See all of the 2024 Small Agency award winners here Still, Jen said she isn’t surprised to see more agencies invest further in design, as ever-changing consumer habits continue to disrupt traditional advertising. “Advertising-based creative business is really under a lot of pressure right now to change,” she said. Also read: Independent agencies drive change in compensation Standalone practices A standalone design unit can help agencies better position themselves and compete for new business against legacy shops, according to several executives. GS&P, for example, previously told Ad Age its new practice aims to drive awareness of its existing design capabilities. “People compare like objects,” said Toby Barlow, CEO and chief creative officer at Lafayette American, which relaunched its design practice as the standalone Scorpion Rose Studio in late 2023. “If we go [into a pitch] saying, ‘We’re kind of an advertising agency and a design firm,’ it doesn’t really sound like you have a lot of commitment or passion for one or the other.” It seems Lafayette American’s strategy is working. The Detroit agency expects Scorpion Rose to double its design revenue in 2024, according to the agency’s Ad Age Small Agency Awards entry. The studio’s first work was the rebranding of the Toledo Museum of Art. Some shops are making changes to boost speed and efficiency. Last month, MullenLowe U.S. brought together its East and West teams to form MullenLowe Design Studio. The agency’s design teams did previously work together, but one coast was responsible for leading the assignment, making collaboration “a little harder,” said MullenLowe U.S. CEO Frank Cartagena, who joined the agency in January. With the new studio (introduced in the video below), the agency will give clients access to its 20 designers from the very beginning, allowing the marketers to pick and choose talent. Coupling work As their budgets continue to shrink, some marketers are looking to hire an agency that can manage both creative and design, opening up work for shops that have added and formalized such services, according to search consultants interviewed by Ad Age. “In the ‘old’ days, a client would never sacrifice best-in-class [specialist] agencies, but in a questionable economy, they are more interested in coupling more work,” said Joanne Davis, founder of Joanne Davis Consulting, in an email. For independent shop Joan, launching a design practice was another step in becoming a full-service agency for clients. Over the past few years, the agency has also established its own media and production capabilities, and opened a new office in London. “The reality is that if a client has a brand design agency and a media agency and a creative agency, it just becomes a lot to manage,” said Lisa Clunie, Joan’s co-founder and CEO. “Also, a lot of these agencies have their own strategic processes, which are quite good, but how does the client then know which one to listen to?” Read more about Joan’s redesign The need for one or more agencies varies based on the client’s needs, Davis said. “Depending on the client assignment they might favor design over creative, but often it’s sequential. Need a logo facelift? Hire a design specialist. Then hire the creative agency,” she added. And the same goes for budgets. “It comes down to how did the client arrive at recognizing the need for an improved design system? Because if it was determined upfront that it was a standalone thing they needed, there’s likely a standalone budget,” said Meghan McDonnell, president of consultancy Pile and Company. If the review focuses on broader creative, there’s “generally not a separate budget.” Emerging needs and new services Redesigns are often the big money makers for design shops. Most of Pentagram’s revenue comes from “invention” work, which can include rebrands or reimagining a brand’s identity, according to Jen. The New York consultancy’s Reddit redesign cost between “six figures and a million dollars,” Jen said. In general, rebrands can cost up to several million dollars depending on the assignment, according to multiple people Ad Age interviewed for this story. Also driving the need for design: Companies investing further in experiences. Boston-based Colossus, which in 2022 merged with design studio A&Co, is increasingly working on clients’ offices and merchandise, as well as presentation materials at conferences, trade shows and events. “I think the days of having a booth with a little carpet and potted plant [at an event] are long gone,” said Travis Robertson, Colossus’ executive creative director. “Now, it’s like, what do our LED walls look like? What do our haptic floors feel like? What’s our signature scent?” More rebrand and redesign news from Ad Age Leaders at Joan, meanwhile, said clients are looking to design to help them stand out in areas such as social media, which is especially tough given the proliferation of content on platforms these days. And the increased use of generative AI is making work “more and more homogeneous,” said Jaime Robinson, Joan’s co-founder and chief creative officer. “That’s not to say we don’t love AI,” Robinson said. “We absolutely do, but what we need to do is apply our own point of view … to a brand new design idea, [then] utilize AI to supercharge it.” Read more about AI Check out the latest Ad Age events and award programs Joan, which has four design projects on the way, is leaning into the use of AI in its design work, putting Anjela Freyja, creative director of design and brand, at the helm of the practice. Freyja has been teaching the rest of the agency about the many ways to use AI internally, according to Robinson. The agency has created “Artificial Objects,” an online gallery of everyday objects reimagined in unique ways, such as a challah bread sofa or a computer chair made out of a keyboard. When it opened its design practice, GS&P told Ad Age that clients had begun approaching the Omnicom Group agency for help dissecting and reimagining brand guidelines that another design company created. “It’s a pain point that these clients are feeling,” Jenna Duboe, the agency’s director of account management, said. As new competition pops up, some design agencies are diversifying their services. Collins is leaning further into business transformation, investing in capabilities such as management consulting, communications, film and financial modeling, said Collins. Pentagram has been working on creating what it describes as “custom creative tools” for brands, which are designed to be used in-house by clients. “Most clients, they don’t know [about] these things. So we have to actually educate them along the process,” Jen said. Getting it right Design should not simply be treated as another revenue stream, as many ad agencies have done in the past, according to Collins. “Historically, advertising agencies have turned designers into exotic menials trying to make their ads look better,” he said. To be successful, agencies will need to embrace a “design philosophy,” Collins said, pointing to Mother, 72andSunny, Wieden+Kennedy and Anomaly as shops that have done this effectively. Collins urged ad agencies not to pitch their design work for free—which he said the design industry does not do—lest they devalue these types of services. Putting design on the same playing field as creative is also essential. “Some agencies have the design team go off and make things, and then the creative directors and the advertising agency present that work. That fails,” Collins said. “Designers have to be in the room from the beginning. All the way through.” See all of the Global Automotive Marketing Awards winners here McCann claims to have followed Collins’ advice. When pitching for TJ Maxx, the Interpublic Group of Cos.’ agency “put everybody on it,” including designers, said Shayne Millington, chief creative officer at McCann New York. That helped McCann Design eventually create a custom font for TJ Maxx alongside MCKL founder Jeremy Mickel. Ultimately, Jen said these new design practices aren’t a threat to design-focused companies such as Pentagram and she welcomes more players in the space. She also predicts that AI will disrupt advertising as a whole and that agencies will have smaller teams in the future doing big work. Pentagram is composed of multiple studios that have around eight to 14 employees each. This allows the shop to be agile even during tough economic times or times of disruption, according to Jen. For example, Pentagram’s work on Reddit was handled by only seven employees. On the emergence of new players, Collins shares a similar sentiment to Jen: “Welcome to the fight.”

Why ad agencies are launching design units

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