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In logo design, there are five essential rules for graphic designers to follow. One common mistake among amateur designers is substituting a letter in the logo with a symbol or graphic, which can lead to ineffective branding. To illustrate how problematic this can be, the video references a British television competition where contestants had to develop a branding solution for a baby food company. The resulting logo from one team exemplified poor design and failed to inspire confidence in the product. This serves as a cautionary example for designers about the importance of adhering to fundamental design principles to create effective logos.