It's been said that even the most obscure agency is only one client away from the big leagues. But what happens when that one client becomes so dominant that it threatens to overtake all of the agency's time, attention and manpower?
Independent Boston agency MMB may be about to find out. When Subway shifted its entire $340 million account to the shop last month, it became the agency's top client, accounting for an estimated 70 percent of its revenue. Though the move put the shop higher on the industry's radar, having such a dominant client on its roster could affect the shop's ability to lure new clients, said industry observers.
"The good news is they have a huge client," said Chris Colbert, chief marketing officer at Pile and Co. "But now the agency has the double-whammy task of servicing the hell out of that client … and at the same time figuring out how to turn off the new business volume and diversifying [the client roster]."
Agencies in similar situations have met with varied success. Since the late 1990s, Peterson Milla Hooks in Minneapolis has become the de facto lead agency for Target, but has preferred to stay small and dedicated mainly to the account. Publicis Groupe's Team One in El Segundo, Calif., has finally begun to turn ts experience working for luxury automobile client Lexus (which accounts for 90 percent of the shop's revenue) into a more diversified roster, adding Ritz-Carlton hotels and, more recently, Procter & Gamble's Millstone coffee brand.
Executives at MMB say they're ready to "make hay while the sun shines" in the wake of the win. "Clients will go where they see success," said managing partner Chad Caufield. Part of the agency's strategy is to address the elephant in the room head-on. "It's one of those things we address ahead of time," he said. "Subway is definitely important to us, but by no means are we defined by them."
But turning a big client win into sustained new business momentum can be tricky. "It can be a dominating influence of the agency, and it can be self-perpetuating," said one executive who worked at a shop that had a dominant client. "Some agencies find themselves so focused that they can't take their eye off that ball and look at other things."
Such has been the experience of Peterson Milla Hooks. The shop has gained recognition and awards for its award-winning work for Target over the past five years. But the shop has been so dominated by the client that converting the attention into new business has been a struggle, according to sources. (Agency principal and creative director Dave Peterson, who declined comment for this story, has said the agency's decision to remain small and focused is by design.)
Another problem with doing notable work for such a dominant client is having that client (and its work) define the agency to the point where potential clients that don't share a similar business philosophy may take a pass on a shop before even taking a look, said Colbert. As the former president of Holland Mark in Boston, Colbert has firsthand knowledge of what it's like to work at such an agency. The shop, which closed its doors right after 9/11, was dominated by Polaroid. "[Polaroid] was b-to-b, so we became known as a b-to-b agency," Colbert said. "It immediately diminished our ability to get b-to-c work."
Colbert's shop also fell prey to the most obvious of pitfalls: losing the dominant client. When Polaroid filed for bankruptcy in July 2001, Holland Mark was left with millions in unpaid bills, Colbert said. "The company that created us killed us," he said. (Similarly, Mad Dogs & Englishmen shuttered its New York office last month after its core client, Atkins Nutritionals, stopped spending before filing for bankruptcy earlier this month.)
Last year, Los Angeles independent david-andgoliath received a similar scare when the shop's core client, Kia, put its $270 million account into review. Losing the business, which accounts for an estimated 65 percent of the shop's revenue, would have been devastating. (After a full review, the client opted to stay with the incumbent.) "It was probably one of the most trying times of my career," said agency CEO David Angelo. "You rely on your talent, experience and tenacity to get through it all."
Of course, not every agency with a dominant client is destined to have a rough time. Colbert noted that independent agency Modernista! has done an admirable job diversifying around its core Hummer account. Though the GM car brand spends about $100 million annually (and accounts for about 50 percent of the agency's revenue), the shop has used that high-profile client to win accounts like Napster, TIAA-CREF and Animal Planet.
"There are pros and cons from a client point of view. You know you're going to get the principals working on the business—that's the biggest positive," said Tom Seddon, president of the Subway Franchisee Advertising Fund Trust. "Maybe you worry a bit more about the depth of talent if key staff leave, but I think you've got that with any agency."
MMB has already seen its profile rise in the wake of the Subway win. The shop was on the long list of agencies that received the RFP for creative duties on BMW's national advertising account, for instance. Part of the agency's trick will be to manage the new account, while using its momentum to open some more doors.
"The challenge is you've got to work even harder at new business," Colbert said. "So much of this business is about perpetual momentum. We used to say, we don't want to be perceived as 'hot.' The truth is, people like hot. It's very difficult to maintain that."