NEW YORK Berlin Cameron/Red Cell's loss of its signature Coca-Cola account and the exit of M&C Saatchi's founding client British Airways point to the dangers of dependency on and domination by a single client.
Such client losses can slice total agency revenue in half, and for Berlin Cameron, the same happened to its staff; the 8-year-old shop let go of 40 staffers within a week of losing the $200 million account, leaving about 55.
It seems obvious: Overdependence on a large client can prove devastating when that bread-and-butter client leaves. Yet more than a handful of shops continue to flirt with such danger either by circumstance or choice.
Naturally, small, independent regional shops dominated by one large client are more vulnerable than WPP Group-owned Berlin Cameron and M&C Saatchi, which is part of a 16-office network. And some have shuttered offices after a single client loss. But efforts to diversify are not always successful, and some agencies remain in a precarious situation.
David Angelo, CEO of Los Angeles independent davidandgoliath, called having to defend its $270 million Kia account earlier this year "probably one of the most trying times of [his] career" Adweek, Aug. 22]. Any number of shops could one day be in the same boat.
M&C Saatchi New York's dependence on British Airways was a matter of complacency, executives there say. Established in 1995, the network opened in London with British Airways as its largest client. New York soon opened as a service office for the $30 million U.S. account. "Historically, too much reliance has been put on British Airways" at the New York agency, said M&C Saatchi Asia Pacific executive chairman Tom Dery, who also oversees the New York and Los Angeles offices. "It was a very comfortable situation."
In April, Dery installed Jenifer Willig from Hill Holliday/GMO as managing director and Brett Howlett from Deutsch as M&C Saatchi New York's ecd. It revamped the new-business credentials and reignited relationships with consultants that had gone dormant, Dery said. Since then it landed the $10 million Pods Inc. and estimated $5 million to $10 million Travelex accounts.
Neither will make up for the loss of BA in the New York office, where it accounted for more than half of the revenue. With British Airways, M&C Saatchi New York revenue was about $4 million, according to Adweek estimates. Without it, revenue is about $2 million. Still, Dery said the new accounts and others like The Financial Times, Mandarin Oriental and The Royal Bank of Scotland are enough to sustain the 15-person staff in New York, adding that the team is "young and hungry" enough to keep chipping away at new business one small client at a time.
While some were predicting the demise of the New York office, Leslie Winthrop of AAR said the BA loss "may actually be the healthiest thing to happen to them. Everyone saw New York as an outpost for BA. But it can stand on its own as an agency here. I think they have enough mass." She added: "[If] it's the third or fourth client leaving, then you have to ask, what's wrong with the agency?"
Building the business one small client at a time was Berlin Cameron's strategy before its acquisition in 2001 by WPP, which gave it the necessary clout to pursue accounts like Coke Classic, which it won in 2003. The account became a calling card for new business, and Boost Mobile, Pfizer, Rubbermaid and White Wave Silk Soy Milk joined the roster soon after. Still, Coke continued to comprise more than 40 percent of total revenue, sources said.
New York search consultant Joanne Davis said some clients might hesitate to include in a review a shop that is overly reliant on one client because "the loss of a big account means the loss of talent and resources at the agency. That could affect the agency's ability to service a new account."
Wieden + Kennedy in New York handles media and creative for ESPN, which sources said is 40 percent of its estimated $15 million revenue. Its Portland, Ore., office is anchored by the $200 million Nike account, which until recently, made up two-thirds of the shop's revenue, per Adweek estimates. With the addition of Sharp, Electronic Arts and Coke, Nike accounts for nearly half its total revenue.
Wieden New York managing director Buz Sawyer said diversifying can benefit a large main client. "You certainly want to maintain your cornerstone account even as you add other business," he said. "But new accounts actually help you service the big client better because they force you to add depth and breadth of resources that can be applied to that big account."
—with Adweek staff reports