Agencies embrace health, in bid to diversify beyond pharma

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It's no secret the world's biggest healthcare networks have been on a change streak for the past 18 months. Whether in response to critics of the holding company model or initiated by the more proactive-minded within their ranks, the subsidiaries have taken radical steps, expanding their remit beyond marketing drugs as they seek to tap into the growing health and wellness sector.

The changes amounted to a great deal of reorganizing and rebranding, the net effect of which was a de-emphasis on “healthcare” in favor of “health.” Publicis Healthcare Communications Group rebranded to Publicis Health. Others forged whole new net­works out of healthcare talent. Havas merged Havas Health and all of the Havas Creative Group's global consumer health practices into a single entity, Havas Health & You.

See also: Agencies, Get Ready for a Dose of Clarity

WPP Group formed WPP Health & Wellness to hold the network's healthcare agencies. Omnicom Group restructured its healthcare agencies into four categories, housing them under the newly formed Omnicom Health Group. It also merged three healthcare agencies into a new entity, DDB Health.

A RISING TIDE LIFTS ALL BOATS

Agencies' traditional clients — biopharma and OTC brands — aren't the only ones vying to capture share in health and wellness. Nontraditional healthcare clients want in, too.

“From CPG to financial services to tech, we've seen a hunger for expertise in health and wellness,” says Nick Colucci, CEO, Publicis Health.

Their larger appetite coincided with a 7.8% increase in revenue last year, from $2.8 billion to $3.1 billion, and a 13% boost in the workforce, from 12,700 to 14,460. Among the firms in MM&M's Top 100, revenue data provided by agencies themselves and MM&M estimates totaled $4.96 billion in 2016, a sum that counts every agency's revenue once, even if it's represented twice in the Top 100 — for instance, both independently and as part of a larger sub-holding company. Of the agencies that responded to a question about whether they can accommodate OTC and wellness clients, some 70% said they do. The industry is poised to capture more market share in this area. 

TURNING ON TO TURNING IN

To learn what North American healthcare communications agencies worked on last year, turn on your TV set. Consumer broadcasts claimed the lion's share, 31%, of 2016 billable services, displacing agencies' former numbers one and two: digital, web, and mobile work aimed at HCPs, first, and consumers, second. Each of them still accounts for about a quarter of billables, but for the first time in recent memory, DTC topped the list. Journal ads and PR placed fourth and fifth, respectively, surpassing med ed and direct marketing.

Whether agencies' renewed focus on the consumer is re­sponsible for the profound effect on billings is anyone's guess, but someone's got to crank out all those drug ads — seemingly airing on whichever TV channel you happen to tune in to — and apparently it wasn't only the mainstream consumer ad shops.

And so far in 2017, the majority — 74%, of the 102 who answered this question — said  their business is looking up in the new year, although just slightly, with most respondents estimating growth in the 0% to 10% range versus the same time last year.

See also: The top 100 healthcare agencies, ranked by 2016 revenue

What kept agency leaders up at night? Not the U.S. presidential election, which ranked fairly low on the list of concerns for 2016.

“Last year's election cycle, we found, had little to no impact on budgets,” Colucci reports. “If anything, the outcome of the election has caused more uncertainty in 2017. When there's uncertainty, companies err on the side of being more conservative and hold back marketing investments.”

Indeed, it wasn't so much the presidential election itself that impacted budgets, but the election's aftermath.

With clients facing an increasingly challenging environment, macro forces may have brought out their conservative sides: Shrinking pharma budgets tied with engaging HCPs for second place on the list of agencies' most-pressing challenges of 2016. Dealing with procurement and pricing issues were also cited as major or significant challenges.

FIND 'EM AND HOLD 'EM

In first place among marketers' top tests, according to the respondents: the always-vexing talent acquisition and retention conundrum. The hunt for top talent has taken on new urgency as agencies seek to keep up with the pace of innovation and ward off competition for healthcare business from consultancies and non-traditional players, such as consumer tech.

As for the latter, agencies say they're partnering with big tech — as well as with the rest of the sector — to offer clients the best solutions. Seventy-seven percent of agencies listed such partnerings as service offerings for 2016, putting it in the top five of capabilities.

GETTING TECHNICAL

So what do agencies see as the biggest opportunities? The need to create more and better content and experiences, the continued shift toward mobile and digital, and the increasing personalization of communications were three trends the respondents again heralded as areas of ongoing demand.

It's likewise a safe bet, agencies said, that the intensified focus on analytics and ROI, and the specialty drug and high-science categories, will continue to fuel their work.

See also: Questions for 5 of the healthcare agency world's top execs

What's not likely to be a major focal point, they said, is empowered patients. That relatively low ranking (seventh out of 15 possible trends) seems counterintuitive, considering agencies' aforementioned embrace of all things wellness.

Moreover, millennials, who prize authenticity, are gaining influence. Devoting greater effort to reach them in the right channel with the right message and tone at the right time would seem to be in the industry's best interests. This could set the stage for rebalancing agencies' priorities in the coming year.

*These revenue and workforce totals are based on data companies submitted as part of MM&M's annual agency review and reflect about 70% of the agencies in the Top 100. All data here are taken from the annual agency review unless otherwise noted.

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