It was a breakout year, says Pacific Communications president Ryan Abbate of 2005. “A high watermark was set in 2001. Ever since then we'd had okay [years] but not great.”
Revenues for the Allergan-owned West Coast shop increased by about 17% to $21.1 million. Much of the growth was organic, but the agency also gained new business, including an agency-of-record assignment for Medtronic MiniMed. Abbate was disappointed to lose Berlex's oncology business due to consolidation of business on the East Coast, but it didn't impede growth.
“The agency [continues] to perform at an incredibly high level, both creatively and operationally,” Abbate says. “Certainly the senior management team had a major impact on that.”
Craig Sullivan was promoted to EVP management director, and Henry Lee was promoted to EVP client services. The agency's “significant” device business has been consolidated under VP management supervisor Karen Melanson. Inamed yielded additional device business after being acquired by Allergan.
Abbate doesn't think the pitch is the best way to assess agency capability. “It's artificial and says very little about day-to-day and about the agency. And it's expensive—new business presentations can be $100,000. You have to scrutinize what you go after. I think agencies have been more discriminating.”
Last year, Pacific pitched Baxter and didn't win the business. In what Abbate calls “one of the classiest moves ever experienced in this industry,” Baxter gave the agency some money for the effort. “It was not pre-agreed upon,” Abbate says. “It wasn't enough to cover the pitch, but it made a difference.”
Abbate believes that more clients should be willing to consider compensating agencies. “Part of it has to do with intellectual property,” he says. “We often leave behind incredible strategic thinking and creative ideas. There needs to be some acknowledgement of intellectual property. It's not a commodity.”
The agency has a varied client representation, and Abbate would like to expand its work in oncology, neurology, gastroenterology and devices. At the moment, his priorities are hiring to cover the new business and being careful not to overextend or grow too quickly. Though headcount increased 10-15%, there are still positions open. Abbate says finding talent is one of the agency's greatest challenges.
“It's harder on West Coast than on the East Coast,” he says. “I think people think they're dropping off the end of the earth, which couldn't be more untrue. We are redoubling our efforts. We're going to be more recruitment-oriented rather than new-business oriented. It'll be interesting.”
Overall, Abbate thinks agencies are not developing talent as well as they once did. “The demands of the business have become so enormous, and the commoditization of our industry is a big issue,” he says. “The cost of labor has skyrocketed. The cost of technology has skyrocketed. Yet clients aren't willing to pay more. It's harder to carve out time to develop talent when your cost structure is strained.”
One solution might be educating clients as to the value of agency work and agency cost structures. “Agencies need to be cost-effective, [but] margins are having a deleterious effect on agencies providing the kind of services they once did,” he says.