Agency adds up its painful lessons

Advertising: After losing its biggest client, Gray, Kirk/VanSant has a new name, location and attitude about going after fresh business.

April 08, 2001|By June Arney | June Arney,SUN STAFF

This was to be a time of celebration for Gray, Kirk/Van- Sant Advertising and Public Relations Inc., one of Baltimore's established advertising agencies. It just changed its name and moved into the city's trendy Tide Point development. But there is little time to celebrate.

The agency recently lost its largest account, Choice Hotels International Inc., and was forced to lay off 13 of 68 employees. It missed the final cut for the Best Western International contract, which could have significantly softened the blow of the Choice loss - to a Baltimore firm run by a Gray Kirk alum, which only added to the insult.

The firm's president and chief executive officer, Roger L. Gray, acknowledges that he has heard the industry speculation that the worst isn't over, that more layoffs are to come, that there's a possibility the agency may close its doors.

He gathered his employees recently and declared: "There will be no more layoffs. We're moving to our new space. We'll be hiring people."

Gray offers as evidence of his firm's vitality its recent win of the $7 million to $9 million Phoenix, Ariz.-based Iridium Satellite LLC account and the fact that his shop is one of three finalists in the race for the $15 million Lockheed Martin Corp. account.

He plans to parlay a new satellite office in Phoenix into a $15 million shop within two years, by using the firm's expertise in finance and health care to land bank and hospital accounts there.

Meanwhile, though, the fifth-floor mezzanine is lined with windows offering splendid views of the harbor, but is empty. Gray calls it "expansion space." It was to have been the space for 13 people laid off after the agency lost the Choice Hotels account, which Gray said was worth $30 million to $33 million a year.

GKV Communications Inc. became Gray, Kirk/Van- Sant's new name as it moved last month. It had planned to move from its offices in the World Trade Center, anyway, because the operation was divided between the 11th and 17th floors. But the amount of space that Gray decided to lease in the Cascade Building of the former Procter & Gamble complex in Locust Point was based largely on his long-term relationship with Choice Hotels - one that spanned nearly two decades.

The "celebrity in a suitcase" campaign that GKV created for Choice has been described by some in the industry as one of the top hospitality campaigns of the late 1980s and early 1990s.

Yet, the relationship with Choice allowed the agency, which has $100 million in annual billings, to let down its guard and ignore some basic industry tenets:

Don't assume a client will be around forever.

Beware of letting any one client represent too much of your business.

Never stop pursuing new business.

Industry experts say an agency can be on shaky footing when one client represents 20 percent or more of its work.

"Anything above 20 percent of business is dangerous," Gray said. "You begin to put so much focus on retaining that account rather than generating new business. Candidly, it took my eye off the ball in trying to grow the agency."

But it's not as if Gray was oblivious to the risks.

"It's always in the back of your mind, but you just become so comfortable with an account of that size," he said. "You know it could go away, but you just don't think it's going to happen."

And no one in the industry denies that it's precisely those big clients that everyone lives for.

"When you get a chance to pitch and then win a client that becomes the largest you've ever had, you're not going to back away," said Chuck Donofrio, president and chief executive officer of Baltimore-based Richardson, Myers & Donofrio Inc. "That's everyone's dream."

But having more than 20 percent or 25 percent of your business dependent on one client is also nerve-racking, he said. The day after the win is not too soon to start working that percentage down to make sure that account doesn't remain the largest.

"You have to be honest with yourself and make sure you know where your good fortune is coming from, and what you're going to do if they go away," Donofrio said. "Every client is going to go away."

In 37 years of business, Donofrio said, his agency has had accounts of that magnitude twice and lost them. He declined to name them.

"It becomes such a large focus for all aspects of the business that you run the risk of planning for that relationship rather than running your own business," he said. "It makes it more difficult to be objective."

Any agency would have loved to have had the Choice Hotels account for all the years that GKV held it, Donofrio said.

"Everyone should remember that the work they did for Choice was the best in that category," he said. "It blew away the competition."

Steve McKee, president of McKee Wallwork Henderson in Albuquerque, N.M., puts the danger point at 30 percent, but says a better measure may be the agency's comfort level.

"The rule of thumb is this: If an account goes away and it threatens your company, then it's too big,"' he said.

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