Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 18, 1990 TAG: 9003152047
SECTION: BUSINESS PAGE: BUS1 EDITION: METRO
SOURCE: Mag Poff Business writer
DATELINE: LENGTH: Long
At the end of February, with the same creative people still on board, the agency was forced to close its doors.
"You would not believe how quickly this happened," said Bill Houck, president of the agency.
Houck Advertising fell victim to the financial ills of its largest client and to the outside acquisitions of local businesses.
In this crippled position, Houck Advertising couldn't downsize and still fully serve the needs of its remaining clients.
Other local ad agencies agreed with Houck's assessment that Roanoke is far from a vibrant market. They must seek out clients over a wide geographic area.
Blue Cross-Blue Shield had always been Houck's largest account.
At first, the client was the Roanoke insurance plan, which accounted for 25 to 30 percent of the Houck's gross income.
When it merged with the Richmond Blue Cross-Blue Shield in 1986, the advertising business moved along with the headquarters.
By the end of 1987, however, Houck had captured an advertising plum: Blue Cross-Blue Shield of Ohio.
But the health insurance industry was sinking into financial trouble, Houck said.
The Ohio plan saw a drop in premium income and underwriting coverage as health-care costs escalated.> Looking for sources of significant savings, Houck said, the Ohio company decided it could no longer compete in the mass media.
It opted for less expensive marketing through brochures and direct mail. And it took these campaigns in-house.
Blue Cross-Blue Shield of Ohio told Houck at the end of September that it would drop its advertising program at year's end.
Only this time, he said, Blue Cross-Blue Shield represented 55 percent of Houck's income. The agency lost $400,000 a year in gross revenue.
Meanwhile, Houck had already lost another important client.
Long a mainstay, Colonial American National Bank merged last spring into Crestar Financial. Its ad business went to Crestar's agency.
About the time of the Ohio plan fiasco, Houck learned of other losses.
The Porterfield family of Roanoke sold its Pepsi-Cola business in Tennessee to Pepsi USA. Houck said he was notified that the account would be handled by the new owner's agency in Dallas.
Houck had also done work promoting Centel telephone in rural and small urban markets. But Centel formed a new partnership with both companies agreeing to quit their existing agencies.
Mountain Lake resort, a big advertiser in 1988 and 1989, decided to curtail its campaigns. Several smaller clients, such as Bassett Mirror, advertise only infrequently.
Houck Advertising made an unsuccessful bid for a large new account coming out-of-house at Grand Piano & Furniture. That business ultimately went to the Edmonds Packett Group.
Faced at the new year with the necessity of reducing the agency's staff, Houck learned his situation was "out of control."
The largest client left on his books, the Wendy's franchises in this area, decided that Houck's smaller staff could no longer provide the full service it expected.
Wendy's put its account up for agency review. A week later Houck closed its doors.
Houck said only Roanoke Gas remained "loyal to the end." Its account went up for review only after Houck closed down.
Houck said problems had nothing to do with the agency and everything to do with the economy and out-of-town mergers.
Even free-lancers, who only a few years ago had more work than they could handle, have called him for business.
That's true throughout the country, Houck said.
But there's not enough business in Roanoke, he said. Companies are represented here but headquartered elsewhere, and that's where marketing decisions are made.
The Roanoke market has project-oriented needs such as brochures, he said, and public relations is a growing field everywhere.
"Unfortunately I got whacked real fast in a very short time frame," he said. Once he laid people off, there was no time to recover.
Freda Carper, president of the Advertising Federation of the Roanoke Valley, sees threats at both ends of the spectrum.
Carper, who is local marketing director for Crestar Bank, said the advent of desktop publishing encourages companies to keep small projects in-house.
At the same time, large out-of-state companies are pulling business in Virginia.
Crestar had used a Richmond agency, she said, but put its account up for review last year. The job went to New York.
When Sovran Bank merges with Citizens & Southern of Atlanta, she said, its Norfolk agency is expected to lose the account.
Despite the problems, Carper said she knows of no other local agencies in danger of going out of business.
Jim Webster of Associated Advertising can tell you first-hand about mergers.
Associated created the campaign introducing CorEast from the marriage of Roanoke's First Federal, a long-time client, with a Richmond thrift.
Last April the CorEast account followed the operations center to Richmond.
It caused what Webster called "a dip in our business."
He's since found two new clients in Gulf Shores, Ala., and Charlotte, N.C.
Webster said local agencies must seek clients far afield because the number of large businesses headquartered in Roanoke is shrinking.
Having the headquarters in the valley is more important than the size of the business, Webster said.
After hearing about bank mergers for eight years, Dale Poindexter said, the problem is certainly of some concern.
His agency, Poindexter Associates, serves the Roanoke Valley's most desirable account, Dominion Bankshares.
Dominion is also the subject of continual nationwide speculation as a candidate for acquisition.
Poindexter said an agency "can't operate with a fear of what might happen tomorrow." The only defense, he said, is to do the best possible job.
He declined to say how much of his agency's business depends on Dominion.
Howard Packett, president of Edmonds Packett Group, called advertising "a people industry" like legal and accounting firms. Any can lose a big client any time.
Claire Maddox, president of the Maddox Agency, said a highly competitive environment has existed here for years.
That's not peculiar to Roanoke nor to the advertising industry, she said. All business is competitive.
The Maddox Agency markets its services in a very wide region because the number of potential clients here is not growing.
As the Roanoke Valley begins to grow faster, she said, so will the advertising market.
John Lambert of John Lambert Associates concedes that he might lose one of his oldest clients when Community Hospital merges into Carilion Health System.
Carilion is a part owner of Edmonds Packett Group, which handles its advertising.
But Lambert said he has no single account that comprises a large portion of its work.
Besides, he said, his firm has a special market niche. It specializes in public relations as well as advertising.
Both sides of his business are growing, he said, although a large number of clients are out-of-town. That situation hasn't changed in recent years, Lambert said.
As Houck takes care of the closing details, he says he cannot picture himself working for another agency in the Roanoke Valley.
Houck has interviewed at agencies in Washington and Richmond, and he plans to look at the Carolinas and Florida as well.
He's also looking in the valley for work outside the field.
He's not interested in running a one-man ad shop. Houck said he walked away from the agency rather than operate that way.
by CNB