Hot Ad Shop In The Heartland

Minnesota's Fallon McElligott snatches up fat clients

Like other advertising agencies, Fallon McElligott has trappings of the self-consciously hip--from an in-house diner to strategically placed punching bags. But other features set it apart. Located far from advertising's hub of Madison Avenue, staffers at Minneapolis-based FM are reminded daily that creativity has no geography. Each morning, a message on every personal computer notes the firm's mission: to be "the premier creative agency in the world."

It may not be there quite yet. But entering 1997, Fallon is one hot agency. It snagged two of the highest-profile accounts up for grabs in the past year: the $70 million domestic United Airlines Inc. campaign in October and a $100 million Miller Lite beer campaign on Dec. 12. "We had a helluva year," says Patrick R. Fallon, the firm's wiry, intense co-founder and chairman.

MARKETING MUSCLE. The new accounts--both snared from industry stalwart Leo Burnett Co.--with new business from McDonald's Corp. and Holiday Inn Worldwide, will lift billings for the 15-year-old agency by 65% this year, to $550 million. That puts FM among the top five independent ad agencies in the U.S. The coups show both that the agency, known for its edgy and whimsical ads, can snag blue-chip clients and that midsize shops can develop full-service programs for big accounts. Confounding skeptics who doubted FM could play in the big leagues gave special pleasure to its chief. "I can't tell you the number of people who called me and told me I was wasting my time" pitching the United account, says Fallon, 51, who began his career at Burnett.

Today's Fallon McElligott was born three years ago, after the agency lost a bid for the $60 million MasterCard account. Fallon decided that he needed managers with broader marketing experience. "We thought the natural answer to any business problem was a 30-second TV ad or a print ad," he says. "But we discovered that brilliant advertising alone was not the answer to anything."

So Fallon ordered a shakeup. In came a new president and creative director, Bill Westbrook, former vice-chairman of The Martin Agency in Richmond, Va., and a new integrated-marketing chief, Mark D. Goldstein, former president of Earle Palmer Brown Cos. in Bethesda, Md. Together, they helped transform a firm known for print ads to one that could tackle everything from consulting and public relations to TV and that worked to really understand clients' customers.

FM's first stop on the Miller pitch, for instance, was at bars and taverns, where employees put together a profile of Lite drinkers. The clincher was luring Miller Brewing Chairman John N. MacDonough from his Milwaukee office to watch focus groups discuss potential ads in several cities in the key Texas market. FM's campaign, to be unveiled early in 1997, is expected to be high on entertainment value and to include both bar promotions and TV ads aimed at boosting lagging sales.

The comprehensive approach helped snare United, too. FM staffers spent time in airports interviewing customers and ticket agents and studied everything from pricing to routes. The firm "right from the start was the most aggressive, diving into all business issues," says Michael V. Howe, United's director of marketing communications.

HIGH STAKES. At the same time, FM has kept its knack for the sort of cutting-edge campaigns that helped lure such accounts as Ameritech Corp. and BMW. One of 1996's most polarizing campaigns was the firm's work for McDonald's Arch Deluxe sandwich for adults, which portrayed an ultracool Ronald McDonald and seemed to poke fun at kids. McDonald's says the product is performing well. The controversy is fine with Westbrook. "Let's stir things up a bit more," he says.

FM's prosperity may set traps, though. It can't focus on the new accounts at the expense of older clients. And the campaigns for troubled products carry high stakes--with Miller, the very future of the brewery, and for United, repositioning an American icon. "Clients will give them problems that can't be solved, and they'll get blamed," warns Jonathon Bond, co-chairman of Kirshenbaum, Bond & Partners. "That could sink them."

Sitting in his office, the gray sky of Minnesota's winter behind him, Fallon warms to the challenge. He says he reminds colleagues daily of the pitfalls of success. And, he adds, "I love doing things we're not supposed to be able to do." The new year will test whether FM can continue to do just that.

Before it's here, it's on the Bloomberg Terminal.