After the Covid-era boom, how recession-proof are specialist healthcare agencies?
Healthcare client spending has increased massively since the beginning of the pandemic. Will their newfound enthusiasm for marketing outlast a potential recession?
Healthcare agencies benefited from higher client spending during the pandemic / Unsplash
The coronavirus vaccine rollout last year provided a significant booster of public awareness for the pharma corporations behind the jab such as AstraZeneca, Pfizer and Johnson & Johnson. Those companies, alongside others in the broader healthcare space, believe they have a golden opportunity to refresh their image.
“Clients are delighted that the general public now understands their role in health,” says Claire Gillis of VMLY&R Health. Pharmaceutical clients “feel like they’ve got a lot of positivity – a halo effect. But we know people forget pretty quickly.”
The chance to capitalize on this rare window of public attention has been one of the factors driving pharmaceutical companies and companies in the wider healthcare industry to spend more on marketing.
But as governments and the public look to move on from the pandemic, will healthcare and pharmaceutical companies maintain their marketing efforts at the same temperature, or return to lower budgets?
Healthcare growth
Higher ad spend in this sector has been good news for specialist health agencies such as the one Gillis leads, which have themselves grown significantly since the onset of the pandemic. Revenue at VMLY&R Health rose 82% to $204m in 2021, making the agency one of the fastest-growing in the space.
Meanwhile, Toronto-headquartered Klick Health, for example, grew 14% last year. One of the largest (if not the largest) independents in the sector, it began an aggressive expansion program in June beyond its traditional North American market – launching offices in Singapore, London, São Paulo, Basel, Buenos Aires, Munich and Tokyo.
Chief executive officer Lori Grant says the expansion was fueled by client demand: “The patterns of client requests and increasing global demands for our unique talent, approach and capabilities continue to amplify. It was ultimately the intensifying chorus of clients asking for us to grow our global footprint that made this timing optimal.”
FCB, Deloitte, Wunderman Thompson, Grey-owned Tank, Havas Lynx and Digitas each have sizable operations in the space too.
While consumer brand advertisers are predicted to slash ad spending over the coming years, healthcare clients operate at a greater distance from fluctuations in consumer spending than CPG brands, even if they’re not insulated entirely from the effects of a downturn. The former could potentially bring an end to a bumper post-pandemic era for agencies, but John Connors, chief executive and co-founder of Massachusetts agency Boathouse, tells The Drum agencies like his are ”much less exposed to fluctuations in individual media channels.“
The sector it serves – many of Boathouse’s clients operate in the US hospital sector – and its own diversification over the years “allow us to pivot with clients to the areas with the greatest potential.“ Connors is optimistic about business prospects, despite economic conditions. “The truth is, we are seeing less pullback than we did over the last two recessions.“
“My instinct is that there are two reasons. One, this seems more like a ‘shallow recession.’ In a shallow recession companies believe they can compete their way out. They keep the focus on being in the market rather than shutting everything down to survive.“
Akwanne Onuoha is vice-president and managing director EMEA for Tank. The creative and strategic agency, which celebrates its 15th anniversary this year, was founded to service the packaged goods market but seven years ago (prior to its acquisition by Grey) it pivoted toward the healthcare sector.
There’s a demand among its roster of pharmaceutical clients for “communications that resonate with audiences in a credible, meaningful, data-driven and emotional way,“ she says, which is unlikely to decrease, even with a recession on the horizon. “There will always be opportunity from an agency perspective to be able to service that need. It doesn’t matter what sort of economic cycle the world is in, health will always matter.“
Private hospital providers and pharma companies are no longer just providers of drugs or direct treatment. Areas such as telehealth and digital healthcare were growing prior to the pandemic – now they’re booming. Half of US consumers are estimated to be using telehealth services already, while the market for digital therapies is set to be worth $9bn in 2025, according to Medtech Insight.
All of this means that healthcare clients are more willing than ever to engage agencies to improve their marketing efforts. Analytics firm Pathmatics estimates that pharmaceutical companies spent 32% more on digital marketing last year.
Healthcare agencies tend to enjoy longer-term relationships with clients too. Tank has worked with Pfizer, Moderna and GlaxoSmithKline for years as a preferred partner, and Gillis points out that pharmaceutical clients operate on a different timeline than a CPG advertiser.
“We’re not making widgets or toilet rolls, we’re making drugs, which have a long horizon to get to market.“ The amount of time invested in the production of a new drug, for example, means clients want sure bets from their agency partners. And getting communications right around such a product also carries a safety function. She notes: “The pharmaceutical industry is typically very risk averse because we’re dealing with people’s lives.“
Bringing health to the front
Agencies themselves are working proactively to make their healthcare offerings more attractive to clients. The decision to integrate WPP Health into VMLY&R helped sharpen its edge, says Gillis. She credits much of this year’s growth to that choice.
“We took a very deliberate approach about a year ago. Everything needs to be connected. [Before] you’d have your creative brief and your medical brief and your strategy brief. You can’t do that in a silo. You have to have every single bit of the communication spectrum all come together to answer a challenge, even if the brief is just a campaign,” she says.
The merger back into creative and digital shop VMLY&R has also helped the health division improve its attractiveness to recruits. “Talent is like hen’s teeth,“ says Gillis. “You’ve got to give people a surround sound and make it interesting.“
Rival network Havas recently made a similar move. Its Havas Health & You network will be run alongside the global Havas Creative family by chief executive Donna Murphy. While a personal union rather than a formal merger, it’s a sign that Havas’s health agencies have shifted up a gear. Its healthcare PR agency, Red Havas Health, also made a string of hires in July – further evidence of growth.
By making their agency models look beefier to clients, holding companies such as WPP and Havas will hope to capture more of that expanding pharma ad spend.
Long-term prospects
Healthcare is political – and the fierce debates around medical provision in the United States could rock the business. Connors says that “the biggest change in healthcare is that the space became politically charged with the onset of Covid,“ a fact that’s changed the way his agency services clients.
“Healthcare reimbursement has always been a political issue. But with Covid all parts of healthcare became politically charged. Healthcare became an equity issue, a community issue, a cost issue, a vaccine issue, a supply chain issue, an employee turnover issue, and it grew as a Democrat v Republican issue. As a result, we have had to look much more broadly at the broad healthcare narratives taking place with our clients.
“We have had to monitor many more audiences and issues. In the past we could succeed with a few high-performing channels, but now we must look much more broadly at all channels to proactively manage our narrative and drive performance.“
While Connors says clients aren’t pulling back from spend, they care about spending differently. “The reallocation is happening due to the multiple narratives we must manage. It is also happening because of the increasing importance of proactively protecting patient privacy and making sure we are following the letter of the law.“
Most developed advertising markets, including the UK and the US, are also host to populations that are living longer, Gillis notes. Political priorities and consumer demand will likely favor the sector. “We were getting older, we’re getting sicker. Investment is required to keep people in good health, to maintain GDP.“
Demand for healthcare that gives more power to patients (a core premise of digital therapies and telehealth services) or for more effective drug treatments is unlikely to ebb.
Gillis notes that “political agendas last for years, especially in the UK“ but “health agendas last lifetimes.“