Scary, surreal and exciting. That's how Dave Peterson and Tom Nowak describe the feeling in the weeks after Target told the agency, which created the retailer's cheap chic persona, that their longtime relationship would end.
Minneapolis-based Peterson Milla Hooks began working with Target in the 1990s, first on print ads. But in 1999 Mr. Peterson, creative director and founder of PMH, was charged with coming up with a branding campaign that would define the retailer's DNA. He decided to focus on Target's simple red logo. The rest, as they say, is history.
"We would have been wise to have a contingency plan in place," admitted Mr. Nowak, president of the agency. "But we didn't let ourselves think about it. It's true we had all of our eggs in one basket, but it was a really great basket."
The Target work was fresh enough to attract top-notch talent from around the country. And PMH built a lucrative business around the retailer, which kept it busy enough that the agency only occasionally took on short-term projects from other clients. As of 2010, Target accounted for all the shop's revenue.
Target notified the agency months before it planned to end the relationship, which gave the shop time to plan for the future and pitch new business, but it was also incredibly busy wrapping up work for its longtime client.
"Dave and I just sat with that for a day or two letting it soak in," remembered Mr. Nowak. "[Then] you just go into action mode. It's either OK, we're going to sell the building, or figure out a way forward.
Within 12 months, PMH replaced all the lost Target business -- as of 2010, with work for clients such as JC Penney, Kmart, and Children's Hospitals and Clinics of Minnesota. In 2012, PMH added Gap, Sephora, Chico's and Allina Health to the mix. Between 2011 and 2012 net income grew 16%.
"We desperately needed revenue, but we didn't chase revenue," Mr. Nowak explained. He made some good, old-fashioned cold calls to brands he thought would be a good fit. "We still chose to be selective. That's the positive of being privately owned."
"We know what we're good at. ...We're so strong when we're doing what we love and not so great when it's not our sweet spot," Mr. Peterson added.
New work like the "Love Comes in Every Shade" campaign for Gap has been well received. It paired the retailer's candy-colored products with well-known friends, couples and relatives in ads depicting varied forms of love, from puppy love and sibling love to married love and best-friend love. Meanwhile, PMH's touching campaign for Children's, "That's Why We're Called Children's," has had an outsize impact on that brand's market share and donations.
About 10 people chose to leave following the loss of Target, Mr. Nowak said, noting the shop avoided layoffs. Those departures provided the opportunity to bring in more digital and account-planning talent. The total number of employees at PMH now is 62. Revenue from digital jumped from 4% in 2010 to 19% in 2012.
"We can look back now and just be really grateful for the opportunity to work on Target," Mr. Peterson concluded. "There's a renewed energy now; it's an exciting time for us."