Consider the fact that the average U.S. household now has more than five radios, that 56% of the population gets their first news in the morning listening to radio, and that many of the most affluent working people currently spend more time with radio than with television or newspapers. Despite radio's growing presence in American life, however, many advertisers "treat it as a third-class citizen, after print and TV," says James Duncan Jr., editor and publisher of American Radio, a biannual periodical, published in Kalamazoo, Mich., that reviews radio markets.

Of all the major media, says Radio Advertising Bureau Inc., in New York City, radio's cost per thousand (cpm) -- the cost to the advertiser for reaching 1,000 listeners -- has increased the least since 1968, up 100%, in contrast to television's cpm (168%) and newspaper's (191%). Typically, a 60-second spot on a local radio station can be purchased for as little as $15 or $20, or as much as $600, depending on the skill of the negotiator and the size and quality of the listening audience. In some cases, rates are negotiable within realistic parameters. And, with cooperative advertising dollars, many retailers can cut these rates in half.

Although radio continues to attract predominantly retail and consumer-goods advertisers, other companies have experimented successfully with the medium: Newspapers and magazines use radio to attract advertisers as well as subscribers. High-technology companies recruit people who aren't actively looking for jobs in newspaper classified sections. And, for such industries as banking and transportation, where deregulation has brought significant change, radio can be especially effective in relaying current prices and interest-rate information.

"As banking grows more volatile with deregulation," says Warren Smith, vicepresident and advertising manager of Indiana National Bank, "there's a greater dependence on media you can change in the short term." By buying spots on a combination of 8 to 10 FM and AM stations out of a group of 25 in the Indianapolis market, says Smith, the bank reaches a large percentage of its target market -- working people from the age of 25 to 54.

Although television and print will always have certain advantages over radio -- broadcast TV has greater reach and print permits an advertiser to give consumers more detailed information about products and services -- radio is the most effective medium in targeting distinct groups of consumers. (Only cable television -- still unavailable in many communities and largely unsupported by market data about its viewers -- offers the same selectivity.)

The radio industry is made up of more than 8,000 radio stations -- each with its own mix, or format, of music, talk, and information -- including Hispanic- and black-oriented stations, stations that play only big-band music, even stations devoted to telling jokes. By buying a heavy schedule of spots on 3 or 4 stations out of a market's, say, dozen stations, and se lecting those formats that appeal to teenagers and young adults, for example, a company can efficiently reach a relatively narrow group of potential customers in a specific area.

At the same time, Duncan says, the sheer number of stations -- which he expects will increase by 1,500 within the next five years -- makes it difficult for advertisers to know where to spend their money. "To buy radio today, you have to be smarter," says Christine Woodward, sales manager at WENS-FM in Indianapolis. "As the demographics per radio station narrow," she explains, "advertisers must be more in touch with potential customers . . . They must know where they want growth to come from."

Sau-Sea Foods Inc., in Yonkers, N.Y., for example, was able to use radio successfully to advertise its product, shrimp cocktail, only after deciding to reposition the product from an appetizer to a low-calorie snack that appeals to weight-conscious women between the ages of 20 and 45. With that audience in mind, SauSea's vice-president of sales and marketing, Antonio Estadella, worked with an agency to prepare spots and choose stations that targcted their customer profile. Initially investing $150,000 for the New York metropolitan and suburban market, Sau-Sea has used nine radio stations, playing predominantly adult contemporary music, to appeal to young women. In the first six months of 1983, Sau-Sea's New York sales increased from $1.8 million to $2.5 million. During the same period, sales in other key markets, notably New England and Chicago, dropped 10.5% and 8.5%, respectively.

Besides pinpointing prospective customers, a company buying radio time must also learn to evaluate the ratings and demographic information given out by a station. Today, a salesperson can reel off qualitative data about the average listener's age, occupation, education, and household income, about how often he or she shops in malls, drinks beer, buys jewelry, or visits the local bank. The station also provides quantitative data: its market share and cumulative audience, or number of listeners.

Some of that data, however, should be viewed with skepticism. Unlike television and print, in which several rating services compete, radio is served primarily by The Arbitron Ratings Co. "It's the dominant game in town," says Edmund Fitzmaurice, senior vice-president and director of marketing services for Humphrey Browning & MacDougall Inc., a Boston advertising agency. Most media buyers agree that the syndicated ratings are often flawed. "In a given rating period, a significant audience shift may not be real," says Fitzmaurice, who checks previous ratings to determine whether a dramatic change in the numbers is part of a pattern instead of a fluke in the research.

Rates can also be artifically inflated if a station runs contests and sweepstakes during Arbitron's rating sweeps. "The contests force you to listen in order to win," says Ron Pearson, president and cocreative director of Pearson Crahan & Fletcher Group Inc., an Indianapolis ad agency. Moreover, he adds, "Ratings are history." Once a sweep is over, contests end and listeners return to their favorite stations. The best acid test in evaluating a station, says Pearson, is to talk with regular advertisers, and to listen yourself and get a feel for a format. He advises advertisers not to buy what they personally like. "Just because you listen doesn't mean your potential customer does," agrees Rick Miles, local sales manager for WZPL-FM in Indianapolis.

Buying radio is like shopping at a Roman flea market: There is plenty of room for negotiation. Radio stations in most markets scramble for the same advertising dollars, and salespeople are quick to offer special deals in exchange for a company's schedule of advertising. An advertiser can use his intuition in bargaining for the most effective air times. Although many stations define morning drive-time as the hours between 5:30 and 10:00, says Pearson, most people listen to morning radio between 6:30 and 9:00, and many stations will rotate spots within the time period you request. Stations that sell "rotating packages" with groups of spots divided equally among morning drive-time, midday, and nighttime, will also juggle spots into preferred time slots to keep clients happy.

A number of radio stations offer special packages that are not listed on a rate card, says WZPL's Miles, adding that advertisers that want to stretch ad dollars should avoid advertising during the stations' busiest months, usually August through December. "However, if someone comes to me in January, I'm not going to let him get out the door," says Miles. To encourage advertisers during slow periods, many stations offer special incentives and bonusspots.

"It's no trick to getting radio stations to give you something when you spend money with them," says John Adams, formal vice-president and general manager of Athletic Department Sporting Goods, a 10-store chain of sporting-goods stores headquartered in Indianapolis. The real trick, says Adams, is to get them to participate in a promotion. "When we decide to join in a promotion, it must fit with the station's format," and the clien must be willing to invest sufficient dollars in advertising, says Miles, whose station plays top-40 hits that appeal to teenagers and young adults.

Last June, WZPL participated in a Hobie Cat sailboat giveaway promotion held by Athletic Department in exchange for $5,000 worth of advertising. Athletic Department not only got a sailboat to give away, it also i eceived free mentions about the joint promotion from WZPL. Furthermore, half the cost of the spots, $2,500, was reimbursed with cooperative advertising funds from Hobie Cat because Athletic Department carries Hobie sportswear. Co-op advertising, the ability to split ad costs with vendors (See INC., July, page 94), has, in fact, allowed Adams to more than double the impact of the company's ad budget, 70% of which is allocated to radio.

"The qualifications [for co-op reimbursement] are much easier for radio than for newspaper," says Adams. For example, Nike Inc., a Beaverton, Ore., running sports shoe manufacturer, pays at least half of Athletic Department's media costs of radio, as long as the Nike name is included three times in each ad. In a newspaper ad, by contrast, not only must the retailer include the manufacturer's name, trademark, and an illustration provided by Nike, but it must also devote 56 lines to Nike's product.

When preparing his own radio spots, Adams prefers to use an agency, at $200 to $300 per spot, rather than let a radio station write and read the ad. The quality of production at radio stations -- which is included in the cost of a spot -- varies from station to station. A radio disc jockey's tone can also be a problem, says Ron Pearson. Although some radio announcers can add credibility to a company's message, "if you have the zany afternoon-drive guy voicing your spot and you want to make a sincere statement," he says, "it's a difficult translation."

In radio commercials, the trend is toward "slice of life" ads that listeners can identify with, such as American Telephone & Telegraph's "Reach Out and Touch Someone" campaign. In Sau-Sea's 60-second spots, producer Dick Levy of Levy Flaxman & Associates, in New York City, successfully masks a hard-sell message with a humoious situation. In one, a game contestant, Mr. Ryker, is about to answer a jackpot question. If he is right, he will win a trip to Europe, an oil well, and the space shuttle. If he misses it, he gets a three-pack of Sau-Sea shrimp cocktail.

"You mean Sau-Sea, the shrimp cocktail with the scrumptious shrimp and that tangy sauce?" asks Mr. Ryker. " SauSea, the perfect anytime snack that's only 113 calories?"

Before the host can ask the question in the Famous Short People in History category, Mr. Ryker blurts out, "Goliath," and demands the shrimp cocktail.

But the rules must be followed, the question must be asked, says the host. "Little David, one of history's first short people, slew what famous giant? Goliath is correct. You won."

"Impossible," says the distraught Mr. Ryker. "I meant Marvin Goliath, my accountant."

Humor plays an important part in many radio commercials, but jokes, says Los Angeles radio producer Don Richman, "are for used-car dealers who have a weekend sale. Once you hear a joke, you might laugh the first time, snicker the second, but the third time, you tune it out." Richman also advises advertisers to be realistic: "Don't have children say things that children don't say. How many kids say yum, yum?" Like Richman, radio producer Dick Orkin believes an advertiser's challenge is to create advertising that has a personal relationship with the listener. "That's why we specialize in humor," says the founder of Dick Orkin's Radio Ranch and Home for Wayward Cowboys in Los Angeles. "Of all the emotions, humor is one of the most universal."