Low rates and the ability to target audiences make the airwaves a good place for advertisers
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.
