Is Radio Advertsing a Cost or Investment?

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Most people, even marketers, accountants and management view advertising as an expense. This is exactly what we have been taught in marketing, management and accounting courses. Many textbooks teach you that a company should budget approximately 10% of its sales for advertising and promotions.

I personally think that this is very stupid advice. Pegging your advertising dollars to your previous months/year’s sales revenue does not make any sense. This means that when your sales are dropping, you will be spending less on advertising, which will draw in less leads, giving you less customers and driving your sales down even further. Whenever my sales are low, I increase my visibility and draw in more people by advertising more heavily!

So, do marketing gurus view advertising and investment or expense?

The answer is…it DEPENDS.

When the advertisement you use does not work, it is an expense. For example, you place a $1,000 advertisement in the newspaper. This draws in 60 more people into your store, of which only 9 buy a garment each, spending an average of $80 on their purchase.

Since each garment costs you $30 to make, you merely make an additional gross profit of ($80-$30) x 9 garments = $450.

Spending that $1,000 on the advertisement gave your business a return of only $450. That’s a loss of $550. In this case, advertising is an EXPENSE!

For most businesses I know, advertising is an expense simply because their ads don’t work. What’s worse is that most businesses don’t even measure the effect of their advertising.

They have no clue as to how many extra customers their ad brought in or the additional gross profit made through the ad(s).

However, when a company uses effective ads and measures its results, advertising becomes an INVESTMENT. When you learn how to write powerful ads and place them in the right media, you will be able to generate much more leads for the same amount spent.

Assume that with the right strategies, your $1,000 ad is now able to pull in 240 people into your store (four times the previous ad). Out of the 240, 36 customers buy an average of $80/- each.

This time, the additional gross profit generated from the ad is ($80-$30) x 36 = $1,800. Spending $1,000 on the ad has brought you extra profits of $800. This is an 80% return on investment (ROI). Advertising is clearly an investment this time.

So, let me ask you this. If investing $1,000 returns you $1,800 each time, how many $1,000 will you put in? Put it another way, if you get $1.80 for every $1 you invest, how many $1 would you invest? You would put in as many ‘$1’ investments as you can!

How Much Does Radio Advertising Cost?

Radio advertising costs include the cost to produce your radio commercial and the cost to run your radio ad (or spot) on the air. Budget between $300 and $1000 to produce the ad, including marketing strategy, copywriting, voice talent and any sound editing.

While many radio stations will offer to produce your radio ad for free, this might not be the best financial decision in the long run. An ad that was created for $0 and aired for $500 but produces only $400 in sales, has actually cost you $100. Spending $500 for a more effective ad and $500 for the same air time and netting $1600 in sales is a no-brainer good-business decision.

Air time is sold in “spots.” A “60 spot” is 60-seconds of air time. You will find radio stations selling a 60 spot for as little $3 or as much as $500, depending on their audience size and the time of day the ad runs. The majority of radio spots cost in the $20 – $80 range. Usually radio advertising prices are quoted as a 30 spot or 60 spot aired during a particular daypart. Dayparts are Morning Drive (6:00 a.m. – 10:00 a.m.), Mid-Day (10:00 a.m. – 3:00 p.m.), Afternoon Drive (3:00 p.m. – 7:00 p.m.), Evenings (7:00 p.m. – 12:00 midnight) and Overnight (midnight – 6 AM)

If you have no experience with advertising on the radio, you may want to consider looking for a radio commercial advertising agency. They will be able to find a radio station whose listeners’ demographics match your target audience. If you are selling bridal gowns, you don’t want your commercial running on a station or at a time where 80% of the listeners are middle-age men driving to work. Look for an agency with a proven track record of successful campaigns. Radio advertising must translate into sales.

To test radio’s effectiveness, experts suggest you budget for a campaign of 20 spots a week, running your ad once each morning, mid-day and evening on Monday through Saturday and twice on Sunday. To conduct such a test is likely to cost anywhere from $1500 to $4000.

What does Radio advertising cost? Great question! How much airtime do you want? That’s the answer. All ad campaigns are different, just look at your advertising budget in other areas. How much does your newspaper advertising cost? Ask your business friends and they’ll give you different replies. Do you want hourly, daily or weekly exposure?

An owner with a single store may spend $5000 a month and get some solid exposure whilst a chain store might invest ten times that number during a specific campaign.

When you’re driving around in your car, you hear the same ads time after time, so you know they work. If you want to get the word out about your product, you need to air your ads many times during the day. Regular radio advertisers know that to get results you need to air your ad frequently to get results.

They are prepared to invest to get their messages heard. Rather than asking about radio advertising costs you should ask what investment am I prepared to make to ensure that they work.

That’s all fine but what does it cost! You need to think about how many people will get to hear your message for a good CPT (cost per thousand). It’s better than any other method available today. Prices will be different from town to town, talk show to talk show and will also depend on the time of day you want to air your message.

Popular stations will charge you more than less popular stations and prices inside a popular station will vary depending on shows that you want to use. It all depends on who your customers are…

Radio is a great medium because it has really flexible costs and availability to almost any business. You really don’t need a mega budget.

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