The Business Case for AM/FM Radio Advertising: Be Known Before You’re Needed
Click here to view an 11-minute video of the key findings.
Click here to download a PDF of the slides.
A local advertiser recently asked for the “business case for AM/FM radio advertising.” Over the last ten years, a vast array of marketing science studies have documented how AM/FM radio advertising can build local businesses and national brands.
Key findings:
- In one of the most significant studies ever conducted on the sales effect of AM/FM radio, Peter Field, one of the “godfathers of marketing effectiveness,” reveals major differences in business outcomes for marketers who utilize AM/FM radio versus those who don’t: +13% greater mental availability, the propensity of a brand to be noticed and thought of in buying situations; +28% larger market share; +17% increase in pricing power; +42% increased profits, with AM/FM radio’s impact on profit growing; +23% greater return on advertising spend
- Across dozens of sales effect studies, Nielsen reports AM/FM radio advertising generates an outstanding $10 return on advertising spend
- Nielsen Media Mix Modeling: “Radio consistently ranks as a top tier medium for ROI”
- Ebiquity/Gain Theory: Of ten media, audio is number two in short-term ROI and number three in long-term ROI
- LeadsRx 17-campaign analysis reveals a +14% average increase in website traffic due to AM/FM radio advertising
- Through the long-term use of radio, Steve’s Pest Control of Columbia, Missouri has expanded its business from one van to ninety vans
AM/FM radio advertising generates significant sales and profit growth reports Peter Field, “godfather of marketing effectiveness”
Peter Field’s latest blockbuster study is called The Long and the Short of It – 10 Years On: Radio’s Enduring Role in Effectiveness. This consequential new study lays out hard evidence for how AM/FM radio drives significant lifts in market share, pricing power, sales, profits, and ROI.
Field analyzed the Institute of Practitioners in Advertising (IPA) databank of over 1,200 case studies submitted to their Effectiveness Awards Competition. Covering a broad spectrum of marketing categories and budgets, they “represent the most rigorous proofs of the effectiveness of marketing communications in the world.” Field compared the business outcomes of marketers who have AM/FM radio in their media plans to those that do not use AM/FM radio advertising.
AM/FM radio boosts mental availability (the propensity of a brand to be noticed and thought of in buying situations) by +13%
In their book 66 Ways To Screw It Up: How Not to Plan, Les Binet and Sarah Carter explain:
“The single most important factor driving brand preference is ‘mental availability’: how well known a brand is, and how easily it comes to mind. Brands with low mental availability tend to struggle, rejected in favour of more familiar rivals. Or not considered in the first place. Brands with high mental availability don’t have to push so hard to sell, so tend to have higher market shares and better margins.”
Field’s research found that marketers that used AM/FM radio had +13% greater mental availability than brands that did not use AM/FM radio.
Media plans with AM/FM radio have +28% greater market share than brands that do not use AM/FM radio
From 2000 to 2022, brands in the IPA databank using AM/FM radio had a +28% greater market share (32%) compared to brands not using AM/FM radio (25%).
Pricing power is the biggest profit driver; Brands cannot thrive just by selling more
Peter Field’s analysis of the IPA databank reveals that pricing power is the biggest profit driver:
- 46% of brands with market share increases report large profit gains.
- 56% of marketers with pricing power have very large profit growth.
- 75% of brands with both market share gains and pricing power have very large profit growth.
Field notes businesses cannot thrive just by growing sales volume. Pricing power is a key profit accelerator.
Warren Buffett: “If you’ve got the power the raise prices, you’ve got a good business”
Warren Buffett has made a career of investing in companies with strong brands. Companies with strong brands recover faster from uncertain economies and have greater consumer purchase intent.
AM/FM radio improves brand pricing power by +17%
Compared to brands not using AM/FM radio, Field reports advertisers using AM/FM radio enjoy +17% greater pricing power, a key profit driver.
Advertisers using AM/FM radio have +42% greater profit than brands that do not use AM/FM radio
AM/FM radio’s impact on profit growth is increasing
Since 2016, Peter Field’s analysis of the IPA databank reveals the profit uplifts among marketers who use AM/FM radio versus those who do not have been growing steadily.
Brands using AM/FM radio experience +23% greater return on marketing spend
Compared to brands who don’t use AM/FM radio, AM/FM radio advertisers experience +23% greater return on advertising spend (ROI).
Peter’s Field’s new study makes a decisive business case for AM/FM radio advertising.
Nielsen: AM/FM radio generates impressive $10 return on advertising across a wide variety of categories
Nielsen has conducted dozens of AM/FM radio sales effect studies by matching Portable People Meter AM/FM radio ad exposures to retail purchases from credit and debit cards and consumer packaged goods sales via grocery shopper card data. Averaging all of the studies yields a $10.59 return on AM/FM radio advertising spend.
The figures above represent incremental sales generated by a dollar of AM/FM radio advertising. For example, Nielsen reports a dollar of AM/FM radio advertising for an auto aftermarket retailer drove $17 of incremental sales.
How does AM/FM radio’s sales effect company to other media?
Nielsen Media Mix Modeling: “Radio consistently ranks as a top tier medium for ROI”
Nielsen recently released the results of a major media mix modeling analysis of 2,857 national, local, and international campaigns across advertiser categories where the allocation to AM/FM radio averaged a notable percentage of the total media budget.
Dave Hohman, EVP & GM Global Marketing Effectiveness at Nielsen’s Media Mix Modeling practice, concludes: “When the relative weight of impressions is large enough to be measured, radio consistently ranks as a top-tier medium for ROI. Streaming audio also performs well, albeit behind broadcast radio.”
Ebiquity/Gain Theory: Of ten media, audio is number two in short term ROI and number three in long term ROI
Profit Ability 2: The New Business Case for Advertising is a significant recent study on marketing effectiveness from measurement firms Gain Theory and Ebiquity, along with media agencies EssenceMediacom, Mindshare, and Wavemaker UK. The study was a massive undertaking that involved analyzing $2.2 billion in media spend (2021-2023) across 142 brands, 14 sectors, and 10 media channels.
The study revealed audio has the second highest short-term return on advertising spend (within one to thirteen weeks). Audio ranks third in overall return on advertising spend (week one to two years).
A dollar invested in audio (AM/FM radio, podcasts, or streaming) would generate $3.12 of profit within one to thirteen weeks. Overall, a dollar invested in audio will return $6.29 of profit over the entire two-year period (one week to two years).
LeadsRx 17-campaign analysis reveals a +14% average increase in website traffic due to AM/FM radio advertising
Over the course of five years (from 2019-2023), the Cumulus Media | Westwood One Audio Active Group® has commissioned LeadsRx, a leader in measuring the impact of advertising on site traffic, to conduct 17 attribution studies for brands spanning a variety of categories.
The categories included tax preparation services, B2B supplies/services, apparel and jewelry retailers, financial institutions, job websites, subscription managers, identify theft protection, online therapy apps, vitamin supplement subscription services, and a haircare supplement.
On average, AM/FM radio campaigns generated a +14% lift in site traffic across the 17 campaigns
Campaigns are measured against LeadsRx benchmarks to determine the performance of attributed lift. The scale ranges from a small attributed lift (0% to +3% lift) to excellent (+15% or more). Across the 17 campaigns analyzed, the average attributed lift was +14%.
How advertising really works: Steve’s Pest Control of Columbia, Missouri used AM/FM radio to build a huge business
1,095 miles to the west of New York City lies Columbia, Missouri, the home of Steve’s Pest Control, “Missouri’s number one choice for pest control.”
Steve’s Pest Control knows what Madison Avenue has forgotten. To generate substantial sales and profit, a business needs to create future demand rather than obsess over short term metrics and only focus on converting existing demand.
Steve Hotsenpiller and his wife Anita started their business over three decades ago with one truck. They bought ads on a small radio station.
Each year, they devoted about 8.5% of their revenues to advertising. As they grew, they bought ads on more radio stations and soon became one of the largest advertisers on local radio.
Their ads are charming, funny, and entertaining. They usually end with the jingle that exclaims, “Now you’ve got a friend in the pest control business – Steve’s Pest Control!” Today, with over 90 trucks, Steve’s Pest Control is the undisputed leader in the pest control business.
Due to its use of AM/FM radio, Steve’s Pest Control leads the market across all stages of the consumer journey
Steve’s Pest Control’s usage of AM/FM radio advertising has built a dominant brand. It is so impressive for a local business to win against big national brands!
Steve’s Pest Control’s unaided awareness (34%) is +32% greater than the next brand. Its ad recall (40%) is two and half times the nearest competitor. This is significant as advertising recall is the most responsive measure of advertising activity.
Steve’s Pest Control leads all brands in favorability. In terms of purchase intent, Steve’s Pest Control is two and half times larger than the next brand.
Steve’s Pest Control usage is two and half times greater than the nearest competitor. Its brand preference is more than twice as strong as the next brand.
Easy to mind, easy to find: that’s how Steve’s Pest Control built a massive business with AM/FM radio
By patiently investing in brand building advertising to create future demand, Steve’s Pest Control has made his service easy to think of and easy to buy. His lighthearted and humorous ads have created positive feelings and associations with broad reach ads that people find interesting and enjoyable.
In the end, Steve’s Pest Control’s lesson for Madison Avenue is that advertising is not just about manically measuring short-term performance. It’s about “being known before you’re needed.”
Key findings:
- In one of the most significant studies ever conducted on the sales effect of AM/FM radio, Peter Field, one of the “godfathers of marketing effectiveness,” reveals major differences in business outcomes for marketers who utilize AM/FM radio versus those who don’t: +13% greater mental availability, the propensity of a brand to be noticed and thought of in buying situations; +28% larger market share; +17% increase in pricing power; +42% increased profits, with AM/FM radio’s impact on profit growing; +23% greater return on advertising spend
- Across dozens of sales effect studies, Nielsen reports AM/FM radio advertising generates an outstanding $10 return on advertising spend
- Nielsen Media Mix Modeling: “Radio consistently ranks as a top tier medium for ROI”
- Ebiquity/Gain Theory: Of ten media, audio is number two in short-term ROI and number three in long-term ROI
- LeadsRx 17-campaign analysis reveals a +14% average increase in website traffic due to AM/FM radio advertising
- Through the long-term use of radio, Steve’s Pest Control of Columbia, Missouri has expanded its business from one van to ninety vans
Click here to view an 11-minute video of the key findings.
Pierre Bouvard is Chief Insights Officer of the Cumulus Media | Westwood One Audio Active Group®.
Contact the Insights team at CorpMarketing@westwoodone.com.