Radio: the ROI multiplier
Last week the RAB unveiled a new study demonstrating that brands using radio for advertising get almost eight times the return on investment. Here, looking at the findings in more detail, the RAB's MD, Simon Redican, makes the case for a change in spend.
Albert Einstein famously defined insanity as doing the same thing over and over again and expecting different results.
I was reminded of this oft quoted aphorism when the RAB presented the results of our recent econometrics study.
For over twenty years the RAB has argued that the UK's second largest medium is seriously underinvested in by UK agencies. That in effect, radio is a sleeping giant, unjustly overlooked in favour of lazier creative routes or more fashionable choices - Bebo or Myspace anyone?
Throughout the 1990s this message seemed to be starting to cut through, with the number of stations and subsequent audience growth mirrored by parallel rises in radio revenues.
To help justify radio's increasing profile and presence on major advertiser budgets, the RAB was first to market an entire sector with ground breaking research into radio's multiplier effect. The original Awareness Multiplier study showed how clever redeployment of around 10% of a client's budget into radio could deliver a 15% growth in awareness generated.
Simple stuff now, but ground-breaking in a world of virtually no effectiveness metrics. The RAB followed this up with studies into radio's impact on FMCG sales (up by an average of 9% vs non-radio campaigns since you ask!)
More recently we have demonstrated that radio remains the most emotionally powerful of all of the three main media channels - TV, Online and Radio - via our Emotional Multiplier research.
In a world of connected consumers where the UK leads the way with 12.7% of all retail sales online, our Online Multiplier research showed that consumers exposed to radio ads had levels of brand browsing 52% higher than those who only saw the same campaign in other media.
The results are both a vindication of our long held position and a challenge to any advertiser or agency who do not invest at least 20% of their budget into radio."
Despite all of this, and despite three years of UK radio revenue growth, our share of the total advertising pie remains stubbornly stuck below 6%. This is way behind radio's 25% share of overall media consumption.
When Martin Sorrell told the Wall Street Journal that Econometrics and ROI were the "holy grail" for advertisers, it got us thinking. If he is right, then our informed hypothesis that radio is the multiplier medium which turbo charges marketing plans might be supported by analysis of econometric data.
We were given confidence that econometrics might prove radio's business effect when Thinkbox and Ebiquity announced their Payback 3 report in winter 2011. This showed that radio delivered the second highest profit return on investment after TV, returning £1.48 for every pound invested.
Across the last year, the RAB and our research partners Holmes and Cook have worked with specialist econometrics agencies representing all of the world's major media agency groups to produce the definitive report on radio's ability to deliver a marketing return.
The results are both a vindication of our long held position and a challenge to any advertiser or agency who do not invest at least 20% of their budget into radio.
Across the 517 cases measured in our study, radio again delivered the second highest ROI after TV with £7.70 returned for every £1 spent (TV was £8.70). In addition, in eight out of 10 sectors measured, the best radio performer beat the best performer from all other media including TV - a compelling indication of radio's potential when used strategically and creatively.
We discovered that overall campaign ROI grows as radio investment increases, with the optimum returns coming with radio taking a 20% share of the total media budget.
And in a real break with convention we found that to maximise returns from radio advertisers should aim to maximise the weekly coverage of their radio campaigns. In a world where reach is an increasingly rare commodity, this demonstrates that it pays to plan radio as a lead strategic medium to maximise return.
The study explores these and other areas in greater depth than I can cover in this article so I urge you to look at the full report here (or at least read the Executive Summary!)
This project caps twenty years of RAB research proving the power of radio and demonstrating how it is a massively under-utilised weapon in the media armoury. The interesting challenge that lies ahead is stimulating a change in behaviour amongst agencies and advertisers on the back of these findings.
Who will be the first to act on their own data? Who will take the challenge of investing 20% of their client's media budget into radio, and ensuring that this then gets the creative care and attention that such an investment demands?
Surely there must be some behavioural shift in response to these findings - after all, who wouldn't want to unlock advertising's missing millions?
To carry on ignoring the facts and doing the same thing over and over again would be insane, wouldn't it?