Radio’s ROI Advantage.

The Radio Ad Effectiveness Lab is pleased to present its third major new study in twelve months. This project is our largest yet, and it addresses the core issue of advertising—Return on Investment. The results confirm our prior theories: Radio’s ROI in this test was 49% higher than we observed for television.

This “real world” study was conducted by Millward Brown and Information Resources, Inc. (IRI), and it examined four pairs of radio and television campaigns in a range of product categories over a six month period ending in early 2005. The product categories included Grocery Food, Grocery Non-Food, and two very distinct Over-The-Counter Drug products.

By conducting the study in four IRI BehaviorScan markets, we were able to create four test cells—one with no TV or incremental radio; one with incremental radio only; one with national TV only; and, one with both national TV and incremental radio.

After the six month campaigns, we were able to analyze scanner sales data for each of those controlled test cells. The key finding is that incremental radio campaigns showed significantly better ROI for these advertisers than did their national television campaigns, whether the TV ROI was measured by this test’s results or by the advertisers’ own historical return estimates for television:1

For all the study’s complexity, we think the implications for advertising are clear:

· Radio moves product. Across four different advertisers, incremental radio advertising consistently and significantly increased product sales and delivered meaningful profit for each dollar of advertising. Radio demonstrated in this study that it can function as a primary medium for advertising.

· Radio ads increase sales even when national television is present. Radio was just as potent in the presence of 50–100 TRPs of national TV as it was by itself. In fact, the test results actually suggested slightly more impact for radio when combined with television than when used alone.

· Radio’s effects can be measured—when radio is used at sufficient weight. Radio is prepared to be held accountable for its advertising effectiveness. But effectiveness measurement requires that advertising be present at sufficient weight for statistics to accurately capture that result.

· Most importantly: Radio’s ability to deliver strong Return on Investment for advertisers has been proven in a real-world test at last. In this study, radio’s ROI was 49% better than television’s, and radio advertising’s value is no longer just speculation.

One final thought: We can only guess how much better that value might be if the creative quality of radio advertising received as much attention and investment as ads in other media. All the television campaigns in this test had received favorable advance testing; none of the radio ads were pretested.

To view study CLICK below (Adobe Acrobat reader required):

http://www.radioadlab.com/library/rael_radios_roi_advantage.pdf

1 Our research partner, IRI, recommended that we benchmark our television test results to the advertisers’ own internal estimates of TV ROI as reassurance that our TV test results were reasonable.