According to a recent Nielsen “sales effect study,” examining radio’s return on ad spend in four retail categories, every dollar spent in radio advertising could generate up to $17 of revenue from listeners exposed to ads from department stores, home improvement stores, mass merchandisers and quick-service restaurants. Hispanic consumers led all categories measured in total spend, and drove increased sales ranging from 9% to 49%.
The study found that, while new digital formats are capturing headlines, traditional formats, specifically radio, could give advertisers the returns they want, says the report.
Combined data from Nielsen’s Portable People Meter (PPM) panel with Nielsen Buyer Insights credit and debit card data, radio exposure positively affected bottom-line sales and drove new, valuable shoppers for each category studied.
Payback Per $1 Spent On Radio Advertising
ROI for $1 Spent
Source: Nielsen, January 2016
However, says the report, there were differences across the different categories that marketers should be aware of when using radio to reach consumers:
Department stores: Four department store brands scored an average 17-to-1 return on ad spend. They invested $21 million in third-quarter 2014 in radio advertising to generate $357 million of incremental revenue. Exposure to radio campaigns delivered a 10% increase in sales overall. Radio brought in more shoppers, and they spent more each time they shopped.
Mass merchandisers: Two mass merchandiser retailers put nearly $14 million dollars to work on the radio in fourth-quarter 2014. Combined, they saw more than $227 million in revenue from customers exposed to the radio campaigns surpassing their expectations. This 16-to-1 return on ad spend was driven by increases in the total number of buyers and an increase in the amount spent per transaction.
Home improvement stores: Two home improvement store brands invested more than $38 million in second-quarter 2014 radio advertising and were able to generate nearly $370 million of incremental revenue from customers exposed to radio campaigns. This is an example of radio’s excellent return on investment of 9-to-1, says the report.
Quick-service restaurants: Three quick-service brands with more than $29 million of ad spend in third-quarter 2014 generated more than $87 million of incremental revenue from customers exposed to radio campaigns. These restaurants also saw an average 6% increase in the total number of buyers compared to the prior three-month period. Radio exposure delivered a 3-to-1 return on ad spend, notes the report.
Carol Edwards, senior vice president, media analytics, Nielsen, concludes that “… reaching 93% of all U.S. adults every week and playing a leading role in consumers’ purchasing decisions, radio has the ability to positively impact campaign results… ”
Weekly Reach of Devices (% Of U.S. Population)
Source: Nielsen, October 2015
For more information about the Nielsen report, please visit here.
Assuming that it is possible to correlate a dollar spent on radio with sales results, without considering all of the other factors like the impact of a brand's other advertising, word-of-mouth, brand image, etc.---which I doubt, this study is meaningless without comparisons, using the same underlying assumptions, for TV, digital media, newspapers and magazines. Also, what kinds of products/services are we talking about and how representative are they of other advertising categories?
Ed, your point is well taken. However, the fact remains (if the premise of the underlying report is true) that a group of PPM panelists who were exposed to these campaigns used their debit or credit cards to purchase items from the aforementioned retailers.
A comparioson to a control group of panelists whoe were not exposed to the advertising would be helpful in determining the efficacy of the report's results, but since we do not have that then it still can be said that this is compelling evidence that advertising on the radio provides significant lift to retail categories.
To Carol Edwards at Nielsen (who was quoted in this report): It would be helpful to see the underlying research parameters and more detailed results.
This is great news for marketers. The Nielsen studies are available on their website. The studies are testament to the power of "and" in a media mix. The history of media ROI studies show that multi-media campaigns perform better. In today's TV world, 78% of all viewing is being done by 40% of the population. These viewers are older and less likely to be working. 60% of the TV viewing audience are under-served with a typical TV buy. The majority of radio listeners are 25-54, and have higher incomes because most listening is done in the car – to and from work. Radio reaches 93% of Adults for 13 hours every week. When radio is added to the media mix more consumers are reached overall, the 60% of the population who are under-served by a typical TV campaign are delivered, the mix is more efficient due to radio's CPM advantage, and more consumers are impacted closer to the point of purchase. Millions of local businesses know radio works, as do major marketers as evidenced in the Nielsen ROI studies. For advertisers not using radio there could be a big hole in their media plan. The Radio ROI results show the value of plugging that hole. Radio in the media mix wins for clients. Imagine this pitch to a Cupertino VC company or an advertiser. "I have an open source app that is used daily by 93% of the population for 13 hours per user per week. The user experience is music, entertainment, information and utility delivered free on-demand with a simple one-button interface. It delivers a hyper-local community experience at scale and has native advertising platforms that are socially influential and ad blocking proof. There are no signal dead zones and the app burns zero talk or data minutes for the majority of users. For advertisers it can target the exact audience profile they want based on demos, lifestyle, and geography and there are no production cost barriers to entry. It can serve an ad at scale at any specific day of the week or time of day and is the largest mobile medium in existence. From a shopper marketing/ geo-fencing perspective it serves an ad adjacent to retailer locations and immediately prior to consumer transactions. It delivers a better CPM and higher ROI than all other media. Would you be interested in investing in this technology?" The answer would probably be "YES" That app is local AM/ FM radio. In an effective media plan a combination of "proven media used in new ways", with "new media used in proven ways", drives ROI. If I was a client I would look hard to see if there is a hole in my media plan, and I would want to include an app in my media mix that delivers an $8 to $1 ROI.