Clients share they often turn to radio advertising for quick activations that lead to faster sales growth. Additionally, as a media outlet, radio works to actively position brands in the audience mind, thus influencing their inclination towards purchase. Radio boosts the fundamental consumer habits by fixating the customer mind to choose a specific brand over a longer period of time. Even small changes can led to millions in additional sales overtime. 

A German study by German sales house AS&S proves the long-term effects of radio advertising by analyzing a number of campaigns and their return on investment (ROI). Since 2007, the German public television company AS&S has been conducting research on consumer packaged goods (CPG)*  and retailer campaigns. The research is in collaboration with GfK**, which has a large consumer panel in Germany with 65,000 users and 30,000 households reporting their buying behavior, as well as the consumption of radio and other media. Based on this set of data at an individual level from one source, 170 campaign-specific values of return on investment were calculated (72 retailers and 98 brands in the CPG sector). An analysis of these campaigns found that the average net return on investment for radio was 1.45 for CPG brands and 6.62 for retailers. Return on investment is calculated as the increase in sales caused by radio divided by the net investment in radio.

The time interval between purchases is important

The purchase cycle (average time between purchases) varies significantly in different product categories and is extremely suitable for measuring the effectiveness of advertising. For food retailers, a one-cycle purchase can be 4 days, while for DIY stores*** it can be 34 days. The product purchase cycle and the impact of advertising are related, with short-term effects appearing after 1 or 2 purchase cycles, while long-term effects are revealed only after a few purchase cycles. The time interval between purchases, which is specific to the products or categories, should be treated as the main time frame for impact analyzes.

Beyond the "short term"

The full impact of radio advertising can be seen when looking at the return on investment over a longer period of time. For example, if a brand invests in an advertising campaign within 10 purchase cycles, only a slight initial increase can be observed, but the echo of this increase continues with each subsequent cycle. This is due to the delayed return on investment from the initial purchase cycle, as well as the impact of recurring purchases over time.

A model of the average impact of a retail campaign with a 14-day purchase cycle shows that during each additional purchase cycle that the campaign covers, return on investment and additional sales increase due to delayed purchases and increased likelihood of purchase:

The data shows that the average return on investment for retail campaigns in one purchase cycle is 5.29, while the average value for 10 cycles increases to 7.24.

In the case of brands in the CPG sector, the average return on investment for retail campaigns in one cycle of purchase (1 month) is 1.85, compared to 2.54 for 10 cycles.

Marathon or sprint?

The purpose of this study was to persuade clients to use their budgets as efficiently as possible. Investing an amount over a longer period of time gives much better results than a large one-time investment. The data shows that a sustainable long-term approach to radio advertising can lead to a more significant increase in the overall return on investment than the short-term strategy - the return is gradual but can double revenue.

Radio works

Radio advertising is well known as an effective short-term sales engine, but the full potential and ability to influence consumer habits in the long run is underestimated. Campaigns focused on gradual, repetitive, and prolonged exposure may not cause the same sharp and immediate jumps in return on investment as short-term campaigns, but they do affect the likelihood of a purchase and add huge additional sales over time.

* Consumer packaged goods (CPG) – term meaning goods that consumers use and change often.

** GfK – global leader in the field of data work and analysis, providing information on consumers and the market for more than 85 years.

***What is meant by DIY stores are examples such as Mr Bricolage, Praktiker, etc.

bTV Media Group

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