About

Radio is traditionally used for activation campaigns that bring short term uplifts in sales. But radio can help brands create mental availability, through high reach and continuity, and affect purchase probabilities, i.e. impacting the underlying consumer habits to buy a specific brand over many buying cycles. Even small changes can add up to millions in additional sales over time. In this week’s egtabite, we take a closer look at a German study proving the long-term effects of radio adverising.

Meta analysis based on ROI case studies

AS&S, the German public broadcaster’s sales house, has access to a unique data set that looks at the short- and long-term effects of radio campaigns. Since 2007, they’ve been conducting case studies for CPG brands and retailer campaigns in cooperation with GfK, which has a large consumer panel in Germany with 65,000 consumers and 30,000 households reporting their purchase behaviour as well as radio and media consumption. On the basis of this single-source individual-level data set, 170 campaign-specific ROIs were calculated (72 retailers and 98 CPG brands). Within the 170 analysed campaigns, the average net ROI for radio was 1.45 for CPG brands and 6.62 for retailers. ROI was calculated as radio induced sales uplift divided by net radio investment.

Timing matters

The buying cycle (the average time between purchases) varies greatly across product categories and is extremely relevant when measuring advertising effectiveness. For food retailers, one buying cycle could be 4 days, whereas for a DIY store it could be 34 days. A product’s buying cycle and advertising impact are connected, with short-term effects appearing after 1 or 2 buying cycles while long-term effects only reveal themselves after several buying cycles. The product- or category-specific time interval between purchases should be treated as the central time frame for impact analyses.

Beyond ‘short termism’

The full impact of radio advertising can be seen when looking at ROI across a longer period. For example, if a brand invests in an ad campaign across 10 buying cycles, it may only see a small initial uplift, however, the echoes of this uplift continue with each cycle. This is due to the delayed ROI from the initial buying cycle as well as the impact of repeated purchases over time.

A model of the average impact of a retail campaign with a buying cycle of 14 days shows that during every additional buying cycle that the campaign covers, the ROI and additional sales rise due to the delayed purchases and increased purchase probability:

The full impact of radio advertising can be seen when looking at ROI across a longer period. For example, if a brand invests in an ad campaign across 10 buying cycles, it may only see a small initial uplift, however, the echoes of this uplift continue with each cycle. This is due to the delayed ROI from the initial buying cycle as well as the impact of repeated purchases over time.

A model of the average impact of a retail campaign with a buying cycle of 14 days shows that during every additional buying cycle that the campaign covers, the ROI and additional sales rise due to the delayed purchases and increased purchase probability:

The data shows that the average ROI for retail campaigns across one buying cycle is 5.29, whereas the average across 10 cycles increases to 7.24.

In the case of CPG brands, the average ROI for CPG retail campaigns across one buying cycle (1 month) is 1.85, compared to 2.54 across 10 cycles.

A marathon or a sprint?

The goal of this piece of research was to convince clients to use their budgets as effectively as possible. Investing an amount over a longer period of time, rather than a one-time big investment, delivers much better results. The data show that a sustained long-term approach to radio ads can lead to a more substantial increase in overall ROI than a short-term strategy – the pay-off is incremental but can double the revenues.

Radio works

Radio ads are well-known as an effective short-term sales driver, yet the full potential and ability to influence consumer habits long-term is underestimated. Campaigns focusing on gradual, repeated and prolonged exposure may not produce the same sharp and immediate spikes in ROI as short-term campaigns but they do affect the purchase probability and add massive additional sales overtime.

More info:

» Echoes of Victory on the website of AS&S (click here)

» Presentation of AS&S at egta's MIM meeting (click here) Only accessible to egta members, you need to be logged in to access the content.