Radio advertising costs less than you think!

We Killed in the last sweeps! "We killed in the last sweeps!" beams the eager young rep from KIRO 97.3 FM, brandishing a Power Point print-out stuffed with Arbitron Charts. "And we can deliver your hot demo at a 3.8 frequency and a whopping 1.6 reach. You get 680 total GRPS over 13 weeks plus free creative and production! All for just..."

You glance at the bottom line on the Tapscan Contract, nod wisely, and promise to think about it. You know how everything in your Corporate Empire works. But how does radio advertising work? What does radio advertising cost? And what will it cost you?

This article answers the question "What does radio advertising cost?" How much should you buy depends on how well it drives your business. Speaking of driving...

Radio Advertising Costs as much as gasoline Gasoline is priced by the gallon but it's sold by the tank, tanker truck, tanker car, or tanker. The more you buy, the less you pay per gallon. Radio advertising is priced & sold a lot like gasoline.

One Gallon of Radio = 1,000 Gross Impressions.

If one person hears your commercial once, that's one gross impression. If 100 people hear your commercial twice that's 200 gross impressions. If 390 people hear your commercial an average of 2.6 times, that's about one gallon of radio.

Nobody buys one gallon of gasoline. Nobody buys one gallon of radio, either. You buy a commercial, or a flight of commercials, or a 13-week schedule, or a long-term contract.

The more radio advertising you buy, the less you pay per gallon. Nobody knows exactly how many people are listening to any station at any moment in time. So Price per Gallon (AKA CPM or Cost per Thousand) is based on Arbitron Ratings, which are somewhat less accurate than Texaco pumps.

KIRO-AM Seattle $4.00 per gallon. In most markets there's a local competitive CPM for Persons Aged 12+. In Seattle, for example, the P12+ base CPM might be $8.00 for spots that run between, say, 6am and 8pm Monday-Friday. If Arbitron says the Average Quarter Hour audience on KIRO-FM is 12,000 P12+, then the rate card price of a :60 will be about 12 x $8.00. Call it $95. (:30s cost about 20% less.)

But what if your Target Audience is, say, Males aged 25-54? Do you get a price break because some women hear your message, too! Nope.

Fortunately, Arbitron's latest ratings might report that 63% of KIRO-FM's AQH are M25-54s. So your Target Audience cost per gallon is:

KIRO-FM M25-54 CPM

Each commercial delivers about 7,560 Males 25-54, so your TA CPM is $95/7.560 gallons = $12.57. Or, $7.92/.63 = $12.57. Thank goodness for spreadsheets, eh?

The graphic above is a screenshot from my FREE Planning for ROI.xls. It's an Excel file that helps you write a solid Communications Strategy, define your Target Audience, set up a Year I Budget, and plan a 10-Day Test. Click the link to get one.

We Killed in the last sweeps! That eager young rep from KIRO, and her cohorts, might not sell all of next week's spots at the rack rate. Stations run about 2,000 minutes of advertising per week and are usually happy to sell 1,600. This Wednesday night, any Unsold Avails for next week might drop into the Remnant Bin. My brokers might pick them up for as little a $30 a piece.

Remnant CPM is a lot less than Rate Card CPM!

Same commercial. Same 12,000 P12+ AQH. Same 7.560 gallons of Men. But at $30 per :60 instead of $95 your TA CPM drops to $30/7.560 = ???.

Naturally, if anyone comes along who's willing to pay more than $30, some or all of your remnant spots won't run. But if they do run, you'll save a ton of cash!

Did you want to run a multi-station Remnant Blitz in any of the top 100 DMAs? Our current average P25+ CPM is $3.62. Call me at (407) 895-3092 for a market quote.

Radio advertising costs vary with station size, day of the week, day part, recent ratings bumps & bangs, ad agency & retailer demand, bonus spots, and a host of other factors. If you decide to negotiate your own buys, you should be familiar with terms such as GRP, CPP, Cume Reach, Average Frequency, and other bits of jargon in the GLOSSARY.

The cost of a radio commercial is almost irrelevant. What matters is how many gallons it delivers. So:

How many gallons should you buy?
How much should you pay per gallon?

If we test some copy on KIRO-FM and get decent response, we might want to negotiate a long-term flight plan with the station. Maybe 15 x :60 a week every other week for six months. Call it 200 spots. Most will run Mon-Fri 6a-8p; some on weekends; some will stream on KIRO's website. Each day part boasts a different AQH.

Say the total buy delivers 2.5 million P12+ gross impressions.

That's a pretty good sized tanker of gas. What should you pay? Less than the rate card, surely. But probably a little more than remnant.

Here's an eager young proposal:

KIRO FM 13 WEEK CPM

The rep hands you a pile of Tapscan print-outs replete with the aforementioned jargon. If you had a copy of my Free Planning for ROI.xls you could plug three numbers into the Yellow Boxes and see instantly that your M25-54 CPM is only $4.13.

That $4.13 is a pretty good price per gallon. But is it a reasonable radio advertising cost for you? That depends on how much business your creative generates on KIRO, or any other station.

What's Your Target Media Cost per Sale?

Corporate Brand Managers, Car Dealers, Retailers, and Direct Response Radio Advertisers all set different TARGET MCPS. Each is willing to spend some percentage of ad-driven revenue on gross media.

For example, say you want to attract $1.7MM in new sales from customers who spend, on average $300, and you're willing to spend 19% of incremental revenue on radio. Your MCPS will be $300 x .19 = $57 per sale or per customer:

Radio Advertising Cost per Sale

By the way, what would be the total Year I radio budget?

When you tested your copy on KIRO, you got one call, or click, or store up, or some other measurable Inquiry for every 3.500 gallons of radio. (Tracking the ratio of gallons to inquiries is a critical part of all advertising: radio, TV, email blasts...) You also converted 22% of those inquiries to sales. Assuming you flight properly and get the same response, what's the maximum long-term CPM you can afford on KIRO?

Radio Advertising Costs KIRO Max CPM

As it happens, the KIRO CPM answer is a trivially easy piece of arithmetic. Click to Target M on the Direct Response Radio Math page.

By now you know a little more about how radio advertising is priced. Only you know how much you can afford to spend on it! We Killed in the last sweeps!

"Can you deliver my affordable Cost per Gallon?" is the question you must ask the eager young reps from KIRO FM and every other station, regional network, satellite channel or national network.

If you'd care to learn more about strategy, creative, production, media planning & buying, conversion, testing, rollouts ̶ everything you'll ever need to know about How Radio Advertising Really Works ̶ start on my home page or the site index.

Oh, and send for my Free Planning for ROI.xls.

(Always Be Closing, right?)


"We killed in the last sweeps!" beams the eager young rep from KIRO 97.3 FM, brandishing a Power Point print-out stuffed with Arbitron Charts. "And we can deliver your hot demo at a 3.8 frequency and a whopping 1.6 reach. You get 680 total GRPS over 13 weeks plus free creative and production! All for just..." You glance at the bottom line on the Tapscan Contract, nod wisely, and promise to think about it. You know how everything in your Corporate Empire works. But how does radio advertising work? What does radio advertising cost? And what will it cost you? This article answers the question "What does radio advertising cost?" How much should you buy depends on how well it drives your business. Speaking of driving... Gasoline is priced by the gallon but it's sold by the tank, tanker truck, tanker car, or tanker. The more you buy, the less you pay per gallon. Radio advertising is priced & sold a lot like gasoline. One Gallon of Radio = 1,000 Gross Impressions. If one person hears your commercial once, that's one gross impression. If 100 people hear your commercial twice that's 200 gross impressions. If 390 people hear your commercial an average of 2.6 times, that's about one gallon of radio. Nobody buys one gallon of gasoline. Nobody buys one gallon of radio, either. You buy a commercial, or a flight of commercials, or a 13-week schedule, or a long-term contract. The more radio advertising you buy, the less you pay per gallon. Nobody knows exactly how many people are listening to any station at any moment in time. So Price per Gallon (AKA CPM or Cost per Thousand) is based on Arbitron Ratings, which are somewhat less accurate than Texaco pumps. In most markets there's a local competitive CPM for Persons Aged 12+. In Seattle, for example, the P12+ base CPM might be $8.00 for spots that run between, say, 6am and 8pm Monday-Friday. If Arbitron says the Average Quarter Hour audience on KIRO-FM is 12,000 P12+, then the rate card price of a :60 will be about 12 x $8.00. Call it $95. (:30s cost about 20% less.) But what if your Target Audience is, say, Males aged 25-54? Do you get a price break because some women hear your message, too! Nope. Fortunately, Arbitron's latest ratings might report that 63% of KIRO-FM's AQH are M25-54s. So your Target Audience cost per gallon is: Each commercial delivers about 7,560 Males 25-54, so your TA CPM is $95/7.560 gallons = $12.57. Or, $7.92/.63 = $12.57. Thank goodness for spreadsheets, eh? The graphic above is a screenshot from my FREE Planning for ROI.xls. It's an Excel file that helps you write a solid Communications Strategy, define your Target Audience, set up a Year I Budget, and plan a 10-Day Test. Click the link to get one. That eager young rep from KIRO, and her cohorts, might not sell all of next week's spots at the rack rate. Stations run about 2,000 minutes of advertising per week and are usually happy to sell 1,600. This Wednesday night, any Unsold Avails for next week might drop into the Remnant Bin. My brokers might pick them up for as little a $30 a piece. Remnant CPM is a lot less than Rate Card CPM! Same commercial. Same 12,000 P12+ AQH. Same 7.560 gallons of Men. But at $30 per :60 instead of $95 your TA CPM drops to $30/7.560 = ???. Naturally, if anyone comes along who's willing to pay more than $30, some or all of your remnant spots won't run. But if they do run, you'll save a ton of cash! Did you want to run a multi-station Remnant Blitz in any of the top 100 DMAs? Our current average P25+ CPM is $3.62. Call me at (407) 895-3092 for a market quote. Radio advertising costs vary with station size, day of the week, day part, recent ratings bumps & bangs, ad agency & retailer demand, bonus spots, and a host of other factors. If you decide to negotiate your own buys, you should be familiar with terms such as GRP, CPP, Cume Reach, Average Frequency, and other bits of jargon in the GLOSSARY. The cost of a radio commercial is almost irrelevant. What matters is how many gallons it delivers. So: How many gallons should you buy? How much should you pay per gallon? If we test some copy on KIRO-FM and get decent response, we might want to negotiate a long-term flight plan with the station. Maybe 15 x :60 a week every other week for six months. Call it 200 spots. Most will run Mon-Fri 6a-8p; some on weekends; some will stream on KIRO's website. Each day part boasts a different AQH. Say the total buy delivers 2.5 million P12+ gross impressions. That's a pretty good sized tanker of gas. What should you pay? Less than the rate card, surely. But probably a little more than remnant. Here's an eager young proposal: The rep hands you a pile of Tapscan print-outs replete with the aforementioned jargon. If you had a copy of my Free Planning for ROI.xls you could plug three numbers into the Yellow Boxes and see instantly that your M25-54 CPM is only $4.13. That $4.13 is a pretty good price per gallon. But is it a reasonable radio advertising cost for you? That depends on how much business your creative generates on KIRO, or any other station. What's Your Target Media Cost per Sale? Corporate Brand Managers, Car Dealers, Retailers, and Direct Response Radio Advertisers all set different TARGET MCPS. Each is willing to spend some percentage of ad-driven revenue on gross media. For example, say you want to attract $1.7MM in new sales from customers who spend, on average $300, and you're willing to spend 19% of incremental revenue on radio. Your MCPS will be $300 x .19 = $57 per sale or per customer: By the way, what would be the total Year I radio budget? When you tested your copy on KIRO, you got one call, or click, or store up, or some other measurable Inquiry for every 3.500 gallons of radio. (Tracking the ratio of gallons to inquiries is a critical part of all advertising: radio, TV, email blasts...) You also converted 22% of those inquiries to sales. Assuming you flight properly and get the same response, what's the maximum long-term CPM you can afford on KIRO? As it happens, the KIRO CPM answer is a trivially easy piece of arithmetic. Click to Target M on the Direct Response Radio Math page. By now you know a little more about how radio advertising is priced. Only you know how much you can afford to spend on it! "Can you deliver my affordable Cost per Gallon?" is the question you must ask the eager young reps from KIRO FM and every other station, regional network, satellite channel or national network. If you'd care to learn more about strategy, creative, production, media planning & buying, conversion, testing, rollouts ̶ everything you'll ever need to know about How Radio Advertising Really Works ̶ start on my home page or the site index. Oh, and send for my Free Planning for ROI.xls. (Always Be Closing, right?)