Costing and Negotiation for Radio Advertisements

Category: Radio Advertising

Estimated time: 40 minutes

OVERVIEW & PURPOSE

Just like advertisers pay for the commercials you see on television during your favorite show, some advertisers also choose to focus their marketing dollars on radio advertising. That is, buying commercials, frequently called spots in the radio industry, to promote their products or services. Advertisers pay commercial radio stations for airtime and, in exchange, the radio station broadcasts the advertiser’s commercial to its listening audience.

In radio advertising, there are numerous types of commercials that an advertiser might employ, similar to how brands might pursue different print advertising options (newspaper vs. magazine, for example) or electronic advertising options (email vs. social media). This module is aimed at helping you understand the basics of radio advertisement costing as well as negotiation tactics to get the most out of your investment in radio ads.

OBJECTIVES & RATIONALE

As a key stakeholder in crafting advertising and marketing strategies for your business or brand, you will have to analyze the importance of advertising through different channels in order to justify whether radio is the right medium for your brand. Part of the justification involves a risk-benefit assessment – will the cost of investing in radio give you a worthwhile return? In this module, you will learn to:

  • Understand the cost structures and benefits attached to radio advertising
  • Negotiate better deals for radio advertisements.

IDEAS/TOPICS COVERED

  • Radio advertising options
  • Cost structure for radio advertising
  • Negotiating radio advertising rates

LEARNING OBJECTIVE 1

Understand the cost structures and benefits attached to radio advertising

DETAILED LEARNING

In order to get into the costs and benefits of radio advertising, we will have to go over some basics first.

Basics of Radio Ad Costing

When you advertise on the radio, the commercial is called a spot. Radio stations charge per length of the spot. When you advertise on the radio, you will want to advertise often otherwise your audience will lose interest and forget about you. This means that you will need multiple spots playing to reach a larger audience. Different radio stations charge different amounts for the advertisement spots. Then they break down the costs of the spot based on when the advertisement will air. Higher listener times would cost more just like prime time television spots cost more. If you have the resources, then having your advertisement play more often and at different times would probably be your best bet to reach as many people as possible.

The cost of advertising will vary greatly from market to market. Also, since the costs will be based on which spot and how many spots you run, giving a true cost will be impossible unless you talk to a radio station representative or a media agent specifically. Speaking to each radio station would be better though. You can even hire an agency to assist you with this process, again their costs will vary depending on the market and how much work they will have to put into your advertisement.

In some areas advertising can average as low as $1,250 dollars for 15 weekday spots and four weekend spots. This would be mostly in smaller communities. In major areas such as New York City, the advertisement costs can range from $4k upwards of $8k. The costs all depend where you are and the estimated number of people that would be listening to the radio station. This is normally the cost per week. Just keep in mind that it would not be possible to give an exact amount. It is recommended that you check with the individual station for their rates.

Deciphering Radio Advertising Terminology

When your local radio station puts together a media buying proposal, they will probably include many terms specific to radio advertising. Here are a few definitions you might encounter:

Len – Length in seconds
Spots – Number of times the commercial will run
Rate – Cost per advertising spot
Cost – Rate times the number of spots
Average Quarterly Hour (AQH) – The average number of persons listening to a particular station for at least five minutes during a 15-minute period
AQH Rtg – The AQH divided by the population x 100
Frequency (Freq) – The average number of times the same person will hear a commercial
Net Reach – The number of different persons reached in a given schedule

Many different factors come into play when stations are deciding how much to charge for their ad spots. The major influences on radio advertising costs are:

How many people will be listening – The more people that tune into the station and will hear your commercial, the more you can expect to pay.

The demographic of the station’s listeners – Some target groups are more popular among advertisers than others. For example, expect to pay more for adults ages 25-54.

How much competition there is from other advertisers – If a lot of different businesses are looking to run ads at the same time, the station can drive up prices. This could occur, for example, during the holiday season when many retail stores are advertising sales.

How well you negotiate – The station will send you over a pricing proposal, but this is not necessarily the final price. You should be able to negotiate down 20-40% depending on your negotiation skills and the terms of your contract.

ACTIVITY

Call or email your local radio station or media channel partner to ask for a radio advertising RFP (request for proposal). Take a look at the new terms above. Are there any terms you do not understand?

Optional: You can call Gainbuzz representatives (visit www.gainbuzz.com) if you do not understand a part of the proposal.

LEARNING OBJECTIVE 2

Negotiate better deals for radio advertisements

DETAILED LEARNING

Now that you have background information on how radio stations will price an ad spot, we can talk about negotiating your price. Here are a few methods you’ll want to use:

Start with a rate card

If available, the rate card will provide you with the general pricing framework, which is different than a customized proposal. The rate card will give insight on the maximum amount you will have to pay. It should include a chart with standard pricing for different dayparts. If you are a good negotiator you should be able to get 20-40% off of this price – especially over time, once you build a working relationship with the radio channel partner.

Ask for discounts

The first time that you advertise, be sure to ask for a new advertiser discount. While a station may or may not offer such a discount, it leaves the door open for negotiating a lower price. There should also be volume discounts if you purchase multiple ad spots at once.
Offer a trade – Radio stations are always looking for giveaways, so try offering one of your products for free in exchange for the advertising spot. You may not get your whole cost covered, but you could drive the cost down.

Shop around

Make sure you ask around at different stations in your area so you get a sense of what the average prices are. If one station gives you a lower price, let the station with the higher price know in order to try to get them to reduce the cost. This may not always work, especially if one station has a different target demographic, but it can potentially get you some leverage.
Another option to lower your rate is to let the radio stations decide when your advertisement runs. This could be during a set period of time. If you choose to let the radio play sometime between 6 AM and 6 PM, you may be able to get them to shave a considerable amount off the rate card.

Beware of Freebies

Also keep in mind that Radio stations will usually offer to produce your ad at no charge. However, you want to be wary of this option. As they say, you get what you pay for, and if you’re not paying anything, there’s a good chance you won’t be satisfied with the ad they create.

A Final Word on Costing and Negotiation

Most radio stations researched do not have prices on their websites, but they want contact information so that someone can contact you back. This is why we talked about the RFP process earlier.

The other thing is, if you bring people through the doors using radio ads, the costs may not be that big of a deal as they will be easy to justify to upper management. This is why keeping track of any increase in customers is important. If you spend $1,000 in radio spots and increase your sales by $1,500, at least your radio advertising efforts were worthwhile. Keep that in mind when negotiating rates with your provider so you can make sound investing decisions with your radio ads.

EVALUATION

You are a marketing manager for a retail sporting goods chain. Radio advertisements have been identified as a particularly strong channel for marketing to commuters who are your target customers. Craft a detailed, step-by-step plan for how you will go about researching costs and negotiating bulk rates with local radio stations.

FURTHER READING

http://smallbusiness.chron.com/advantages-amp-disadvantages-radio-advertising-40629.html

https://www.inc.com/guides/2010/09/how-to-buy-radio-advertising-on-a-budget.html

http://ad-buying-secrets.com