Radio compares itself to TV, and decides it's better on ROI

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With emerging media offering marketers unprecedented ways to measure how effective their ad messages are, traditional mass media are under pressure to prove they can deliver the goods.

The radio industry stepped out last week with its very own six-month return-on-investment study that ranked radio 49% more efficient than TV when it came to driving sales relative to advertising costs. It's the latest from the Radio Ad Effectiveness Lab, an industry group charged with upping advertiser confidence as the industry battles perception challenges while trying to grow its share of national ad dollars.

The study did not compare radio to the Web, but focused instead on comparing itself to TV. TV snagged 42% of the first-quarter advertising pie, according to TNS Media Intelligence, while radio-typically a secondary or tertiary buy after TV nationally and newspapers locally-managed to slice off 7%. Stealing share from TV would be nice, radio executives admit, but the study was meant to do more than compare the two media.

"TV is vulnerable to radio from a national-advertiser perspective," says Mary Bennett, exec VP-marketing for the Radio Advertising Bureau and vice chair of RAEL's research committee. "But none of us are without our vulnerabilities. The end run has to be for us to develop solutions that help advertisers and agencies work with the mix and help them understand how to use all of our media . . . in that respect, radio's been overlooked."

The return-on-investment study, conducted by Millward Brown, used Information Resources Inc. BehaviorScan data and surveys to track consumer habits in four midsize markets. Four advertisers-two over-the-counter marketers, one grocery food marketer and one grocery nonfood marketer-participated, several of whom already used a steady diet of network radio advertising. Test groups were exposed to TV advertising, additional radio advertising without TV, both media or neither. Then RAEL used IRI's UPC-scanning models to test sales data and phone surveys to measure brand awareness and other psychological effects.

The study suggested that radio's effect was as powerful in the presence of a national TV schedule as it was on its own. And, of course, because radio's cheaper than TV, it garnered better ROI.

"If you look at recovery of CPM rates from recession to last year, we think radio lagged behind TV by about 50%," says Victor Miller, entertainment security analyst for Bear, Stearns & Co. "So [the results] are not really a surprise." It may, he says, suggest some pricing flexibility for radio.

And while it's all well and good that radio is cheaper than TV, that's, of course, not all planners take into consideration. Most buyers and planners will take the RAEL data to their research departments, which will dissect the study and figure out where it may fit into their own proprietary research.


"What RAEL is doing is important to the industry and these results will perhaps help radio sales people craft a more effective pitch," said David Bank, director-equity research, RBC Capital Markets. "But I don't think it's the Rosetta stone."

He, along with other analysts, wished the study could have compared radio to other media, such as newspapers or interactive. Part of that, said Bennett, was because there was no way to control for those media, like IRI could control TV exposures.

"It's hard to take radio by itself and it's best used in conjunction with other media," said Eric Blankfin, senior VP-director of communications channel planning at New York's Horizon Media. "But radio's become more and more malleable as far as planners are concerned when it comes to offering unique units, unique promotions."

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