Costs Of Radio Advertising

( Originally Published 1932 )

ON every side one hears of the vagaries, the mysteries of radio. Advertisers backed by years of achievement find themselves shying from radio as a demon fraught with treachery and deceit. Yet there is no reason for such skepticism towards radio as an advertising medium other than the fact that radio does present a myriad ramifications which on the face of it is certainly disconcerting. These ramifications, however, fall into the most exemplary order when one builds on the firm foundation of radio advertising costs.

So let us go to the very beginning. Let us assume for the sake of simplicity that our product is of general appeal. We would therefore select a time for broadcasting when the largest general audience will be tuned in. Such a time would naturally be the evening hours, preferably the middle evening, or about nine o'clock. And because of this same general appeal we would select a radio pro-gram of broad general appeal. Such a program would probably be musical, preferably built around an orchestra.

It so happens that public taste, which usually indicates its preferences in very tangible form, albeit these preferences cannot always be satisfactorily explained, has established one-half-hour as the most desirable length for a musical program. One-quarter-hour, three-quarter-hour and hour musical .programs have been attempted, some-times most successfully it is true, but on the average they do not meet with the popular favor accorded the one-half-hour program. Thus our evening musical program would probably be thirty minutes long.

In so far as the advertiser is not interested in spending any more money than is necessary, we would broadcast this program but once a week. Here again experience has shown that a good half-hour program will successfully carry its audience from week to week, whereas extending the interval to two weeks or more would greatly jeopardize the program's hold on its audience as well as decrease materially the value of the radio advertising dollar.

Finally, since any radio program, if a new one, must obviously develop an audience before it can deliver its sales message, we must provide our program with sufficient time to take root. Once again experience indicates that a good program can be fairly expected to develop a very sizeable listening audience in a period of thirteen to twenty-six weeks. We would therefore schedule our broadcast for twenty-six weeks when we would probably continue it, if successful, for fifty-two, for the program at twenty-six weeks is just beginning to work full time at selling its product. This period of one year also coincides with merchandising and advertising plans in general and so fits well into the present routine of business management.

Thus, let us say, we have decided to broadcast a musical radio program one-half hour in the evening once a week for one year. The talent cost for the program would average $2,000 per broadcast or $104,000 per year, as stated elsewhere in this book.

Now let us further assume that our product enjoys nation-wide distribution, following population in general. This means that with our radio advertising we would tend to cover virtually all the population centers in the country if we wanted thorough coverage. Actually, however, we would first be careful to estimate the efficiency of the radio coverage in each center which would mean that certain centers would be arbitrarily dropped.

Our next step would be to decide which of the two radio channels available would better serve our needs.

First, there is direct broadcasting over the so-called "networks" (the Columbia Broadcasting System and the National Broadcasting Company). In this case our program would be enacted in a given studio and broadcast simultaneously from every radio broadcasting station in our network.

Secondly, there is indirect or so-called "spot" broad-casting over individual radio stations (radio stations not linked in a common chain). In the majority of cases, this would call for the use of electrical transcriptions which in turn means that our program would be enacted and electrically transcribed on a master plate of which as many pressings would be made as there are radio stations to be used. With this set-up our program would not be broadcast simultaneously from all the radio stations used.

For no good reason but merely because we are accustomed to thinking of radio programs as being transmitted at exactly the same time they are enacted, let us consider first the costs of direct broadcasting from coast to coast.

For our half-hour evening program these costs would run from about $3,100 2 to $7,200 per broadcast, an annual cost of approximately $161,200 to $374,400, respectively, depending upon the number of stations in our coverage and the network used. (Due to a difference in discount rates, these charges would be approximately $3,500 and $8,100 per week, respectively, if twenty-six instead of fifty-two programs were broadcast annually.)

We may find, however, that it is difficult to get just the time we want from coast to coast. This is very possible in view of the fact that every radio station used for a network program must broadcast the program simultaneously and that Pacific Coast time is three hours behind Eastern Standard Time, a time difference which must be carefully taken into account. (Advertisers sometimes rebroadcast their program at a later hour for the western stations. By careful management this can be done with an extra charge to cover the second program production and talent costs only.)

Our alternative then would be spot broadcasting, the cost of which would begin at about $4,500 3 per broadcast, or approximately $236,000 annually, and increase enormously, subject entirely to the number of radio stations wanted. There have been several such pro-grams on the air broadcast from more than 150 radio stations !

The above costs have been compiled from the Standard Rate and Data Service, June, 1932. Let us break them down into costs per listener.

2 Unless otherwise stated, this and all following radio costs do not include the talent charge.

3 This figure does not include the additional mechanical charge for making electrical transcriptions.

The Columbia Broadcasting System has made the greatest strides in arriving at an actual estimate of the number of radio sets within the territory reached by the radio stations in the Columbia network. This estimate is so tabulated as to indicate both primary and secondary coverage. The National Broadcasting Company by a more arbitrary system has arrived at a somewhat less accurate estimate of the number of radio sets within the range of its. urban and rural coverage. As for the individual radio stations used in spot broadcasting, the large majority of those we would probably consider for our coast-to-coast campaign would appear in either the Columbia or National Broadcasting networks.

With this data we would be able to estimate that our radio advertising would penetrate a territory wherein there are from 12,000,000 4 to 15,000,000 radio sets, depending upon the number of radio stations used.

The Crossley Reports based on one hundred and sixty thousand widely distributed personal interviews point to the interesting conclusion that "on a given day only three out of four sets owned will be used." This is an average and takes into consideration the slight fluctuation caused by the day of the week, the season of the year, and general locality. Thus we would have a low of 9,000,000 and a high of 11,250,000 radio sets in use during the day of our broadcast.

Crossley further reports an evening average of 3.1 listeners per set not including children. Thus, the potential listeners would range from 27,900,000 to some 34,800,000. Actual listeners would be greatly less, however, because no radio program has yet commanded the entire potential audience.

For instance, Crossley Reports indicate that Amos 'n' Andy at the height of their popularity were tuned in by about 50 per cent of the entire day's audience. Therefore it is probably safe to assume that the most popular pro-grams will run from 40 per cent to 50 per cent; very good programs 20 per cent to 30 per cent, and good programs 10 per cent.

Let us therefore proceed on a 10 per cent basis. This would give us a low of 2,790,000 and a high of 3,480,000 persons listening to our radio advertising.

These figures we could quickly break down into a low of about $1.10 and a high of about $2.05 per one thousand listeners. And since these costs are so low, the opportunity for reimbursement looks correspondingly high, hence the temptation would be great to stop right here.

But going back a little we would find that we have a positive cost to the advertiser as against what must fairly be termed only a potential reimbursement, and unfortunately ledgers have a way of not showing potential reimbursements.

Let us, therefore, consider the distribution of our product more closely. Unquestionably we would find that our distribution, even if it were so-called "national," fluctuates from practically the saturation point in certain centers to an almost negligible quantity in others. We would thus be able to estimate the opportunity for sales growth in each area covered by each radio station to be used.

In the general budgeting of every business it is necessary to judge of its future in terms usually of six months or a year, especially with an eye to measuring the likelihood and extent of an increase in sales. With the knowledge afforded by such a general appraisal of our business, we would be able to ascertain with surprising accuracy how much of the cost, if any, of our radio advertising campaign would be written off by our sales. If these sales did not give promise of balancing the cost of advertising, we could approximate how much new business must be gained. Knowing this latter figure, we would be in the best possible position to judge whether or not our radio advertising would pull enough new business to justify the expense.

In this connection it must be borne in mind that we are here considering the minimum of what our radio advertising will do and not what it would be justly expected to do by way of increasing sales. Thus we would be estimating our radio costs on the most conservative basis.

Obviously we would throw out the radio plan if these figures made its successful outcome appear dubious. On the other hand, if the comparative figures looked very favorable, we would immediately proceed to develop a program suited to our needs. This work is often quite difficult but patience and intelligence would finally evolve a highly successful program. While in this experimental stage, however, we would not incur the heavy expense of a coast-to-coast campaign. By using only a group of stations as included in the basic networks of either the National Broadcasting Company or Columbia Broadcasting system we could develop our program with complete thoroughness. We would run this campaign for thirteen or twenty-six weeks, preferably the latter, and would in general cover middle and southern New England, New York, New Jersey, Maryland, Pennsylvania and the Middle West. This would make up an excellent cross section of the radio listeners found throughout the nation. At the same time the average cost for twenty-six weeks would be from about $2,400 to $3,100 per broadcast according to the network used.

At this point it would be well to consider the cost of speeding up the development of our audience.

In order to accomplish this, we could announce the opening broadcast in newspapers throughout the area affected. This could be followed by a small feature line advertisement on local newspaper radio pages during the day of each broadcast. This cost would bear a very small ratio to the annual cost of the radio campaign as a whole. In addition, it would be well to prepare window or counter cards featuring the program and product advertised.

We have thus far followed a comparatively simple but none the less normal development of radio advertising costs, and now we would encounter those myriad ramifications which so often prove very confusing; a confusion, however, that usually arises because they are considered out of their proper order. Let us then take up several of these points.

Suppose our product sells at five, ten or fifteen cents, or suppose it is a necessity or semi-necessity selling for fifty cents or a dollar. We would then be inclined to consider a more intensive radio advertising campaign. Our first thought would probably be to increase the number of weekly broadcasts. Obviously, however, our annual cost would immediately soar to rather stiff altitudes and so we probably would be forced to make a reduction in the length of the broadcasting time of each program.

The only program period available in the evening that is shorter than one-half hour is a quarter hour. Experience indicates, however, that two quarter-hour programs per week are required in the vast majority of instances to equal the advertising value of one-half hour weekly broadcast. Therefore, since we would be making this change in the length of program in order to make possible more intense radio advertising, we would probably broad-cast our one-quarter hour program three or more times weekly.

For three such broadcasts weekly the coast-to-coast cost would run from about $1,800 to $3,800 per broadcast. This would be approximately $280,800 and $592,000 annually. If six one-quarter hour weekly broadcasts were used, these figures would be doubled, subject, how-ever, to a slightly higher time discount rate.

In view of such a change, it would be best in the majority of cases to switch from a musical to a dialogue program, since a good dialogue program is usually considerably less expensive and can be more satisfactorily broadcast in fifteen minutes. This choice also would be one definitely indicated by public taste.

Suppose, on the other hand, that our product appeals exclusively to women who are apt to be found in the home rather than in business during the day. In this case we would consider a daytime radio campaign, which would cut in half our radio station time charge. Our talent charge also would run from about 30 per cent to 75 per cent less, for the daytime program structure would probably be far more simple than an evening program.

Again, in the case of a daytime campaign we might well consider tying in with a so-called participation program. This would be a program regularly broadcast by a radio station in which we might participate either in whole or in part. The talent charge would be included in whatever charge was made for participation.

And so we might go on, taking up one angle after another. Yet each would be for the most part quickly and easily disposed of, provided we put out of our minds our personal opinions, prejudices and tastes and applied our-selves strictly to the facts involved in each problem. Indeed, we cannot stress too much the absolute necessity of forgetting our personal likes and dislikes in regard to radio when building a radio advertising campaign.

After all, radio advertising must appeal not to individuals but to groups. Radio simply plays on the law of averages. Ascertain the facts concerning the average likes and dislikes of the group to whom one's advertising is addressed and build the campaign to suit that average taste.

Thus we find that successful radio advertising like most other businesses is built upon the logical consideration of facts. And these facts must be secured by research; set down in graphic form so that the relation of one to another can be clearly seen; and shrewdly judged by minds thoroughly trained in the pros and cons of all advertising media available for our given advertising proposition—minds with proven ability in the proper interpretation of an advertiser's problems.

Since we know of no business more perfectly equipped to handle these very points than those existing advertising agencies matured by long and successful advertising experience, we suggest:

Let the advertiser forego his skepticism concerning radio as an advertising medium; rather let him be careful to place his advertising in the hands of those who know advertising—radio, magazine, newspaper, outdoor and so on down the line—in short, the personnel of any first rank advertising agency that is not afraid to act and think originally.