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August 31, 2006

Is Cheap Airtime All That Matters In Radio Advertising?

It seems that some people in the radio advertising world would have you believe that the only thing that matters in building successful direct response radio advertising campaigns is getting low CPM's (cost per thousand impressions) and driving low CPL's (cost per lead).

Of course cost matters. It's the denominator in the "return on media" calculation. The lower the denominator, the higher the return percentage. So I'm not saying that cost doesn't matter, rather it's the sole focus on cost that I take issue with. Why? Because it's misleading. It's akin to saying that all that's needed for a successful direct response radio campaign is low cost. The basis for the thought process is "at some price, any ad will work". And that's true. At $1 CPM's, even the worst radio commercial will likely drive profitable revenues. What's not true, however, is that you can build and sustain a large profitable campaign by banking on $1 CPM's. It takes a lot more than that. What about creative, analysis, business cost structure? What about decline, cancel and return rates? Just how much $1 CPM media do you think is available out there? Just what kind of callers do you think that media will deliver? And just what market mechanism do you think is driving that super-low cost? You see, low cost is not the whole story.

We procure for our clients the best performing, lowest-cost remnant media time, but as only one element of a systematic and multi-dimensional approach to building and continuously optimizing profitable radio campaigns. Why? Not just because we love doing these things. Because minimizing CPM and CPL is not the same as maximizing profit. Necessary, but not sufficient. To understand this is to understand the core profitability drivers of the direct-to-consumer business model (the one that utlizes direct response radio advertising).

Posted by Jeff Small at 12:08 PM | Permalink