With 93% of Americans listening to the radio on a weekly basis, radio advertising is still a good way for small business owners to spread their message. However, figuring out how much you should be paying for your radio ads is a little trickier than many other forms of advertising. That’s because prices fluctuate depending on location, time of day, and how well you negotiate.
By having a better understanding of what you should be paying for radio ad spots, you will be able to get the best rates from your local station. In this article we will cover:
- How Much Does Radio Advertising Cost?
- Factors that Affect Radio Ad Cost
- How to Negotiate Your Rate
- Cost of Creating a Radio Ad
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How Much Does Radio Advertising Cost?
For ballpark costs for advertising on the radio, we can look at estimates from the experts at Strategic Media, a media agency that specializes in offline advertising (TV and radio). These are figures for weekly advertising with a top performing radio station.
Radio Advertising Costs by Market
|City||M-F Spots||Sa/Su Spots||Weekly Cost|
|New York City||15||4||$4,981.25|
Factors that Affect Radio Ad Cost
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.
Number Crunching: Pricing Terms You Need to Know
When your local radio station puts together a media buying proposal, they will probably include many terms specific to radio advertising.
Example of Local Radio Proposal
Here is an excerpt from a proposal from a local radio station in Birmingham, AL. It includes pricing for 22 spots a week for a total of 286 spots over 13 weeks. This is pretty typical of what a radio proposal will look like.
Here are a few definitions:
- 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
Since there are many words and terms that are unique to radio advertising, you want to understand them before agreeing to a price. For a full list of radio terms and definitions, go here.
As you can see, the station included spots in different time slots. Do not divide the total cost by the number of ad spots to determine how much you are paying for each spot. This will not be accurate because some times of the day are much more valuable than others.
A spot that airs at 1:00 AM may have less than 1/10th the listeners of a spot that airs at 1:00 PM. By including “garbage” spots, a radio station can make the cost per spot sound very cheap.
Instead of looking at the number of radio spots, you should figure out the Cost Per Thousand (CPM) or Cost Per Point (CPP).
- Cost per Thousand (CPM) – The radio advertising cost to reach a thousand listeners.
- Cost per Point (CPP) – The cost to reach 1% of the population (also known as a Gross Rating Point or GRP) within a specific geographic area.
A CPM in the range of $10 to $20 would be considered average. CPP can vary widely depending on the population of an area. CPP is useful in comparing the relative costs of different advertising options within a specific area.
Pricing comes down to the following equation:
Number of People Listening x Cost To Reach 1,000 listeners (CPM) = Cost of Advertising Per Spot
You can expect a Cost Per Thousand rate that is between $12-16 for adults between 18-49. This rate decreases to around $8-$12 for adults over the age of 50. These estimates are reasonable for daytime spots. If you are looking to advertise in the evening or overnight, you can expect rates to be lower.
Radio Advertising Costs Vary Based On The Demographics Of Listeners
If the majority of a radio station’s audience falls outside the 25-54 age range, you can expect the CPM rate to be on the lower side. Talk radio and country music formats tend to attract an older audience in general. However, if a station has a predominantly male audience between 18-35, you should expect rates to be higher. If a station attracts a wealthy audience, a jazz or classical station for example, you should also expect to pay higher CPM rate.
Competition and Temporary Demand Factors Can Also Play A Role
Radio stations can boot your advertisement if a higher bidder comes along. Therefore, if there’s a popular event happening in town, like a highly contested political election, price for an ad spot will jump. You will have to match these new rates or else your spot will be given up to someone who is willing to pay more than you.
A similar situation can occur during the holiday season when major retail stores are competing to advertise their holiday sale on the radio.
How to Negotiate your Radio Advertising Costs
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 – 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. Here is an example of what a radio rate card looks like.
- 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. However, you want to make sure that you don’t get stuck in the worst available time after signing a deal.
There are two things that you can do to prevent this from happening:
- Ask your account executive to set expectations, “your ad will probably run about 50% of the time in this time slot and 50% in that time slot.” The station will know when your ads will run the day before.
- Ask your ad rep to send you this information on a daily basis. If your rep knows that you are paying attention, it’s less likely your commercials will air during bad time slots.
While letting the station choose your run times can lower your price, remember that radio advertising works when the same people are hearing your ad multiple times. Therefore, even though having the station choose spots for you during a set period is tempting since it’s less expensive, it may not be the most effective method.
Cost of Creating a Radio Ad
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.
However, if you want the station to create your ad, make sure to communicate with your representative that if the ad is not up to your standards then you don’t have to use it. Since stations don’t want listeners to change the channel when a commercial comes on, they have an incentive to make your ad more pleasant by including a background track. This could dilute your message. You will also only be able to run this ad on the station that created your ad.
Another option is to hire someone to record your ad for as low as $5 by searching for a professional voice over on Fiverr. This is a good option if you already have your script and just need a good voice actor to read it.
If you need more guidance with your radio ad, you can choose to work with a marketing agency. You will want to look for one that has proven experience creating successful radio ads. Make sure you ask to hear some ads they’ve produced in the past before you agree to let them create your ad.
This option is not cheap, and you can expect to pay between $1,000-$2,500 depending on what is included in your commercial. The higher end includes the marketing company writing the ad, using stock music, hiring voice actors, and post production editing.
The Bottom Line
Advertising on the radio can be done very inexpensively. That being said, if you want your radio commercials to be successful, you will probably need to invest a good chunk of change. That’s because you need a good quality commercial that will run frequently enough (and during peak hours), so that your target audience will remember your message.
If you don’t have the capital to commit to radio advertising, you may be better off sticking with less expensive forms of marketing, such as social media and email marketing. We have a full section of our website dedicated to small business sales and marketing if you’re interested in other ways to promote your business.