Suppose you woke up one morning and found a 100-year-old machine in your basement. You soon discovered that every time you put a dime in the machine, one dollar came out. How many dimes would you drop in that machine?
Good news for Las Vegas small business owners: such a machine exists and you probably have one in your car, at work, at home, even on your phone. It's called local radio.
Over the past few years, Nielsen has conducted over 20 studies to determine what type of return-on-investment (ROI) a business can expect from radio advertising. Although the results varied by industry, the average company generated $100 in sales for ever $10 invested. Turning dimes into dollars.
The chart below shows the range of returns from each study.
AdAge, a trade magazine for advertising professionals, calls these types of return "eye-popping". The magazine goes on to say radio's ROI is superior to commercials on TV, online, and social media.
One of the reasons radio advertising delivers such impressive returns is the medium's dominant reach.
Last week, for instance, significantly more consumers tuned-in to Las Vegas radio than watched local TV; read a newspaper; or who logged-on to Pandora and Spotify.
According to Nielsen, reach is the most important media consideration for driving sales. It is more important than branding, targeting, recency, or context.
Radio commercials have also proven to be very effective in producing unaided message recall at time of purchase. A Las Vegas consumer can only buy something from a company they can remember. This can have a profound effect on ROI, as well.
Local Ad Recall, a research company that measures the effectiveness of advertising, found that brand recall was five times higher for companies that advertised on radio versus the companies that did not.
Local business owners have always known that they can expect impressive returns-on-investment when advertising on Las Vegas radio stations.
If you were one of the 1,502,898 adult consumers who tuned-in to a Las Vegas radio station last week, then you, no doubt, heard Aaron Taylor. You know, 'The Real Estate Guy'.
"Radio, by far, is my biggest source of advertising," says Mr. Taylor. "We have sold more homes and made more money since I started advertising on the radio than I have at any other time before then."
Mr. Taylor had been a very successful real estate agent prior to advertising on Las Vegas radio stations. He established O48 Realty in 2003 and quickly expanded to 116 agents.
"In 2008, I lost everything," says Mr. Taylor. "When the real estate crash happened, I wasn't prepared. The company's expenses were far greater than what little money was coming in."
"I needed a home run to turn the business around. A base hit would not do," says Mr. Taylor, who is very fond of sports analogies. "Advertising on Las Vegas radio was a home run."
In 2010, during the thick of the downturn, a friend advised Mr. Taylor to invest in radio advertising on two Las Vegas stations.
After the first month of radio advertising, Mr. Taylor did not see any results. "I knew it would take time to work," he says. "So, I committed to myself to stick with it for a year."
During the second month, Mr. Taylor received his first phone call from his commercial. The third month a few more came in. "During the fourth month," he says, "we closed a sale. Then the radio advertising really gained momentum."
"When I saw how successful how our radio commercial was doing, I added a third station, then a fourth, then a fifth, and so on."
"After our first year on the radio," says Mr. Taylor, "we had gone from selling 50 homes a year to 300." By any measure, a home run."
Today, out of 16,000 agents in the Las Vegas area, The Real Estate guy ranks sixth with home sales exceeding $80,000,000 per year.
Mr. Taylor continues to advertise on Las Vegas radio stations. "We are on 24 different radio stations, 52 weeks every year. "I know that every $1.00 I invest in radio advertising will pay back $5.00 in sales," he says.
After seeing the results of Nielsen's ROI studies, media expert Doug Schoen wrote in Forbes Magazine, "I found this data nothing short of fascinating. It’s quite clear that we should all be paying more attention to radio, its reach and potential to help our businesses. It’s doing the job with expert efficiency.”