LONDON: Optimising advertising investment levels in radio could bring an £86m boost to the industry, according to Nick Pugh, head of effectiveness at Ebiquity – and even more if creative is improved.

Speaking at the Radiocentre annual conference, Pugh outlined the findings of follow-up work to Re-evaluating Media, the study by Radiocentre and Ebiquity published earlier this year.

That showed how advertisers undervalue traditional media, especially radio, and they overrate the value of online video and paid social. Where this was based on qualitative research and meta-analysis, Pugh’s new research takes a quantitative approach.

“We [Ebiquity] get lots of input data in terms of spending, ratings, different investment schedules, pricing positions. We’re trying to make the link between that and how that relates to some sort of output, some sort of business KPI – usually it’s around sales or profitability.”

Putting all this information together – gleaned from 150 advertisers and 2,000 campaign observations from multiple sectors over the past three years – he reported that the short-to-medium (i.e. 3-6 months post-campaign) term profit ROI for radio was £1.61 (second only to TV on £1.73) and has been growing steadily over the past decade.

One reason for that growth, he suggested, is creativity. “The synergy of the radio advertising and the creativity in the plan is much stronger now than it has been for the last ten years at least.”

That has been particularly evident in certain sectors, such as retail, he added. “There’s been a lot of symbiotic messaging in radio that complements other touchpoints in the media plan.”

Looking forward, Pugh constructed a series of sector response curves to show the marginal benefit of spending more or less and to find the “sweet spot” of investment for a certain level of spend.

He reported that spending levels on radio can be increased, especially in the retail and travel categories.

Thus, current radio spending in retail stands at around 5.5% of budget levels but should be optimised at around 8.3% (a 51% uplift), and travel would see a similar shift, from 5.6% to 8.4% (+50%).

Financial services – even with the ongoing issue of the terms and conditions that have to be inserted into every audio ad – would rise from 6.0% to 7.5%; only FMCG would be unchanged.

Extrapolating these figures, he stated that there is currently an £86m underspend in radio.

And if one were to improve creative by 100%, he added – creative being potentially “the biggest step change in the payback you get across your advertising spend” – that figure jumps to £135m.

Data from WARC's latest Global Ad Trends report, which focuses on radio and digital audio advertising, show that radio's share of display adspend has grown in the majority of key markets over the decade to 2017. The UK was one of the few exceptions, however, with radio's share dipping by 0.6 percentage points over this time.

Sourced from Radiocentre; additional content by WARC staff