Startups Turning To Radio Advertising To Grow Their New Businesses.

Not all local advertisers buy radio, but those that do are showing their confidence in the medium with their dollars. The average local radio station advertiser spent $48,060 in the medium last year, which according to a new report from Borrell Associates puts AM/FM near the top when it comes to spending. The only media channels to get a higher average spend from local advertisers last week were out-of-home (67,575) and search engine marketing (58,567) with radio getting a higher average total than even television.

The numbers are noteworthy because as Borrell points out, there has been a profound change in the face of advertisers on Main Street. Old clients may not have survived the pandemic, but in the years since the number of applications for new businesses in the U.S. has grown at an average rate of 9.7% per year. The result is there are a lot new small and medium sized business in operation, opening up new sales opportunities for radio stations.

“While economic downturns also trigger business failures, the net number of businesses didn’t decline during the pandemic. In fact, growth accelerated, resulting in a record number of SMBs year after year,” Borrell says in the report. It points out that the pre-pandemic growth in the number of registered U.S. businesses was 1.6% annually. But post-pandemic, the average increased to 2.7%. And last year it was significantly higher, at 4.7%. Borrell says the result is there are 4.1 million more small and medium-sized businesses in operation today than there were in 2019. That averages to an average of 3,886 new businesses in each TV market.

Most critical for radio is that these young new retailers, restaurants and other local businesses are twice as likely to be increasing their spending on radio. Borrell’s data reveals that 14% of the small business that have opened since 2020 plan to hike their radio ad spending this year. That is double the 7% of businesses established prior to 2020. Similar patterns are seen for local newspapers and television stations.

Just as positive for radio is that the Borrell survey finds this new crop of local small businesses are more likely to plan radio ad budget increases than to plan on directing more money into television, print, or direct mail. The only area where more new businesses plan to hike their marketing spending is on events and sponsorships, which creates another opportunity for local radio stations as they are often the creator of events in their local communities.

“In the past seven years, there has been a marked increase in the percentage of SMBs in our survey who deem traditional media to be very to extremely effective,” says Borrell. Even with what it calls the “relentless growth of digital advertising,” its survey of local advertisers finds that nearly all forms of traditional media advertising have seen steady or growing effectiveness ratings — with the exception of broadcast and cable TV, which may be impacted by the rising popularity of CTV/OTT.

The number of local advertisers that consider radio advertising either “very effective” or “extremely effective” has grown by a third in recent years. In 2017, Borrell says one in four local advertisers gave those high marks to radio. Today, one in three do. Only broadcast television (39%) and direct mail (37%) have higher effectiveness ratings than radio in the Borrell surveys.

A perennial challenge for sales reps is keeping up with all the new businesses. It is a factor the report says has grown tougher as targeted digital or cable TV ads may keep them from even being exposed to some potential clients that operate in a different part of town from where they live or work. But Borrell says salespeople shouldn’t be surprised to see this new crop of local advertisers make the first move.

“There are signs that new businesses as they mature are turning to traditional forms of media advertising,” it says. The report suggests it may be because they want to differentiate themselves from competitors using digital-only marketing. Or they have found digital marketing too complex and are looking for a real person to assist them.

The new companies come with new decision-makers, and that may require radio spend more time on educating their clients. Since 2019, Borrell says it has seen a surge of entry-level marketers with more than half (54%) classified as novices compared to 26% considered masters.

Borrell Associates is offering the report free of charge for those who attend a webinar on the findings on Thursday, May 29. See registration information HERE.