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When It Comes To ROI, Radio Needs To Improve Its 'Full-funnel Effectiveness.'

Nielsen's just-released and first-ever ROI Report – which, using a wide range of measurement methods, delivers insights and recommendations for advertisers to increase returns on investment in media plans – features valuable guidelines for all selling media. Among them are addressing advertiser underspending in half of media plans, and focusing on strong target reach to deliver better sales outcomes.

The eye-opener for radio, specifically: the need to more effectively build brand awareness and drive purchasing among targeted listeners, otherwise known as full-funnel marketing. While radio scores significantly higher than print media, and in the same ballpark as out-of-home – where it displays above-average effectiveness in both branding building and sales or either one individually in 47% of cases – that's still far behind social media, digital or linear TV, each of which are strong at both brand and sales initiatives nearly 60% of the time.

As Nielsen points out, this still implies that for those media, there is weakness for at least one of those objectives in 38-44% of cases – which is true in 71% of cases for radio. “Only 36% of channels deliver for both revenue and brand metrics,” Nielsen's report says. “Given the concentration of media spend in these channels, the ad revenue represented by that [percent] of cases is enormous and merits measurement of both objectives. Brands need a balanced strategy of both upper-funnel and lower-funnel initiatives if they want to thrive, and media sellers should prioritize measuring both to prove the full picture of a campaign’s impact. There’s considerably less error when you’re prepared to evaluate all the ways your media can create value for the brand. Giving yourself multiple options for creating positive stories is half the battle.”

Nielsen found that by pursuing a balanced strategy for both upper and lower funnel initiatives, brands can grow overall ROI by 13-70%, suggesting radio would be best served by touting its strengths in both areas.

The '50-50-50 Gap'

According to Nielsen's report, advertiser underspending is a larger problem than overspending, with half of marketers' ad budgets too low to get maximum ROI. This leads to a “50-50-50 Gap” which states that while 50% of media plans are underinvested by a median of 50%, ROI can be improved 50% with the ideal budget.

“Instead of letting budgets get slashed, media sellers should work with their partners to make sure they’re spending the right amount on the channels that work for their goals,” the report says, suggesting that media spend needs to be between 1.4% and 9.2% of revenue to stay competitive.

Improving Target Reach

Nielsen's study earlier this year of 15 brands and 82 digital campaigns in the U.S. revealed that there is a very strong relationship between target reach and campaign ROI. “The first step of any successful marketing campaign is figuring out who your audience is,” the report says. “Reach and targeting are bedrock metrics for brand awareness, but [our] research found that these measurement metrics don’t just help marketers understand who they’re reaching, they can also help them drive better sales outcomes.”

Nielsen found, for example, that only 63% of ads across desktop and mobile are on-target for age and gender in the U.S., meaning that on the channels with the most exhaustive data coverage and quality, over one-third of ad spend is off-target. “To capitalize on opportunity and drive impact, advertisers should prioritize measurement solutions that cover all platforms and devices, with near-real time insights,” the report says.

The ROI Report also addresses CPM pricing as well as ad sales growth strategy. “Publishers are not just competing against others in their channel, but also against other channels, so comparing channel ROIs can help set pricing strategy,” the report says. “The ROI Report uncovered that social media delivers 1.7x the ROI of TV, yet social gets less than one-third of TV ad budgets.”

Download the full report HERE.

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