Radio Advertising Costs – What is a fair price for a “spot”?
The most frequently asked question we get about TV and radio advertising is “what is a fair price for a radio ‘spot’?” Simple question; complicated answer. Just for starters:
• A ‘fair price’ in Great Falls, Montana might be as little as $2.00.
• In Houston, Texas, a ‘fair price’ might be $300.00.
• In New York City, $2000.00 is a common price to ask.
• And during the Super Bowl, you can expect to pay $15 million.
So what does this tell us? It tells us that pricing can vary wildly depending on region, but there’s another angle to consider: what exactly that money buys. It buys radio airtime – time on the air – for your radio commercials, in amounts of 15, 30, or 60 seconds. That’s what a spot is – it’s air. And what’s air worth? Everyone breathes it for free; no one has to pay for the stuff we breathe (and heaven help us if someone decides they can charge for it). So what’s a spot worth? Here’s a simple answer for you: ABSOLUTELY NOTHING.
To better understand what we’re getting at here, let’s look at a bag of Doritos. A nice, big bag of Nacho Cheese Doritos (or whatever your favorite flavor is) will set you back about $3.50. Open it up, and there’s about 100 tortilla chips inside – do the math, and you’re paying just a bit over 3 cents per chip. A fair price for a bag of Doritos; most people wouldn’t argue with it, and odds are you never have.
Now let’s take a walk on the weird side: what if, as a result of some ill-conceived corporate cost-cutting experiment, you opened up that same size bag and found only three chips in the bottom? $3.50 for three chips is a lousy “deal” – you don’t need to be an economist or a mathematician to figure that out. But then let’s reverse the polarity: the same corporate suits decide it’s fiesta time for everyone (possibly in apology for their three-chip fiasco) and you open your bag to discover a bounty of 300 chips. Now that’s a bargain worth celebrating!
It’s amazing and a bit disturbing to realize how many small businesses fail to consider this simple logic when buying radio advertising: they take the spot price at face value and never think to check how many chips they’re getting in the bag. Those chips are impressions – the ears and eyeballs that the spot actually reaches. “Average impressions” is the only number that counts when buying advertising – if no one sees or hears your commercial, then you’ve been ripped off, no matter how cheap you bought the spot for.
So what’s the next step? Obviously, it’s figuring out how not to get scammed – how to determine how many impressions you’re getting when you buy advertising. Our next article will answer this question. Until then, you can visit our page “What is CPM” to learn more about Nielsen and Arbitron ratings and how they affect what you should pay for advertising.
If you have any more questions about TV and radio advertising, feel free to call us. Even if you’re not a client of ours, we’ll be more than happy to help.