The current high rate of inflation is tempering how much Southeast Michigan business owners can spend on advertising.
According to the U.S. Census Bureau, there are approximately 158,000 small businesses in the Detroit area. There is one thing each of the owners of these companies has in common, whether they own a hardware store in Southfield, a furniture store in Birmingham, or a restaurant in Royal Oak. They are all experiencing the negative consequences of inflation.
In a monthly survey conducted by the National Federation of Independent Business Owners (NFIB), inflation now ranks second as the single most important problem companies face. A year ago, inflation was barely an issue.
Inflation has not hampered the enthusiasm to spend among Detroit area consumers keeping retail sales hovering above pre-Covid levels. But, inflation is taking a dramatic toll on the amount of revenue business owners can keep.
According to the U.S. Chamber of Commerce, small business owners see inflation-fueled price increases in almost every cost of operation, including inventory, utilities, rent, and wages.
Because of these rising operational costs, Detroit business owners are looking to cut expenses where they can, including advertising expenditures. But, because there is still robust consumer demand for goods and services, these companies need to make sure that the amount they do invest in advertising has the best return possible.
By almost any marketing metric, advertising on Detroit radio provides the greatest return-on-investment (ROI) of any medium available to local business owners.
Every week, according to Nielsen, Detroit radio reaches 2.8 million adult consumers. This is significantly more adults than watch local TV, browse social media, stream audio or video content, or view programs on cable.
According to a Neilsen study of successful advertising campaigns, after the message itself, the total number of different consumers reached has the most significant effect on sales.
It is the unrivaled reach of Detroit radio among local consumers that drives advertising ROI for local business owners.
Between April 30 and May 27 of 2020, the darkest days of the pandemic, Nielsen analyzed the sales results of a retailer who conducted an advertising campaign during that period using both radio and TV.*
According to Nielsen, people exposed to only the retailer's radio commercials represented 20% of all advertising impressions. However, these same consumers were responsible for 42% of the sales increases.
As a result, the retailer earned a $28,000 increase in sales for every $1000 spent on radio. A 28-to-1 return-on-advertising-investment.
Over the past few years, Nielsen has conducted more than 20 similar studies to determine how many additional dollars in sales could be achieved for every dollar invested in radio advertising. On average, the businesses studied generate $10,000 in sales lift for every $1000 spent. The ROI, therefore, was of 10-to-1.
Between April 30 and May 27 of 2020, the darkest days of the pandemic, Nielsen analyzed the sales results of a retailer who conducted an advertising campaign during that period using both radio and TV.*
AdAge, a trade magazine for advertising professionals, calls these types of returns "eye-popping." The magazine goes on to say radio's ROI is superior to commercials on TV, online, and social media.
United States economic leaders such as Federal Reserve Chairman Jerome Powell, Treasury Secretary Janet Yellen, and Biden administration officials view inflation as temporary and almost wholly driven by factors unique to the pandemic. Once those factors subside, they see inflation drifting lower, eventually getting around the 2% level the Fed considers emblematic of a healthy and growing economy.
But until inflation has been tempered, local business owners need to continue to make sure every marketing dollar spent is invested for maximum return. Advertising on Detroit radio is money spent soundly.
*Study commissioned by Cumulus | Westwood One
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