Almost every advertiser I’ve known possessed little to no idea of how to measure the success of his ad investment. If you were to ask most advertisers how many responses are required to make their ad campaign profitable, the answer would most likely be: “A lot!”
Yet, there are a few analytically-minded retailers who think they have a good idea how many responses are needed to achieve their sales goals. Unfortunately, the number they come up with is usually off by at least an order of magnitude.
One car dealer we worked with described a successful ad campaign as pulling in “400 to 500 people” per week. When those numbers did not materialize, he determined the campaign a failure and chalked up the deficiency as being the fault of…you guessed it: Radio!
Yet a little work with the Return On Investment Calculator demonstrated that not only were his expectations too high, but the message he was conveying was not worthy of a response.
For the purposes of this post, we’ll say our car dealer was willing to spend $8,000 per week. He would like a 7% return on his investment — in other words, he would like enough sales to recover his $8,000 plus make an additional $560 to boot. His profit margin was 5% and his average sale for a new vehicle was $15,500. He also closed 1 out of every 5 prospects.
With all this information, and the cume of our small station (49,500 people per week), the calculator determined that only 55.2 people needed to respond to his message in order for him to close 11.05 of them. This would let him garner gross sales of $171,200 and recover all his investment plus make the extra $560. The 55.2 people worked out to be 0.111616 percent of the cume (slightly over a tenth of a percent).
So the station’s question to him was: “When our 49,500 listeners hear your message, will 56 of them find it compelling enough to respond?”
To his credit, the auto dealer recognized his message fell short of being compelling. We were able to work with him to devise a message the stood out, and actually exceeded the response he needed to hit his goal. After this, he became one of the best clients on our station.
The bottom line: it does not take thousands or even hundreds of listeners to respond to an advertiser’s message. It only requires a schedule sufficient to reach the cume and a message worthy of generating a response. The actual numbers needed might surprise even you.