How is Radio Priced

Research and rates:

Radio stations today generally run their advertising in clusters or sets, scattered throughout the broadcasting hour.  Studies show that the first or second commercial to air during a commercial break has higher recall than those airing later in the set.
Arbitron is one of the primary providers of ratings data in the United States. Most radio stations and advertising agencies subscribe to this paid service, because ratings are key in the broadcast industry. Ad agencies generally purchase radio based on a target demographic. For example, their client may want to reach men between 18 and 49 years old. The ratings enable advertisers to select a specific segment of the listening audience and purchase airtime accordingly. Ratings are also referred to as "numbers" in the business.

The numbers can show who is listening to a particular station, the most popular times of day for listeners in that group, and the percentage of the total listening audience that can be reached with a particular schedule of advertisements. The numbers also show exactly how many people are listening at each hour of the day. This allows an advertiser to select the strongest stations in the market with specificity and tells them what times of day will be the best times to run their ads.

Besides the basic numbers, most radio stations have access to other data, such as Scarborough, that details more about the listening audience than just what age group they fall into.  For example, some data will provide the types of activities listeners participate in, their ethnicity, what type of employment they do, their income levels, what kinds of cars they drive, and even whether or not they have been to a particular entertainment venue, for example.

Radio stations sell their airtime according to dayparts.  Typically, a station's daypart lineup will look something like the following: 6am-10am, 10am-3pm, 3pm-7pm, and 7pm- midnight. The spots running after midnight, from 12am-6am, are referred to as "overnights".  Though this schedule of dayparts can vary from station to station, most stations run similar daypart lineups and sell their advertisements accordingly. Drive times, or morning and evenings when people are commuting, are usually the most popular times of dayand when each station has the most listeners. The "rates", or what the station charges the advertiser, will reflect that.

Rates can also be affected by the time of year an advertiser runs.  January is almost always a very slow time of year, and many stations run specials on their rates during that month. This is not the case in warm weather markets like Florida, where "snow birds" migrate and increase population. In this situation rates are usually at their highest as the population swells. The cost of radio advertising also varies on how well the parties negotiate. During busier times of the year, stations can actually sell out of ads entirely, because, unlike the print media, radio stations only have a limited number of commercial units available per hour. During the dot-com boom, some stations ran as much as twenty minutes of ads per hour.  While commercial levels are nowhere near as high today, with the average station running approximately nine minutes of ads per hour,  peak periods can and do sell out.

Thus, advertising rates will vary depending on time of year, time of day, how well the station does in the particular demographic an advertiser is trying to reach, how well a station does compared to other stations, and demand on station inventory. The busier the time of year for the station, the more an advertiser can expect to spend. And, the higher ranked a station is in the market, according to the ratings data, the more an advertiser can expect to get charged to run on that station.

Advertising rates can vary depending on the length of spot the advertisers elects to run. Although sixty second spots are the most common, stations also sell airtime in thirty, fifteen, ten and two second intervals. Thirty-second ads have always been popular in television advertising, but radio stations just adopted this format recently. Clear Channel kicked off the "Less is More" initiative in 2004, citation needed] utilizing thirty-second commercials in markets across the US. Though studies show that fewer commercials cause better recall rates, research indicates that traditional sixty-second spots may be the better option, with higher brand and message recall than the newer thirty-second ads.

Stations also run ten-second spots, or "billboards".  Typically, this type of spot runs adjacent to some station feature, such as the traffic report, stating, "This traffic brought to you by…", and is usually limited to about thirty words. Fifteen-second spots are generally reserved for station promotional announcements, although some stations sell them.
In addition to traditional radio advertising, some stations are selling airtime during their streaming broadcasts.  In the past, the radio station stream included only the commercials that were also running on air. CBS announced it would begin airing 'live reads' in its streaming radio broadcasts, sold and voiced separately from the stations' regular spots, noting the efficacy of live endorsements.

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