Capital FM Has A Small Audience, So How Do They Still Make So Much Money?

According to the recent KARF radio survey for the first quarter of 2012, Capital FM doesn’t have such a large audience.

 When it comes to total market share, the survey indicated that Capital owns only slightly above zero percent market share(0.3% to be exact). Despite this, Capital FM still manages to charge hundreds of thousands to advertise with them. Why is this so? Isn’t advertising supposed to be directly proportional to the size of the audience?

Well, it just so happens that there is a game-changing variable in the advertising world, known as Living Standard Measure(LSM). LSM refers to the level of wealth, happiness, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area. It is measured on a scale of 1-10. It is categorised as following:

LSM 1-3 = The poor

LSM 4-6 = The middle class

LSM 7 and 8 = The upper middle class

LSM 9 and 10 = The rich

Capital have intentionally positioned themselves to take over the LSM 9-10 market, which consists of the Kenyans who reside in the leafy suburbs such as Karen and Muthaiga, commonly known as barbies. The unfortunate reality in the advertising industry is that advertisers value barbies waaay more than they value the poorer sufferers amongst us. It’s all about purchasing power. Advertisers reasoning is that they want to put their message in front of people who are likely to buy their product, so they’d rather spend more money putting their product in front of the barbies who listen to Capital. When it comes to the sufferers who listen to other radio stations, advertisers don’t believe that they can buy as much, so they pay less to put their message in front of the sufferers. 

Basically, in the advertising industry, a barbie in hand is worth 10 sufferers in the bush. THAT’s why Capital makes so much money despite a small audience.