CPT (Cost Per Thousand) the cost of one thousand contacts with the target audience is a conventional indicator used in media planning to compare the effectiveness of different options for placing an advertising message. Allows you to quantify the ratio of costs and potential results (the number of representatives of the potential target audience who will come into contact with the advertising message) for each advertising placement option. Unlike most other indicators, it can be used for direct comparison and selection of the optimal placement option between different types of media (for example, television and outdoor advertising). The cost is calculated per thousand contacts for practical convenience - the cost of one contact is too small (thousandths of cu).
It is calculated as the ratio of the cost of one advertisement placement to the actual (in the absence of reliable data - to the nominal) audience of the media medium (see formula):
CPT = C/(A/1000), Where
- C - cost of one advertisement placement
- A - media audience
To comparatively assess the effectiveness of different options for conducting advertising campaigns that involve repeated placement of a message on the same media medium, modified versions of this indicator are used:
- CPT OTS
- CPT Reach
CPT OTS
CPT OTS (Cost Per Thousand Opportunities To See)- cost per thousand nominal contacts of the target audience with an advertising message. Here, only contacts are considered as the result of an advertising campaign, because it is impossible to reliably determine the real audience of an advertising message (some of the audience will have more than one contact).
It is calculated as the ratio of the cost of placing an advertising campaign to the number of contacts:
CPT OTS = C / (OTS/1000), Where
- OTS - the number of possible contacts between the audience and the advertising message during the campaign
CPT Reach
CPT Reach- the number of representatives of the target audience who had at least one contact with the advertising message during the advertising campaign. Used to evaluate the effectiveness of advertising campaigns based on the results of marketing research. Calculated using the formula:
CPT Reach = (C*1000) / (Reach(1+) * TQ), Where
- C - cost of advertising campaign placement
- Reach(1+) - the share of the target audience who had at least one contact with the advertising message
- TQ - potential target audience size
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Description of the main media indicators
Main functions and tasks of media indicators
Using media indicators, you can find out information about the target audience of a media channel
Media indicators help characterize the intensity and quality of competitors’ advertising campaigns
Media indicators allow you to digitize your media strategy, help you use accurate calculations to compare different types of media media and select the right media channels to convey your advertising message.
Highlight:
measurable indicators - types of media statistics that cannot be found out without conducting specialized media research
derived indicators - a set of indicators that can be calculated given the original data set.
Media statistics describing the audience of one media event
Rating
Basic characteristic, which is the main subject of media measurements. Measured in %.
TV: TVR (television rating) - television rating
Press: AIR (average issue readership) – average audience of 1 issue
Radio: AQH (audience of quarter hour) - audience of a quarter hour
Formula
Calculation example
Let's say that 10 people are currently watching a TV channel. Of these, only 5 people watched program No. 1.
HUT
HUT (Households using television) - % of households in which the TV is turned on at a given time. Media statistics used for TV measurements. Necessary for calculating the “Share of channel TV viewing” indicator.
Formula
Calculation example
Let's say that 10 people have a TV. These people constitute the general population. At this moment in time, only 6 people turned on the TV.
HUT calculation: 6/10*100%=60%
TV viewing share
Share of television viewing of a channel (share) - % of television viewers watching a specific channel or program of the total number of people watching television at a given time.
Measured in %. To calculate this indicator, it is necessary to calculate the HUT indicator.
Formula
Affinity index
Affinity index is an indicator used in media planning; shows how more or less typical for a given target audience is contact with a given media than for the entire population as a whole. Measured in %.
The higher the index value, the more the media channel used corresponds to the target audience, which means the advertising message will be more targeted and reach the desired consumer. In practice, it is considered that a good affinity index is more than 100-110%.
Formula
To calculate the indicator, you must be able to calculate the indicators Rating, Overall Rating (GRP) and Target Rating (TRP)
Calculation example
At the time the message was shown, 10 people were watching TV, 6 of whom were our target audience. The first program was seen by 5 viewers out of all those watching, and 4 people from the target audience. The second program was seen by 9 viewers out of all those who watched, and 6 people from the target audience.
Affinity index for first gear: TRP1/GRP1 = 67/50*100% = 134%
Affinity index for second gear: TRP1/GRP1 = 100/90*100% = 111%
Conclusion: both programs are affinity (value greater than 100%) and correspond to the target audience. Program No. 1 is more relevant to the target audience.
Media statistics describing the media plan
Overall Rating (GRP)
Formula
Calculation example
We need to calculate the cumulative rating for an advertising campaign. We place our advertising message in two programs. At the time the message was shown, 10 people were watching TV, of which 5 people watched the first program, and 3 people watched the second program.
Target Rating (TRP)
Target rating (TRP, target rating point) - the total rating scored as a result of an advertising campaign among the target audience, i.e. the total number of ratings of the target audience who saw/heard the advertising message.
The main difference from the definition of Aggregate Rating (GRP) is that the calculations do not use the entire audience that currently had the opportunity to come into contact with the advertising message, but only the target audience to which the message was directed.
Formula
To calculate this indicator, you need to know the calculation of the Rating or TVR indicator (for TV). When calculating this indicator, the general population will be the target audience currently watching the media channel.
Calculation example
We need to calculate the cumulative rating for an advertising campaign. We place our advertising message in two programs. At the time the message was shown, 10 people were watching TV, 6 of whom were our target audience. Since we calculate the target rating, when calculating the number of people who saw the advertising message, we take into account only people included in our target audience group.
The first program was watched by 4 people from the target audience, the second program was watched by 6 people from the target audience.
Campaign coverage
Reach of an advertising campaign (Reach / Cover%) - the number of people from the target audience who saw the advertising message at least once. Calculated in thousands of people or as a % of the total number of people making up the target audience.
In media planning they often use:
The larger the N value, the lower the coverage value.
Calculation example
The coverage calculation at frequency 1+ will include people who saw either the first or second program. There were 8 such spectators.
The calculation of coverage at frequency 2+ will only include those people who have been in contact with the message twice, i.e. We watched both the first and second programs. There were 3 such spectators.
O.T.S.
OTS (opportunity to see) is an indicator used in media planning; allows you to estimate the total number of contacts in numerical terms (in people) achieved as a result of the campaign, for example, in different cities or in different media.
Formula
Average frequency
In media planning, the concept of Effective Frequency (EffFq) is often used.
Formula
To calculate this indicator, you need to know the calculation of the Rating, Aggregate Rating (GRP) and Advertising Campaign Reach indicators.
Share of Voice (SOV)
Share of voice (SOV) is an indicator of the advertising activity of a brand or an individual product, meaning the share of the brand’s advertising message in the flow of advertising messages of the entire market/segment for the analyzed period.
Measured in %. It is measured in the context of each media channel. (TV, press, internet, etc.)
Share of voice indicates how visible a brand's advertising message is to consumers in the overall flow of advertising messages across the entire market. The higher the share of voice value, the higher the visibility of the brand’s advertising message in the segment, the higher the likelihood that the consumer will see and remember it.
Formula
Calculation example
Background information:
The media weight of the first flight is 2500 GRP, the media weight of the second flight is 2100 GRP.
The forecast for the total annual media weight of the “cosmetics for children” category (all competitors + company brand) is 10,000 GRP.
We calculate the total media weight of the brand for the year in the category “cosmetics for children”: the total weight of all advertising activities of the brand in this media channel - (2500 GRP + 2100 GRP = 4600 GRP)
Cost characteristics of media
CPT
CPT (cost per thousand) or cost per thousand is a cost indicator used in media planning; represents the cost of achieving 1 thousand contacts or reaching 1 thousand target audience.
CPT indicator for comparing the cost effectiveness of individual media and media plans with each other. The lower the CPT, the more effective the media channel is in terms of optimizing advertising investments.
Formula
To calculate this indicator, you need to know the calculation of the indicator Rating, Aggregate Rating (GRP), Advertising Campaign Coverage, OTS.
CPT for Cover – the cost of reaching a thousand people from the target audience
CPP
CPP (cost per point) or cost per rating point is a cost indicator used in media planning; represents the cost of informing or reaching the 1% audience. The cost of a rating point is the main indicator of cost effectiveness, primarily for TV campaigns.
Formula
To calculate this indicator, you need to know the calculation of the Rating or Overall Rating (GRP) indicator.
Share of Advertising Spend (SOS)
Share of advertising costs (share of spend, SOS) is an indicator of the advertising activity of a brand or an individual product, meaning the share of the brand’s advertising costs in the total advertising costs of the market/segment for the analyzed period. Measured in %.
Formula
The ratio of SOS and SOV indicators
If SOS > SOV: the company uses its financial resources (advertising budget) less efficiently than its competitors. Since a larger share of advertising costs provides a smaller share of advertising pressure. This situation is possible if a better quality contact is achieved (for which an overpayment is possible), otherwise there are resources to optimize costs. Also, this situation may exist for small companies that, without a smaller budget, place advertising messages at higher prices.
If SOS = SOV: the company uses its financial resources optimally and the next step is to think about cost optimization.
If S.O.S.< SOV: компания использует свои финансовые ресурсы более эффективно, чем конкуренты. Так как за меньший бюджет компания получает более высокий медиавес в категории. Такое соотношение характерно для крупных компаний - лидеров медиа-размещения, которые за большой бюджет получают выгодные условия (скидки или бонусы) для рекламного размещения.
Advertising to Sales
Advertising to Sales (A/S) is an indicator by which the effectiveness of advertising investments is assessed. Indicates what percentage of the sales of the advertised brand the company spends on supporting this brand. Measured in %. Typically considered over a company's annual or reporting period.
The lower the indicator value, the more effective advertising investments are considered.
There is no clearly established performance standard for this indicator. There are several simple rules to assess the adequacy and realism of an indicator:
If the expenses of competitors in the category are known, then the A/S indicator can be compared with the indicators of competitors or with the industrial average and the adequacy of the indicator can be determined based on the brand’s goals: if the brand expects to be a leader, then the A/S indicator should be one of the highest , or on par with key competitors
For brands that are just launching, the A/S indicator can be one of the highest and even approach 60-80%, since when launching a new product (especially if it is important), it is necessary to “pump up sales”: increase knowledge about the new product, form an idea of the properties product and image characteristics. But in subsequent years, the A/S indicator for this product should decrease and reach the industrial average level.
If a company has multiple supported products and brands, it can compare A/S scores for each brand and determine the optimal score based on personal experience
Ideally, the A/S of the same brand should not increase from year to year, should decrease or remain at a constant level. A constant or decreasing indicator means that brand promotion is carried out consistently and effectively, and advertising campaigns are bringing good returns
The A/S indicator for existing / non-new brands can grow from year to year if competition becomes fierce and it is necessary to strengthen the competitive position of the brand through promotion, if the brand reaches new markets and audiences; in the case of setting new communication tasks for the brand that were not previously faced, etc.
Formula
Variation of the indicator: instead of using the indicator “sales revenue”, use the indicator “net profit of the company”. This modification is used very rarely by companies and reflects what percentage of the brand’s profit goes to supporting it.
Other indicators
Clutter
Clatter – reflects the level of advertising noise, the volume of advertising messages in a category per 1 consumer. The clutter level may be large, small or absent. The clutter level is determined based on an analysis of the presence of competitors' advertising campaigns by analyzing the frequency and coverage of campaigns.
If the clutter is large (that is, at the time of the advertising campaign of your product, many advertisers are advertising with high frequency and coverage of campaigns), then the memorability of advertising decreases. If the clutter is high, it is recommended to increase the frequency of contact of the advertising message with the target audience, use a variety of creative solutions to increase the visibility of the message, and use other media channels in which the clutter level is low.
If the cluster is small, then it is necessary to make maximum use of the low level of competition to form and strengthen the leadership of the company, product or service. To increase knowledge as much as possible, to form an attitude towards the product, while being based on a reasonable frequency of communication. (see Effective frequency.
the market is not large in size, and the required level of advertising investment is high and does not allow for a return on investment;
the consumer is practically not receptive to advertising of products in this segment;
the market is stagnating or falling;
the market is promising and new (or your product is the first mover on the market), and the level of competition is low.
Advertising wear
Wear out of an advertising message is a process as a result of which an advertising message stops “working”, i.e. with an increase in media weight (see Aggregate rating (GRP) of an advertising message, the growth of the following indicators stops:
for the brand: knowledge and image characteristics
It is impossible to fix the number of ratings at which the advertising message wears out, since this is determined by: the nature of the message (simple - complex), the advertised product (new product - general image), creative, etc.
The level of roller wear is determined using tracking studies, as a result of which the dynamics of indicators responsible for roller wear are recorded.
Dependence of voice share and market share
One of the leading professional bodies in the field of advertising in the UK (IPA - The Institute of Practitioners in Advertising) commissioned Nielsen to summarize all global research in the field of advertising effectiveness and, using also internal Nielsen methodologies, to estimate the impact of share of voice (SOV - share of voice). ) and other marketing factors to increase the market share (SOM - share of market) of the supported brand.
Description of the study
Nielsen identified a pattern between share of voice (SOV) and share of market (SOM) growth based on an analysis of 123 brands across 30 different product categories that used standard advertising methods and commercials without special awards. To ensure representativeness of the sample, both new and mature brands participated in the study.
The results of this study can be used in media planning of goods and services in the FMCG market when setting goals for brand advertising campaigns.
Nielsen Research Results
Research suggests that there is a direct relationship between a brand's share of voice (SOV) in a channel and its share of market (SOM).
All other things being equal, brands that have an excess of share of voice over market share (SOV > SOM) in the long term increase their sales volume and, through advertising investments, are able to increase their market share.
The ESOV indicator is a driver for the growth of a brand’s market share.
Formula: ESOV = SOV-SOM, where ESOV - excess share of voice or excess share of voice, % SOV – share of voice or share of voice, % SOM - share of market or market share, %
The revealed pattern is 10: 0.5. A 10 point difference between SOV and SOM results in a 0.5% increase in market share. Those. a brand with a market share of 20.5% that has an excess of SOV>SOM of 10 points will acquire an additional market share of 0.5% and reach 21% of the market share at the end of the year.
Overall conclusion: If a brand aims to grow market share and uses standard advertising messages to convey information to the target audience, it should achieve growth in share of voice (or increase in advertising investment). With a decrease in share of voice and a reduction in the advertising budget (without compensating for the decrease in costs using other means of the marketing mix - new products, prices, new communication channels, etc.) the brand can expect a decrease in market share in the long term.
Additions to the model
There are a number of factors that influence changes in the established pattern:
Brand size. The larger the brand, the greater market growth the ESOV indicator (=SOV-SOM) will provide it, since large brands already have a well-structured distribution, product and pricing policies adapted to the needs of consumers, which helps them use ESOV more effectively.
Brand position - leader or contender for leadership. With the same ESOV (=SOV-SOM) indicator, the market leader will achieve a higher share increase than the contender for leadership. The pattern is as follows: with ESOV = 10 points, the market share of the leader will increase by 1.4%, and the market share of the challenger by 0.4%. Reason: the leader has a stronger position in the market and its marketing mix works more effectively than that of the challenger. Accordingly, the applicant needs to achieve equal conditions with the leader not only in the share of voice, but also in all points of the marketing mix in order to compete at the same level.
The novelty of the brand and the “youth” of the category. The element of novelty leads to an increase in response to ESOV (=SOV-SOM) by 15-25%. This pattern also applies to the new developing category of goods and services.
The impact of voice share and market share on brand strategy
Market share or SOM - share of market - describes the position of the company/brand in the market, measured in %; the model uses market share in value terms.
Market share = brand revenue for period N / market size in value terms for period N.
Model of the relationship between SOV and SOM
To build a model you need:
Identify key brand competitors in the segment
Fill out the table below according to the following principle: if the SOV indicator of competitors is higher than the brand indicator - the indicator is “high”, otherwise “low”. If a brand’s SOM indicator is higher than competitors’ indicators, then the indicator is “high”, otherwise it is “low”.
Brand strategies depending on the ratio of SOV and SOM
Development strategy through niche market segments with an emphasis on protecting sustainable competitive advantage. Find a market niche - a segment in which the company’s brand has maximum competitive advantages, and competitors’ brands have weak positions. The entire brand strategy should be focused on its development in niche segments and strengthening its competitive advantages. All advertising support for a brand should be aimed at strengthening the brand’s competitive advantages. Do not strive to increase your share of voice, look for communication channels that are relevant to the brand’s target audience, in which competitors’ brands are poorly represented.
Leadership retention strategy. Increase advertising investment to grow brand voice. Achieve leadership in terms of share of voice in each market communication channel - the company’s brand must be a leader in visibility. Concentrate all efforts on protecting brand sales from competitors (emphasis in communication on competitive advantages, active use of BTL promotions, investments in target audience loyalty, etc.)
Strategy of attack and expansion. Achieve high share of voice to attack key competitors to switch consumers. Focus advertising investments on building an overwhelming lead in knowledge and loyalty among audiences. Maintain engagement throughout the audience's buying cycle.
Matrix for determining the effective Ostrow frequency
Ostrow's effective frequency determination matrix (Joseph W. Ostrow) is a practical method for determining the effective frequency for an advertising campaign, which allows you to analyze many factors influencing the effectiveness of advertising returns, digitize all factors and, as a result, determine the minimum effective frequency threshold for an advertising message.
Model description
The model consists of a table assessing 20 factors that can influence the effectiveness of an advertising message. 20 factors are grouped into 3 important groups:
market factors,
media factors.
The assessment is carried out for each factor on a 4-point scale from (-2) to (+2). The assessment is carried out as follows: initial base frequency for an advertising campaign according to the Ostrow model = 3; after filling out the table, all points scored as a result of the assessment are summed up and added to the initial base frequency; the resulting frequency is the minimum threshold for the effectiveness of the advertising message.
The assessment of many factors is carried out by experts, based on one’s own experience, knowledge and understanding of the market. In order to give ratings in a more logical and reasonable way, it is recommended for each parameter to record for yourself “what is meant by extreme values (-2 and +2).”
When organizing a display or contextual advertising campaign on the Internet, any advertiser calculates its approximate budget. For the customer of an advertising campaign, it is important to see how funds for its implementation are distributed, whether the money is spent for its intended purpose and with what effectiveness it is used. advertising product in media planning is based on several indicators, one of which is the CPM index. What kind of indicator is this and how to use it - we will find out below.
CPM- why is this needed
What CPM is in advertising has been known since the last century. The module was used in all advertising campaigns that took place in the media. Publishers, television and radio channels still use this indicator to calculate advertising costs. CPM is used when we are talking about the price of one ad impression not to single recipients, but to a thousand possible buyers. It was then that this term was introduced into circulation. Owners of advertising platforms could only operate with their circulation and thematic focus, so the CPM indicator was determined, and advertising taking into account this value was effective.
Definition of CPM
A simple definition of CPM is cost per thousand. The name of the module comes from the English words Cost-Per-Thousand, where M is a Roman numeral meaning 1000. Thus, to the question of what CPM is, we can answer that this is the price for one thousand impressions of an advertisement. The more times an advertisement appears on the pages of newspapers and magazines, the more often it is heard on the radio or flashed on a television channel, the greater the indicator of this coefficient.
Calculation of CPM in online advertising campaigns
On the Internet, the role is usually played by banners - those same annoying pop-up windows that users don’t like so much, and which bring money to the owners of advertising platforms. The more popular the site, the more users view a given Internet page, the more expensive advertising on this site will cost the customer.
Now it’s clear what CPM is. One of the most important indicators. An advertiser can calculate how much money the site owner needs to pay in order for the information to be shown to one thousand network users.
This calculation can be clearly demonstrated using a simple example. The cost of hosting one portal is, for example, $400 per week; statistics from this website show that the site is viewed by about 10 thousand users per week. So a simple calculation gives the value:
CPM = $400/10,000 * 1000=$4 per thousand impressions of advertising information.
Advertisers should understand that a simple display of a banner on a thematic site is mostly informative. There is no guarantee that all ten thousand people who visit the page will definitely click on the banner. Whether the visitor wants to follow the link or not depends only on the attractiveness of the banner itself and the information posted on it. Each site will definitely provide all the data of interest for calculating the CPM parameter. It is understandable that this is beneficial to the site owner. But advertising, its quality and interest for the end consumer are the tasks of the customer himself.
Auxiliary module CTR, calculation methods
To reduce costs, one more indicator should be taken into account - the CTR index. The name also comes from English and sounds like click-through rate - click-through rate. CTR shows how many people clicked on the banner and went to the page of the advertising customer. This module directly depends on the correctness of the chosen site, because the more relevant and necessary the advertising on the site looks, the more likely it is that a site visitor will be interested in the information and click on the banner. The method for calculating this indicator looks like this:
CTR = (number of users who clicked on the banner)/(planned number of banner views per day) *100%.
For example, if out of 20 thousand people who saw an advertisement, 800 users followed the link, then the CTR is 800/20,000*100=4%, which is higher than the minimum acceptable value.
It has been empirically proven that the minimum CTR is 3-5%. If it is less, then the cost per potential client will exceed the expected profit, and advertising will be considered ineffective.
Using Indexes
CPM can be used when choosing a narrower target audience. For example, when ordering a banner placement, the platform site provides the advertiser with information about the age, gender, place of residence, and hobbies of all registered site visitors. Thus, the required banner appears only for those users for whom this advertising product was designed. In this case, the advertising campaign budget is spent more economically and more efficiently.
You should also take into account the activity of regular users. The more often the same visitor sees the same advertising product, the more often money is debited from advertisers, but this does not result in any more clients for the customer. Therefore, competent calculation of the CPM and CTR indices, combined with a deep analysis of the information provided by this advertising platform, should bring the desired result to the customer.
Another point to consider at the beginning of an advertising campaign. Payment can be billed either by CPM or CTR. In other words, the customer must understand the essence of banner advertising using the CPM module - that this is not payment for user clicks, but only for demonstrating the advertising product
Summarizing
When asked what CPM is, we can answer that this parameter is one of the most important when analyzing the effectiveness of a particular advertisement, and is also necessarily taken into account when calculating the budget of an advertising campaign. The number of expected contacts of a potential consumer with advertising information and the cost of placing a banner on several sites with a similar thematic focus are taken into account. Taking these parameters into account, you can calculate the effectiveness of a particular advertising platform and successfully manage your advertising budget.
CPM, CTR and CPC are all synthetic indicators that are necessary for the most accurate understanding of reports on advertising campaigns. They do not have a direct impact on the business, but they help formulate the most profitable strategies for spending budgets.
Today we will continue our “Metrics” section and look at the average cost per impression (CPM).
What is CPM?
CPM is one of the most popular tools for determining the cost of an advertising campaign. It's great for almost any type of advertising (radio, online, newspaper or TV), and since all other parts of the equation remain the same, you can fairly evaluate the effectiveness and cost of a given advertising channel.
CPM (Cost Per Millennium) or otherwise CPT (Cost Per Thousand) means “cost per mile” or “cost per 1000 impressions”. The term CPM means exactly the cost of 1000 impressions, where “M” (from Latin) is a thousand. The profit from such advertising depends on the total number of impressions made on the site. That is, this is a model of relationship with the advertiser, which provides a fixed payment per thousand impressions of an advertisement.
How does CPM work?
CPM is based entirely on the number of impressions made on a page. It doesn’t matter what type of advertising is used - the only thing that matters is that, unlike CPC, where clicks are counted, impressions are counted in CPM.
Such advertising campaigns need a constant source of traffic to start earning money. Let's say you have a website with a CPM banner, and for every 1000 impressions you will make a profit. The advertiser can use either the fixed amount option or the auction option, but the CPM cost will still be calculated using a formula.
CPM = cost / number of impressions x 1000
Let's take, for example, a certain advertiser's budget and the desired number of impressions:
Desired number of impressions: 1,000,000
CPM = 1,000 /1,000,000 x 1000
Of course, these numbers are just an example and may vary depending on the advertiser's budget.
But this example just shows how the average cost per impression is calculated.
Difference between CPC and CPM
CPM advertising is one of the types of interaction between an advertiser and an advertising platform. It works the same way as CPC, the only difference is how exactly it is monetized. In CPC, clicks generate profit. And in CPM - the number of ad impressions or page views. CPC is a good way to make money from advertising with a small audience, while CPM does not work so well with low traffic - because there will be fewer page views, which means fewer impressions and less money. So CPM requires a wide audience. Then this method becomes relevant for site monetization.
CPM makes sense for campaigns aimed at increasing brand awareness or communicating a specific message. Also good for video.
In this article, we have tried to briefly explain what CPM is and how it works.
Naturally, this is not the only and not the most important indicator, but depending on your goals, you can set different KPIs.