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Cost Per Thousand
(CPM)
Cost Per Thousand represents the relationship between the size of
a media vehicle's audience (measured as households, adults, teens, etc.) and its
cost in time or space. It is used to compare the cost efficiency of one vehicle
with another; for example, one magazine with another or one radio station with
another. The purpose is to gain the largest audience at the lowest cost. The
cost is calculated per thousand to provide workable dollars-and-cents
figures that are easier to compare.
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Needed:
A. Gross impressions, that is, the
number of households or persons exposed to a vehicle. (If the figures are given
in GRPs, convert to numerical values by multiplying GRPs by the population
base.)
B. The cost of a single unit of
advertising space or time. (Production costs are not normally included.)
Formula:
Cost per thousand = Cost of media
vehicle unit x 1,000
Gross audience impressions
Steps to work the formula:
1. Determine the number of gross impressions, annual
attendance, households, or persons.
2. Divide the media unit cost by the number of gross
impressions. This will give the cost per impression.
3. Multiply by 1,000 to convert to cost-per-thousand
impressions.
Example:
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A
20,000 seat Arena with Cup Holders at Anytown Arena cost $15.00 per seat per
year, total cost $300,000. The Anytown Arena annual attendance for last year was
2 million. What is the cost per thousand attendees?
$300,000
x 1,000 = $150.00 CPM
2,000,000
An
advertiser would pay $150.00 for each 1,000 visitors who were exposed to Cup
Holder advertising for 3 hours. This figure is commonly compared with the CPM at
another media such as magazines, newspapers, TV and radio station to determine
which one is more economical. We must also consider the quality and
effectiveness of a 3 hour impression.
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Cost Per Impression (CPI)
To obtain the Cost Per Impression you simply
take the CPM (from the example above) and divide by 1000.
Example:
CPM $150.00 divided by 1000 = .15 cents, Cost Per Impression (CPI)
An advertiser would pay .15˘
for each visitors exposed to Cup Holder advertising for 3 hours.
Return on Investment (ROI)
Continuing from the example above determine the
ROI. To determine the ROI, take the total annual attendance and multiply
it by the appropriate response rate (range from 2% thru 15%). Then divide
the annual cost of Cup Holders by that percentage.
Example:
| Annual
Attendance X Response Rate %
= Response
= ROI
Cost of Cup Holders
|
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2,000,000 X 2%
= 40,000 = $7.50
300,000
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2,000,000 X 10%
= 200,000 = $1.50
300,000
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An advertiser would pay $7.50 to acquire a new
customer at a 2% response. Due to the power of Cup Holders, it would not be
uncommon for an Advertiser to obtain a much higher response rate.
10 Reason Why Cup Holders
are Successful
| 1. Long lasting Branding
Impression 2. Year long campaign
3. Higher consumer response rate 2% to
15%
4. Lower customer acquisition cost.
5. Immediate ROI
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6. Lower cost per impression (CPI)
7. Clear and strong consumer demographics
8. Exclusive market/facility
9. Customer loyalty through convenience
10. Free Press and Added Value Service |
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