CPM, CTR and CPC are all synthetic indicators that are necessary for the most accurate understanding of the reports on the conducted advertising campaigns. They do not have a direct impact on the business, but they help to form the most profitable strategies for spending budgets.

Today we will continue our Metrics section and look at the average cost of impressions (CPM).

What is CPM?

CPM is one of the most popular costing tools. advertising campaign. It works great for just about any type of advertising (radio, internet, newspaper, or TV) and since the rest of the equation stays the same, you can fairly judge the effectiveness and cost of any given advertising channel.

CPM (Cost Per Millennium) or in other words 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) - 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 for a fixed payment for a thousand impressions of an advertisement.

How does CPM work?

CPM is entirely based on the number of impressions made on the page. It doesn't matter what type of advertising is used - the only important thing is that, unlike CPC, where clicks are counted, impressions are counted in CPM.

These ad campaigns need a constant source of traffic to start earning. 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 figures are just examples and may vary depending on the advertiser's budget.

But this example only shows how to calculate average price display.

Difference between CPC and CPM

Advertising with CPM is one of the types of interaction between an advertiser and an advertising platform. It works in the same way as CPC, the only difference is how it is monetized. In CPC, clicks are the way to go. And in CPM - the number of ad impressions or page views. CPC- good way make money on advertising with a small audience, while CPM does not work so well with low traffic - after all, there will be fewer page views, which means fewer impressions and less money. So CPM needs a wide audience. Then this method becomes relevant for monetizing the site.

CPM makes sense for campaigns aimed at increasing brand awareness or delivering 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.

When organizing a media or contextual advertising campaign on the web, any advertiser calculates its approximate budget. For the customer of an advertising campaign, it is important to see how the funds for its implementation are distributed, whether the money is spent for its intended purpose and with what effectiveness they are used. advertising product in media planning is based on several indicators, one of which is the CPM index. What is this indicator, how to use it - we will learn below.

CPM- why is it needed

What is CPM in advertising has been known since the last century. The module was used in all advertising campaigns that took place in the media. Publishing houses, television and radio channels still use this indicator to calculate the cost of advertising. CPM is used when it comes to the price of one ad impression not to single recipients, but to a thousand potential buyers. At the same time, this term was introduced into circulation. The owners of advertising sites could only operate with their circulation and thematic focus, so the CPM indicator was determined, advertising, taking into account this value, was effective.

Definition of CPM

The 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, when asked what CPM is, we can answer that this is the price per thousand ad impressions. The more times an advertisement appears on the pages of newspapers and magazines, the more often it sounds on the radio or flashes on television channel- the higher the index of this coefficient.

CPM calculation in online advertising campaigns

On the Internet, banners usually play a role - those annoying pop-ups that users don't like so much and that bring money to the owner of advertising sites. The more popular the site, the more users view this page of the Internet, the more expensive advertising on this site will cost the customer.

Now it’s clear what CPM is. In one of key indicators. The advertiser can calculate how much money the owner of the site needs to pay in order for the information to be shown to one thousand network users.

This calculation can be visualized with a simple example. The cost of hosting one portal is, for example, $400 per week, the statistics of this web page show that about 10,000 users view the site per week. So a simple calculation gives the value:

CPM = $400/10,000 * 1000=$4 for one 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 that is placed on it. Each site will provide all the data of interest for calculating the CPM parameter. That it is beneficial to the owner of the site, you can understand. But advertising, its quality and interest for the end user 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 of English language and completely sounds like a click-through rate - an indicator of click-through rate. CTR shows how many people clicked on the banner and went to the ad customer's page. This module directly depends on the correctness of the chosen site, because the more appropriate and necessary the advertisement on the site looks, the more likely it is that the site visitor will be interested in the information and click on the banner. The calculation method for 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 advertisement, 800 users followed the link, then the CTR is 800/20,000*100=4%, which is higher than the minimum allowable value.

It has been experimentally proven that the minimum CTR is 3-5%. If less, then the cost per potential customer 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 site-platform provides the advertiser with information about the age, gender, place of residence, hobbies of all registered site visitors. Thus, the desired banner appears only for those users for whom this advertising product was designed. At the same time, 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 the customer does not get more customers from this. Therefore, a 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 made either by CPM or by CTR. In other words, the customer must understand the essence of banner advertising according to the CPM module - that this is not a payment for user clicks, but only for the demonstration of an advertising product

Summarizing

When asked what CPM is, one can answer that this parameter is one of the most important when analyzing the effectiveness of an advertisement, and is also taken into account when calculating the budget of an advertising campaign. The number of expected contacts is also taken into account. potential consumer with advertising information, and the cost of placing a banner on several sites with a similar thematic focus. Taking into account these parameters, you can calculate the effectiveness of a particular advertising platform and successfully master the advertising budget.

4.3 / 5 ( 6 votes)

Description of the main media indicators

Main functions and tasks of media indicators

With the help of media indicators, you can find out information about the target audience of a media channel

Media metrics help characterize the intensity and quality of competitors' advertising campaigns.

Media indicators allow you to digitize your media strategy, help to compare with the help of accurate calculations different types media carriers and select the correct media channels for the transmission of the advertising message.

Allocate:

measurable indicators - types of media statistics that cannot be known without conducting specialized media research

derived indicators - a set of indicators that can be calculated from the original data set.

Media statistics describing the audience of a single media event

Rating

The basic characteristic, which is the main subject of media measurements. Measured in%.

TV: TVR (television rating) - TV rating

Press: AIR (average issue readership) – average audience of 1 issue

Radio: AQH (audience of quarter hour)

Formula

Calculation example

Let's assume that in this moment 10 people watch a TV channel. Of these, only 5 people watched program number 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. Required to calculate the indicator "Share of TV viewing of the channel".

Formula

Calculation example

Let's say 10 people have a TV. These people make up the general population. At this point in time, only 6 people turned on the TV.

HUT calculation: 6/10*100%=60%

TV viewing share

The share of television viewing of the channel (share) -% of viewers watching a particular channel or program, of the total number of people watching television at a given time.

Measured in%. To calculate this indicator, you need to calculate the HUT indicator.

Formula

Affinity index

Affinity index - an indicator used in media planning; shows how more or less typical contact with this media is for a given target audience than for the entire general population as a whole. Measured in%.

The higher the index value, the more the media channel used corresponds to the target audience, which means that the advertising message will be more targeted and reach the right consumer. In practice, it is believed that a good affinity index: more than 100-110%.

Formula

To calculate the indicator, you must be able to calculate the indicators Rating, Aggregate Rating (GRP) and Target Rating (TRP)

Calculation example

At the time the message was displayed, 10 people were watching TV, 6 of which were our target audience. The first program was seen by 5 spectators out of all viewers, and 4 people from the target audience. The second program was seen by 9 spectators out of all those who watched, and 6 people from the target audience.

Affinity index for the first pass: TRP1/GRP1 = 67/50*100% = 134%

Affinity index for second gear: TRP1/GRP1 = 100/90*100% = 111%

Conclusion: both programs are affinative (the value is greater than 100%) and correspond to the target audience. Program No. 1 is more in line with the target audience.

Media statistics describing the media plan

Aggregate Rating (GRP)

Formula

Calculation example

We need to calculate the aggregate rating for an advertising campaign. We place our advertising message in two broadcasts. At the time the message was displayed, 10 people were watching TV, of which 5 people were watching the first program, and 3 people were watching the second program.

Target Rating (TRP)

Target rating (TRP, target rating point) - the total rating gained 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 the Aggregate Rating (GRP) is that the calculations do not use the entire audience that at the moment had the opportunity to contact the advertising message, but only the target audience to which the message is 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 aggregate rating for an advertising campaign. We place our advertising message in two broadcasts. At the time the message was displayed, 10 people were watching TV, 6 of which were our target audience. Since we calculate the target rating, when calculating the number of people who have seen an advertising message, we take into account only people who are part of 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 reach

Advertising campaign coverage (Reach / Cover%) - the number of people from the target audience who saw the advertising message at least once. It is calculated in thousands of people or in % of the total number of people that make up the target audience.

Often used in media planning:

The larger the N value, the lower the coverage value.

Calculation example

The 1+ coverage calculation will include people who have seen either the first or second program. There were 8 such spectators.

The coverage calculation at frequency 2+ will include only those people who have contacted the message twice, i.e. Watched both the first and second transmission. There were 3 such spectators.

OTS

OTS (opportunity to see) - an indicator used in media planning; allows you to evaluate 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

Advertising message frequency (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 indicator Rating, Aggregate Rating (GRP) and Reach of the advertising campaign.

Share of voice (SOV)

The share of voice (SOV) is an indicator of the advertising activity of a brand or an individual product, which means 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%. Measured in the context of each media channel. (TV, press, internet, etc.)

The share of the voice indicates how much the brand's advertising message is noticeable to the consumer in the general flow of advertising messages of the entire market. The higher the value of the share of voice, 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

Initial 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 mediaweight of the category "cosmetics for children" (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 is (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 reaching 1,000 contacts or reaching 1,000 target audiences.

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 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 Reach, 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 - a cost indicator used in media planning; represents the cost of informing or reaching 1% of the audience. The cost of a rating point is the main indicator of cost effectiveness, primarily of TV campaigns.

Formula

To calculate this indicator, you need to know the calculation of the Rating or Aggregate Rating (GRP) indicator.

Share of advertising spend (SOS)

The share of spend (SOS) is an indicator of the advertising activity of a brand or an individual product, which means 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) is less efficient than competitors. Since a large share of advertising costs provides a smaller share of advertising pressure. This situation is possible if a better contact is achieved (for which an overpayment is possible), otherwise there are resources for cost optimization. Also, this situation may exist for small companies that, without having 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 SOS< 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 large companies- media placement leaders who receive favorable conditions (discounts or bonuses) for advertising placement for a large budget.

Advertising to Sales

Advertising to Sales (A/S) is an indicator by which the effectiveness of advertising investments is evaluated. Indicates what % of the advertised brand's sales the company spends on supporting this brand. Measured in%. Usually considered to be annual period or reporting period of the company.

The lower the value of the indicator, the more effective advertising investments are considered.

There is no clearly established efficiency standard for this indicator. There are several simple rules to assess the adequacy and realism of the indicator:

If the costs of competitors in the category are known, then the A / S indicator can be compared with the indicators of competitors or with the average industrial value and the adequacy of the indicator can be determined based on the goals of the brand: if the brand is counting on a leader position, then the A / S indicator should be one of the highest , or on par with key competitors

For just starting brands, the A/S ratio 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 “swing sales”: increase knowledge about the new product, form an idea about the properties goods and image characteristics. But in subsequent years, the A / S indicator for this product should decrease and reach the level of the average industrial one.

If a company has several supported products and brands, then it can compare the A / S rates for each brand and set the best rate based on personal experience.

Ideally, the A/S ratio of the same brand should not increase year by year, should decrease or remain at a constant level. A stable or declining score indicates that the brand is being promoted consistently and effectively, and advertising campaigns are generating good returns.

The A / S indicator for existing / not new brands can grow from year to year in case of fierce competition and the need to strengthen the competitive position of the brand with the help of promotion, if the brand covers new markets, audiences; in the case of setting new communication tasks for the brand that were not set before, etc.

Formula

Variation of the indicator: use instead of the indicator "sales proceeds" - the indicator " net profit companies." This modification is used by companies very rarely and reflects what% of the brand's profit goes to its support.

Other indicators

Clutter

Clatter - reflects the level of advertising noise, the volume of advertising messages in the category per 1 consumer. The clutter level can be large, small or absent. The clutter level is determined based on the analysis of the presence of competitors' advertising campaigns by analyzing the frequency and coverage of campaigns.

If the clutter is large (i.e. at the time of your product's advertising campaign, many advertisers with high campaign frequency and coverage are advertised), then the ad memorability decreases. With a large clutter, 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, use other media channels in which the clutter level is low.

If the clutter is small, then it is necessary to use the low level of competition to the maximum to form and strengthen the leadership of the company, product or service. To maximize knowledge, to form an attitude towards the product, while being based on a reasonable frequency of the message. (See Effective Frequency.

the market is not large in size, and the required level of advertising investment is high and does not allow to recoup the investment;

the consumer is practically not receptive to advertising products in this segment;

the market stagnates or falls;

the market is promising and new (or your product is the first mover in the market), and the level of competition is low.

Ad wear

Wear out of an advertising message is the process by which an advertising message ceases to "work", 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 an advertising message wears out, since this is determined by: the nature of the message (simple - complex), the advertised product (new product - general image), creativity, etc.

The level of wear of the roller is determined using tracking studies, as a result of which the dynamics of indicators responsible for the wear of the roller is fixed.

Relationship between 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 Nielsen's internal methods, to evaluate 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.

Study Description

Nielsen identified the pattern between change in voice share (SOV) and growth in market share (SOM) based on an analysis of 123 brands across 30 different product categories that use standard advertising methods and commercials no special awards. For a representative 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 of the FMCG market when setting the goals of brand advertising campaigns.

Nielsen Research Results

Research results show that there is a direct relationship between the share of voice (SOV) of a brand in a channel and its market share (SOM).

Ceteris paribus, brands with an excess of voice over market share (SOV >SOM) in long term increase sales volume and through advertising investments are able to increase their market share.

The ESOV indicator is the brand's market share growth driver.

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 regularity is 10: 0.5. A 10 point difference between SOV and SOM provides a market share increase of 0.5%. Those. a brand with a market share of 20.5%, having an excess of SOV>SOM by 10 points, will gain an additional market share of 0.5% and reach 21% market share at the end of the year.

The bottom line is that if a brand aims to gain market share and uses standard ad messages to reach its target audience, it must generate voice share (or ad investment) growth. With a reduction in voice share and a reduction in the advertising budget (without compensating for cost reductions by using other means of the marketing mix - new products, prices, new communication channels, etc. - the brand can expect to lose market share in the long term.

Additions to the model

There are a number of factors that affect the change in the established pattern:

brand size. The larger the brand, the more market growth will be provided by the ESOV (=SOV-SOM) indicator, since big brands already have a well-established distribution, adapted to the needs of consumers, product and pricing policy, which helps them use ESOV more effectively.

The position of the brand is a leader or a contender for leadership. With the same ESOV (=SOV-SOM), the market leader will achieve higher share growth than the leader contender. The pattern is as follows: with ESOV = 10 points, the leader's market share will increase by 1.4%, and the challenger's market share by 0.4%. Reason: the leader has a stronger position in the market and his marketing mix works more effectively than the challenger. Accordingly, the applicant must achieve equal conditions with the leader not only in the share of the vote, 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 results in a 15-25% increase in response to ESOV (=SOV-SOM). This pattern also applies to a new developing category of goods and services.

The impact of the ratio 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 in period N / market size in value terms in period N.

SOV vs. SOM Relationship Model

To build a model, you need:

Identify key brand competitors in the segment

Fill in 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 it is “low”. If the brand's SOM indicator is higher than that of competitors, 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 a focus on securing a sustainable competitive advantage. Find a market niche - a segment in which the company's brand has the maximum competitive advantages, and competitors' brands are weak positions. The entire brand strategy should be focused on its development in niche segments and strengthening of competitive advantages. All advertising support for the brand should be aimed at strengthening the competitive advantages of the brand. Do not seek to increase the share of the 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 investment in advertising to increase brand voice share. Achieve leadership in terms of voice share in each market communication channel - the company's brand must be a leader in visibility. All efforts should be focused on protecting brand sales from competitors (emphasis in communication on competitive advantages, active use BTL promotions, investment in target audience loyalty, etc.)

Attack and expansion strategy. Achieve a high share of the vote to attack key competitors in order to switch consumers. Focus advertising investments on building an overwhelming lead in knowledge and loyalty among the audience. Maintain activity throughout the audience buying cycle.

Ostrow Effective Frequency Matrix

The Ostrow effective frequency matrix (Joseph W. Ostrow) is a practical method for determining the effective frequency for an advertising campaign, which allows you to analyze many factors that affect the effectiveness of the return on advertising, 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 of evaluation of 20 factors that can influence the effectiveness of an advertising message. The 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 evaluation is carried out as follows: the initial base frequency for an advertising campaign according to the Ostrow model = 3; after filling in 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 evaluation of many factors is carried out by experts, based on own experience, knowledge and understanding of the market. In order to make assessments in a more logical and reasonable way, it is recommended to fix for each parameter “what is meant by extreme values ​​(-2 and +2)”.