Customers service|Media planing : Relative Costs of Media

Determining Relative Costs of Media

1. Cost per thousand (CPM). For years the magazine industry has provided cost breakdowns on the basis of cost per thousand people reached. The formula for this computation is

CPM = [Cost of ad space (absolute cost)/ Circulation] X 1000

2. Cost per ratings point (CPRP). The broadcast media provide a different comparative cost figure, referred to as cost per ratings point or cost per point (CPP), based on the following formula:

CPRP = Cost of commercial time/Program rating

3. Daily inch rate. <p>Television: [Cost of 1 unit of time X 1,000]/ Program rating

Newspapers: [Cost of ad space X 1,000]/ Circulation

While the comparison of media on a cost-per-thousand basis is important, intermediary comparisons can be misleading.

The ability of TV to provide sight and sound, the longevity of magazines, and other characteristics of each medium make direct comparisons difficult.
The media planner should use the cost-per-thousand numbers but must also consider the specific characteristics of each medium and each media vehicle in the decision.
The cost per thousand may overestimate or underestimate the actual cost effectiveness
Consider a situation where some waste coverage is inevitable. The circulation exceeds the target market.
If the people reached by this message are not potential buyers of the product, then having to pay to reach them results in too low a cost per thousand.
Need to use the potential reach to the target market—the destination sought—rather than the overall circulation figure
<p>A medium with a much higher cost per thousand may be a wiser buy if it is reaching more potential receivers. (Most media buyers rely on target CPM (TCPM), which calculates CPMs based on the target audience, not the overall audience.)
CPM may also underestimate cost efficiency. Magazine advertising space sellers have argued for years that because more than one person may read an issue, the actual reach is underestimated. They want to use the number of readers per copy as the true circulation.
This would include a pass-along rate, estimating the number of people who read the magazine without buying it.
In addition to the potential for over- or underestimation of cost efficiencies, CPMs are limited in that they make only quantitative estimates of the value of media.
While they may be good for comparing very similar vehicles