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The Numbers Game

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TV and radio have two standard ways of presenting audience -- as a whole number and as a percent of a market's population. The first is gross impressions, which is used in CPM; the second is gross rating points, which produces cost-per-point.
 
The recent industry proposal, that spot media make things easier by switching from a cost-per-point to a cost-per-thousand currency measure, ignores important differences-and has competitive implications well beyond the numbers game.

Cost-per-thousand is based upon impressions. Cost-per-rating-point is based on coverage. The big difference is a rating point counts only impressions delivered to a specific area, where a CPM counts all impressions.

Converting a CPP to a CPM is simple. You just have to know how many thousand viewers or listeners are in a rating point. For example, if a market has 1 million adults 18-plus, then a rating point is in-market impressions equal to 1 percent of that, or 10,000. If the cost of buying that rating point is $100, then the CPM is $100 (10,000/1,000), or $10. It's an easy calculation if you know the population of the market on which the cost-per-point is based. This is readily available.

Changing a CPM into a cost-per-point is more labor-intensive. You have to know how many of the medium's total impressions were delivered to the desired market area. Cost-per-point is the right currency for spot.

National media traditionally use CPM. Spot media's preference for cost-per-point isn't an accident. Spot is market-specific and cost-per-point emphasizes its ability to reach specific high-value areas. Cost-per-point also simplifies spot planning. If the brand needs 100 adults 18-plus points a week in a market to achieve a 40 weekly reach goal, the buyer takes the CPP, which is $100, and multiplies it by 100 to get the weekly schedule cost of $10,000. You can't do that with cost-per-thousand unless you convert it to rating points and that requires defining a market area.

Which is the better measure?

The better measure is decided by the media plan. Cost-per-point is the cost of geographically targeted impressions and is most useful for buying media like radio and spot TV.

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