How to calculate a cost per point (CPP)

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I’ve recently published two articles relevant to online GRPs. The first focused on explaining what is a Gross Rating Point and how it is calculated while the second explained its relevance to digital in planning, buying and reporting.

This post will be of use to both buyers and sellers in understanding how to calculate a cost per point where digital is concerned. Both need this understanding in order to properly buy and sell online GRPs at appropriate market values.

CPP valuation

How do you determine what your CPP is? Let’s back track to what we already know. Let’s say a video ad campaign has the following parameters: 1 million ad impressions (or views), a frequency cap at 3 per week and a CPM of $15.  This comes to a media spend of $15,000.

These few details are not enough for anyone to determine a CPP. We will need geographic and demographic data to determine what any one CPP will be.

Step 1 – Basic internal parameters

Take any media placement. For example, let’s use a $50,000 online display ad placement with a portal over a 4 week period, geotargeted to Toronto Central, Ontario (the metropolitan city limits, not the extended metropolitan area that would extend to Mississauga and other outlying municipalities), with a frequency cap of 4. At $5 CPM, that’s 10 million ad impressions. The campaign’s primary target audience is male and aged 25-54 years old.

Step 2 – Website demo profile

The website’s average total monthly reach is 4,915,000. It’s composition of the men 25-54 age group is 22.6%, or approximately 1,110,790 individuals in the target demo. Without specific profile targeting of this demo, chances are the impressions will be distributed similarly as age composition concentrations.

Step 3 – Campaign reach

Taking into account the frequency cap of 4, the average campaign frequency should be closer to 3 per individual reached (counting cookies only). This is because some website users (on every website) are heavy users (there every day) while others are light users (once or only a few times monthly). This then means that the campaign’s total potential reach during the 1 month period is 3,333,333 individuals.

Step 4 – Website campaign reach against the demo

Our 10,000,000 impressions should reach on this website 753,333 men 25-54 on this site. That is our campaign potential reach (3.3 million) times the demo’s concentration on the publisher website (22.6%).

Step 5 – Universe

We now have quite a few numbers:

  • campaign budget
  • campaign impressions
  • campaign CPM
  • campaign potential reach
  • website total reach
  • website concentration against the target demo

What we are missing to be able to calculate actual GRPs and what the cost per point (CPP) is for this demo and site is a universe to work with.

This campaign is targeted to men 25-54 in Toronto, Ontario. To find this number, we turn to Statistics Canada. Note that PMB and BBM both could also tell you the total population for any demographic and any specific geographic region. NADbank is limited to 13 major markets and comScore only identifies the online population.

There are 1,343,290 males aged between 25 and 54 years, residing in Toronto, Ontario in 2014.

Step 6 – Calculating GRPs

How to we calculate the estimated GRPs to be yielded by this campaign? We take the gross impressions against the target demo (753,333 men 25-54 x average frequency of exposure of 3 = 2,259,999 impressions) and divide this by the universe of the target demo (1,343,290 Toronto M25-54 StatsCan):  2,259,999 / 1,343,290 = 1,6824…

Take this total and multiply by 100:   168.2 GRPs

Step 7 – Calculating CPPs

What is our cost per point? The CPP = total cost / total GRPs:  $50,000 / 168.2 GRPs = $297.27 CPP

digital cost per point

The almighty question that follows is “is this CPP expensive?” The answer to that is another questions “compared to what?”

Let us compare to a M25-54 Ontario CPP for television and radio to get perspective on this $625 CPP price point. I don’t plan or buy television and radio myself so I called on a few friends who do to get a good sense of what those CPPs are currently.

One friend indicated they never buy M25-54 CPP. What they do is buy the general adults 25-54 and skew to male dominated audiences. In television, stations are bought at different price points if they are conventional or specialty stations.

  • Average CPP for conventional TV in Toronto A25-54 is $595 net  ($700 CPP gross)
  • Average CPP for specialty TV in Toronto A25-54 is $380 net  ($450 CPP gross)
  • Average CPP for radio in Toronto M25-54 is $300 net  ($340-360 CPP gross)

The digital $300 M25-54 CPP is priced favorably when compared to the more general A25-544 for television and even demo-specific for radio.

One could argue it would make sense for digital to be slightly higher than television given it can be interactive. As such it would be normal for it to be higher than radio which has no visual support.

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