VIDEO TRANSCRIPT
PART B: APPLICATION OF THE COST PER POINT AND COST PER THOUSAND EFFICIENCIES
In the previous video lesson, you learned how to calculate Cost per Point and Cost per Thousand. The
question now is how to apply this analysis. This is what we call a cost efficiency analysis.
After you finish this video lesson, you will be able to:
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Understand the working relationship between a media planner and a media buyer
Understand the typical applications for the CPM and CPP analysis
Understand how to initiate a negotiation with a television station
Understand the media terminology associated with the media efficiencies
Understand how to make media decisions to deliver a marketer’s message in the most cost
efficient way
There are three typical applications for a Cost per Point and Cost per Thousand Cost analysis:
Scenario A:
Scenario B:
Scenario C:
Media Planner sets a market CPM/CPP to plan budgets / media buys
As a negotiating mechanism between a buyer and a media rep
As an evaluating analysis to compare the efficiencies of a media vehicle and between
media vehicles. The CPM and CPP can be set by daypart, by market, demo, and by
quarter.
Let’s take it one by one:
In Scenario A: The Media Planner sets a market CPM/CPP to plan budgets / media buys; what does this
mean?
The relationship between a Media Planner and a Media Buyer can be very symbiotic. I can
tell you that when I was a buyer, the media planners consulted our buying team constantly to
understand the media rates to buy television and radio airtime expressed in terms of CPM and CPP. For
the media buyer, it is very important that the media planner estimates the budgets accurately so they
have sufficient money to be able to buy efficiently.
The way I experienced my buying career and the best way I can explain it is that the planner was closest
to the client (sometimes even being located in the same city where theclient was headquartered) and
our buying team buyer was located geographically closer to the spot
markets we bought. Because of this constant media negotiating activity, the buyer really knows the
market conditions and the media rates to be able to assists the media planner to estimate budgets. It is
the Media Planner’s job to establish the ideal exposure levels to reach the client’s goals. Example, if the
client wants to sell X% more product than the previous year, the media planner estimates how much
advertising exposure to the target is necessary. This exposure estimates are calculated in terms of how
many ratings and impressions, how much reach and frequency, how much coverage and what target
composition will be necessary to achieve those goals.
After the Media Planner determines how many rating points and impressions to reach the client’s goals
are ideal, they estimate the exposure and budget necessary to achieve those goals based on the
recommended CPP / CPM supplied by the buyer given the market conditions and the time of the year
such as flight dates or Quarter the buy will run.
For Example,
 Let’s say that a Media Planner estimated that in order for the client to sell 10% more product
than the previous quarter, it will take the exposure of 150 Points per week in Primetime in a
given spot market.
 The Media Planner will take the media buyer’s recommendation of the Cost Per Point of $1375
per rating point in Primetime for television in the sport market and for the quarter specified.
 The Media Planner can estimate the budget by multiplying the estimated 150 rating points
(estimated by the planner) in Primetime times the estimated $1350 CPP (supplied by the media
buyer) for total budget of $206,250.
 In other words, for the client to achieve their business goal of selling 10% more, it will take 150
ratings points per week in primetime, at a Cost Per Point of $1,350 for a total estimated budget
of $206,250 per week.
In Scenario B: As a negotiating mechanism between a buyer and a media rep
Once the Media Buyer receives the media buy from the Media Planner with how many rating points and
impressions to buy at an established CPP/CPM that will work in the market given the market conditions,
the buyer uses them as a negotiation compass. The Media sends rates or avails at the Media Buyer’s
request. The un-negotiated rates will not necessarily meet the CPP/CPM established in the buy, hence
why the buyer needs to negotiate the rate.The media buy’s established CPP/CPM will help to guide the
negotiation. Keep in mind that the analysis can be done in Cost per Point or Cost per Thousand. Because
not all media is measured in rating points, CPM is the universal measure for all media. For ratings
measured media, such as radio and television, the analysis can be done using Cost per Point or Cost per
Thousand, either or.
Scenario C: As an evaluating analysis to compare the efficiencies of a media vehicle and between media
vehicles (CPM / CPP can be set by daypart, by market, demo):
Imagine this real world example:
The media buy establishes to buy Primetime daypart. The spot market being bought has 6 television
stations. Primetime is considered M-Sat 8-11pm / Sun 7-11pm. This is 22 hours of weekly Primetime
programming = Mon-Sat 8-11p = 3 hours (3 hours per day x 6 days = 18 hours) plus Sun 7-11p (an
additional 4 hours) 132 of Primetime programming options to consider = Each station runs 22 hours of
weekly Primetime programming x 6 stations = for a total 132 primetime hours and programs. If you do
not have a guide to put all programs on the same scale, how will you evaluate 132 programs, each with
a different rating and a different rate? This is where the media buy’s established CPP/CPM comes in.
This established CPM and/or CPP will guide the negotiation and is the parameter to weigh each
programming option against each other. Remember that this is a very competitive business and stations
are very competitive with each other.
Now, let’s go back to the chart we have been working with.
Let’s start with CPM. You have already calculated CPMs and CPPs for all programming on the chart.
Assume that this chart are avails that stations have sent you, and you are doing your cost efficiency
analysis.
Let’s say that the planning cost per thousand is $1.07 per every thousand people. You have six different
programs with rates, and you have to compare if they are cost efficient or you have to negotiate them
to make them cost efficient given the planning cost per thousand.
Step ONE,
Calculate the CPM as the Avails show by taking the rate and dividing by Impressions thousands
(Take out 000s). Do that for all the programs on the chart.
Step TWO,
Analyze which programs are above the Planning CPM of $1.07. If they are right at or below $1.07, you
do not need to negotiate these. But any programs above the $1.07, need to be negotiated. The question
is to how much?
Step THREE,
For the inefficient programs, multiply the planning CPM times the delivery Impressions Thousands. After
you have calculated the CPM for all the programs, you see that Sunday Night Football is coming in at
$1.42 to reach a thousand people, which is more expensive than the allocated $1.07, so we know that
This rate needs to be negotiated.
To know how much we need to lower this rate in order to stay on budget, for Sunday Night Football we
take the planning cost per thousand of $1.07 and multiply by the Impression Thousands (remember to
take the 000 out) of 7750 and get the rate to negotiate of $8,292.50.
So we know that this rate needs to be negotiated from $11,000, as the avails show, to $8,292.50 in
order to be able to “afford” it.
Now do the same for the rest of the inefficient programs in the chart. The answers are in the full lesson
PPT for this module.
Now remember that the station may not be able to negotiate the rate if they are in a situation of high
demand for that program, but at least you (the buyer) and the station know where the rate needs to be
at in order to negotiate effectively.
Let’s do the same for CPP.
Let’s say that the planning cost per thousand is $1,375 for every rating point you buy. Again, look at your
six different programs with rates, do the same analysis but with rating points. .
Step ONE,
Calculate the CPP as the Avails show by taking the rate and dividing by Rating Points. Do that for all the
programs on the chart.
Step TWO,
Analyze which programs are above the Planning CPP of $1,375. If they are right at or below $1,375, you
do not need to negotiate these. But any programs above the $1, 375 need to be negotiated. The
question is to how much?
Step THREE,
For the inefficient programs, multiply the planning CPP times the delivery Rating Points. After you have
calculated the CPP for all the programs, you see that Sunday Night Football is coming in at $ $1,815.18
CPP, which is more expensive than the allocated $1,375 per point, so we know that this rate needs to be
negotiated.
Now do the same for the rest of the inefficient programs in the chart. The answers are in the full lesson
PPT for this module.