Advertising Metrics
This module covers the concepts of impressions, gross
rating points, CPM, reach, frequency, and share of
voice.
Author: Paul Farris
Marketing Metrics Reference: Chapter 9
Impressions are the basic unit
of advertisement measurement.
IMPRESSIONS
Impressions
Each time a person has an opportunity
to see an ad, an exposure, or
impression is counted.
More accurately, these are Opportunities to See
as we don’t know if the person actually paid attention.
Definition
Impressions = Exposures = Opportunities to See (OTS)
MBTN | Management by the Numbers
2
Rating Points are used to describe the audience or “reach” of a single
advertisement or program. For example, if NBC Nightly News has a
rating of 20% (or 20 rating points), that means that a single
advertisement will be seen by 20% of a population.
When multiple ads are considered, we sum the rating (points) across
all ads to determine Gross Ratings Points (GRPs). Therefore, the
rating of single advertisement will never exceed 100. However, GRPs
will usually exceed 100 because the advertisement (or advertising
campaign) will be shown multiple times and often across different
media choices.
GROSS RATING POINTS (GRPS)
Gross Rating Points (GRPs)
Definitions:
Gross Rating Points (GRPs) represent the sum of Rating Points over
several media vehicles (note, sometimes provided as a %).
Target Rating Points (TRPs) is the same concept as GRPs but replace
the total population with a specific target group. Especially important for
advertisers who wish to reach a particular audience.
MBTN | Management by the Numbers
3
To measure the cost efficiency of campaigns, advertisers monitor the
cost per impression. Given this is likely to be an impractically small
number (fraction of a cent) CPM is more often quoted. CPM is just the
cost per thousand impressions or the cost per impression x 1000.
Definition
CPM ($) = 1000 * Cost of Advertising / Impressions Generated
COST PER IMPRESSION AND CPM
Cost Per Impression and CPM
Question 1: What is the CPM for an ad that
generates 20,000 impressions and costs $400?
Answer:
CPM
= 1000 * Cost of Advertising / Impressions Generated
= 1000 * $400 / 20,000
= 1000 * .02 = $20
MBTN | Management by the Numbers
4
If impressions are the basic unit of measurement in advertising, a
company might also be interested in how those impressions are
distributed across a target population. The company might want to
know how many different people are actually being exposed to their
advertisement (known as “reach”). They also might be interested in
knowing how often (on average) someone sees their advertisement
(known as “frequency”).
REACH AND FREQUENCY
Reach and Frequency
By definition then, Impressions are the product
of the number of people (Reach) & how many
times they see it (Frequency)
Definition
Total Impressions (#) = Frequency (#) * Reach (#)
MBTN | Management by the Numbers
5
REACH
Reach
Definitions:
Reach (#) = People who have been exposed to an advertisement
Effective Reach (#) = People exposed at or above a given effective
frequency level (i.e. only registers if a person has seen an advertisement
three times)
A Venn Diagram is often the best way to
illustrate the Reach of an advertising
campaign.
Reach of
Advert A
Note that the qualifier “net” is often used to
emphasize that individuals are not double
counted when calculating reach. Therefore,
Net Reach is equivalent to Reach.
Caution: Only
count once
Reach of
Advert B
MBTN | Management by the Numbers
6
Definitions
FREQUENCY
Frequency
Average Frequency = Average number of times each person who has
been reached has an opportunity to see the advertisement.
Frequency (#) = Total Impressions (#) / Reached Individuals (#)
Effective Frequency (#) = Number of times a person needs to be
exposed to an ad for it to be counted as “effective”.
Insight
It is important to note that frequency is defined, perhaps non-intuitively,
as the average number of times each person reached was exposed to
the advertisement. It is NOT the average number of exposures for
everyone in a population, whether reached or not. Therefore, if reach is
10% and GRPs are 200, then average frequency is 20. For the 10% of
the population who has been exposed to the ad at least once, the
average frequency of exposures is 20.
MBTN | Management by the Numbers
7
These are three common assumptions about responses to advertising:
1.2
1) Linear:
e.g. Steady progress. As
advertising spend increases,
the response increases.
Linear Response
1
0.8
0.6
Cumulative
Effectiveness
0.4
0.2
0
1
1.2
2) Threshold:
e.g. Complete effect at a
certain point or threshold.
2
3
4
5
Frequency of Exposure
Threshold Response
1
0.8
FREQUENCY RESPONSE FUNCTIONS
Frequency Response Functions
Cumulative
Effectiveness
0.6
0.4
0.2
0
1
1.2
2
3
4
5
Frequency of Exposure
Learning (S) Curve
1
3) Learning or S-Curve:
e.g. Accelerating response followed
by decelerating marginal
effectiveness.
0.8
0.6
Cumulative
Effectiveness
0.4
0.2
0
1
2
3
4
5
Frequency of Exposure
6
7
MBTN | Management by the Numbers
8
Question 2: Phil’s Phabulous Olive Oil just completed their launch
advertising campaign for their new line of Phlying Phish Oils. They
purchased 20 local cable TV ads which generated 25,000 impressions
each. The company’s advertising agency estimated that the average
frequency was 12.5 and that 20,000 people had seen it at least 3
times.
• What was the reach of the advertising campaign?
• If their target population was 100,000 people, what was the GRP for
the campaign?
EXAMPLE
Example
Answer:
Reach
= Impressions / Average Frequency
= 20 * 25,000 / 12.5
= 500,000 / 12.5 = 40,000
GRP
= 500,000 / 100,000 = 500% or 500 GRP
MBTN | Management by the Numbers
9
A company might want to compare the impact of their advertising with
their competition. Share of voice is one measurement used to measure
this relative difference. It does not, however, capture the overall
effectiveness of the advertising campaign.
SHARE OF VOICE
Share of Voice
Definition
Share of Voice = Company Advertising Spending / Total Advertising
Spending in the Market
Conceptually it may be better to use impressions
to measure share of voice to take out the impact
of potential cost differences to the advertiser.
Definition
Share of Voice = Company Impressions / Total Impressions in the
Market
MBTN | Management by the Numbers
10
Question 3: Phil’s Phabulous Olive Oil had one other competitor who
also ran a local ad, but using radio instead. The competitor’s ad
campaign generated 200,000 impressions at a cost of $40 CPM.
• What was cost of the competitor’s ad campaign?
• What was Phil’s share of voice based on impressions?
EXAMPLE
Example
Answer:
We know that CPM
Cost of Advertising
= 1000 * Cost of Advertising / Impressions, so…
= CPM * Impressions / 1000
= 40 * 200,000 / 1000
= 8,000,000 / 1000 = $8,000
Share of Voice
(Impressions)
= 500,000 / (500,000 + 200,000)
= 500,000 / 700,000 = 71.4%
MBTN | Management by the Numbers
11
Marketing Metrics by Farris, Bendle, Pfeifer and
Reibstein, 2nd edition, chapter 9.
- And -
FURTHER REFERENCE
Further Reference
MBTN Web Metrics Module which focuses on metrics
specifically for on-line environments and includes
definitions and examples of hits, pageviews, visits,
visitors, clickthrough rate, cost per click, cost per order,
cost per customer acquired, bounce rate, abandonment
rate, and cost per friend.
MBTN | Management by the Numbers
12