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 Definition Impressions are the basic unit of advertisement measurement 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)

Gross Rating Points (GRPs) Rating Points are impressions as a percent of a population. Therefore, if an advertisement is shown on TV 4 times and that show is watched by 10,000 people out of a population of 100,000, that advertisement would generate 40 rating points (4 x 10,000 / 100,000). Because people can be exposed to an advertisement multiple times, this measure is often greater than 100. Definition Gross Rating Points (GRPs) represent the sum of Rating Points over several media vehicles Gross Rating Points (%) = Impressions (#) / Total Population (#) Definition Target Rating Points (TRPs) replace the total population with a specific group

Cost Per Impression and CPM 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. Definition CPM is just the Cost per Thousand Impressions CPM ($) = Cost of Advertising / Impressions Generated (in 000s) Example: 20,000 impressions generated for $400 have a CPM of $20.

Reach and Frequency Definition Reach and Frequency 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”). 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 (#)

Reach of an advertising campaign Definition Reach: number of people who have been exposed to the advertisement Reach of Advert A Reach of Advert B Caution: Only count once Reach of an advertising campaign AKA Net Reach: The qualifier “net” is often used to emphasize that individuals are not double counted when calculating reach. A Venn Diagram is often the best way to illustrate Reach Definition Effective reach is registered only after a threshold (effective frequency -- often 3) has been achieved Effective Reach (#) = People exposed at or above a given Effective Frequency (#) level

Frequency Definition Definition Frequency Average Frequency is the average number of times each person who has been reached has an opportunity to see the advertisement. Frequency (#) = Total Impressions (#) / Reached Individuals (#) Definition Effective Frequency is the number of times a person needs to be exposed to an ad for it to be counted as “effective”.

Frequency Response Functions These are three common assumptions about responses to advertising: Linear: steady progress 2) Threshold: complete effect at certain point 3) Learning - S – Curve: accelerating followed by decelerating marginal effectiveness

Share of Voice Definition Definition 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. 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