Too many advertisers erroneously base their marketing decisions on the cost per thousand impressions (CPM) of different channels.
Why is the CPM different for different channels? It’s not because the actual cost of executing advertising in certain channels is more expensive than others (although that is true). It’s because the efficiency of a single impression is greater in certain channels.
Media is a marketplace. Prices eventually settle into place based on perceived value. Buyers would not be willing to fund the cost of television versus digital display unless they believed the efficiency was significantly greater. The value of cable television at a $25 CPM must be equal to five times the value of display ads at $5 CPM. Otherwise, why would anyone ever purchase the more expensive option? Why haven’t the pricier media channels been driven out of business? It is because the CPM is the price “the market will bear”.
If one accepts this rational view of media pricing, the notion of CPM becomes rather useless as a planning tool. Spending a $1MM on cable TV would logically deliver the same value as spending $1MM on display ads. Display ads merely require more impressions to deliver the equivalent value (i.e., has a message been seen and absorbed by an audience of consumers?).
I encourage clients to think in terms of the return per thousand impressions or RPM. RPM represents how hard your marketing dollars are working to achieve a financial result. With price essentially a “constant” across channels, choosing the appropriate mix of media depends on the answers to more strategic questions.
Which channels are being used by the people that represent the best opportunity for my brand?
With the myriad of media available today, it is clear that no single channel reaches everyone. And even those channels with equivalent levels of consumption are often used by very different types of consumers. In today’s people-based marketing environment, the first order of business is always to determine who is the best target for your message. Developing a high value audience of actual people who have the highest likelihood to convert is crucial. Once this has been established, determining the appropriate media mix starts with maximizing effective reach. What channels and more importantly what combination of channels will reach your audience? CPM’s inside the specific channel become meaningless as long as the overall return is in line with expectation.
Which channels are best able to deliver an effective call-to-action?
Not all channels are created equal in their ability to deliver your brand message and your offer in a compelling manner. Video continues to be an essential element in selling many brands’ value proposition. For others, print is necessary to more clearly articulate the offering. Once you know the channels that will allow you to reach your target, eliminate those that are unable to present the communication in the way you intend. One channel may be perfectly capable of creating engagement at the awareness building stage, while another may be necessary to deliver a conversion-worthy offer. Spending the same amount of money in the same channel for both purposes will quite likely produce a very different RPM.
Which channels offer the opportunity to intercept my target at the appropriate time?
Finally, pay attention to which media channels allow you to reach your target consumers at the appropriate “moments of truth”. Consumers are more mobile than ever before, and in reaction, media is more portable than at any time in the history of advertising. In addition to considering the WHO (i.e., the target) and the WHAT (i.e., the content), you must also factor in the WHEN (i.e., the timing). A billboard that features your spokesperson may attract the attention of a consumer on their afternoon commute but might not be recalled when she is shopping on her tablet. In that case, the $10,000 spent on out-of-home might be better used to purchase twice as many impressions on social media at a higher RPM.
Of course, truly “new media” can command a higher initial CPM among early adopters until the marketplace has an opportunity to evaluate the true value of its impressions (think the cost of next generation consumer electronics upon introduction). Eventually, the realized cost/value ratio has an opportunity to settle in and a bearable CPM is set. Assuming these emerging channels fit the choice criteria outlined above for your brand – your target embraces them; they fit your message requirements; the timing of delivery can be optimized – paying an inflated cost to create a first mover advantage via emerging media can be well worth the spend.
Once you accept the fact that CPM is really your advertising peers (both inside and outside of your industry vertical) telling you the comparative value of various media impressions, you will have the incentive to make your media mix decisions based on the criteria that will have a much bigger impact on sales. So stop worrying about CPM as the way to choose between media channels. Think RPM. Your CFO will thank you.
By Scott Bailey, EVP, Strategy Analytics