How to Efficiently Media Buy on TV

Media-ChartsThere are many questions we’re asked when placing a media buy for a client. One of the most frequent questions is…

How do you measure success on a media buy?

One major way we measure the success of a media buy is through the cost per point (CPP) – a ratio based on how much it costs to buy one rating point, or one percent of the population in specified market or area. The CPP is calculated by taking the total amount spent on a specific television station and dividing it by the total number of gross rating points (GRPs). GRPs, pronounced “grips”, are a standard measure in advertising denoting the advertising impact. GRPs are calculated by the total number of spots that you have running in a specific daypart (timeframe) on a TV station, multiplied by that specific daypart rating. Daypart ratings are determined by how many people in the market tuned into that show, or timeframe.

Nielsen and Rentrak are two major global information, data and measurement companies. They create ratings books that will give a rating to every program that runs on TV. Some of our clients advertise all 12 months of the year. So, to get a better idea of how the program we are buying did, we might ask that the TV station rep uses a 4 book average for all 4 seasons of the year. The ratings will be different for whatever age group you decide to use as your demographic. This way, if a November book performs exceptionally, but a July book does not do nearly as well, they would be averaged together and that would be the rating given to that program. This is very important because it affects your cost per point. Whatever the average rating is of all four books is your rating for that program. If we divide the program rating into the spot rate, we get the cost per point.

All markets are different sizes, especially in population. The size of a market typically impacts the cost per point. For example, smaller markets in rural and upstate New York would have lower cost per points than markets of a much larger size like, metro (NYC) area, Buffalo and Albany. Our goal as a media buyer is to reach our audience demographic at the lowest cost per point we possibly can.

Confused yet? Don’t worry… here’s an example:

Station A is #1 in the market (in ratings/viewership). Station B is #2 in the market.
We have a budget of $1000 to advertise with. I receive one proposal from each station using a 4 book average from Rentrak.
Station A’s proposal:
5am-6am morning news – $50 per spot for 4 spots – Rating 2.8
6pm-7pm evening news – $200 per spot for 4 spots – Rating 12.1

So for $1000, I would receive 4 spots in morning news and 4 spots in evening news. If I multiply the rating of 2.8 x 4 morning new spots, this gives us our GRP’s total, which is 11.2. Doing the same thing for evening news, it’s another 48.4 GRP’s. So total for $1000, we would receive 59.6 GRP’s. If we divide the $1000 into the total GRP’s 59.6, we get our cost per point, which is $16.78.

Station B’s proposal:
5am-6am morning news – $25 per spot for 8 spots – Rating 2.2
6pm-7pm evening news – $100 per spot for 8 spots – Rating 8.6
The total GRP’s with the same calculations above would be 86.4 GRPs. And if we divide to get our cost per point, it is $11.57.

As you can see, the #2 station, station B costs $5.21 less to buy one rating point. This example shows you just two dayparts (time slots your ad has to run in), now imagine a cable buy when you are buying 15 different networks and 4 different day parts per network?! Things get crazy. That’s when a media buyer can be essential to ensuring you get the most bang for your buck. The best part, media buying is typically a free service provided by agencies like MPW. You don’t pay extra for this service. A typical 15% commission is paid directly out of your intended media investment. So, you get more value out of the media outlets and don’t have to pay a dime to do it. Now THAT is a win-win.