ELI5 Part 2 - Media Efficiency
As discussed in my previous blog, ELI5-Media KPIs, I like Reddit’s Explain Like I’m Five (ELI5) forum. It’s a great learning tool that breaks down complex and detailed information in such a way that a five-year-old could understand it. In the last blog, I focused on Media KPIs that are related to top of the marketing funnel and help measure brand awareness. This time I will break down media KPIs that measure the efficiency of your advertising campaign.
As a reminder, KPI (Key Performance Indicator) is a unit of measurement that allows measuring and evaluating your business performance. It helps determine whether the objectives of an advertising campaign are being met. Not all KPIs are appropriate for all businesses or advertising campaigns. KPIs need to align with the business objectives and goals to be helpful.
What is efficiency regarding Media buying? Media Efficiency is the relative cost of advertising on different media. It’s a way to compare the costs associated with media placement in everything from out of home to TV to digital ad placement. There are several KPIs that are used to analyze media placement efficiency.
Cost Per Mille (CPM)
ELI5: CPM is the cost charged for 1,000 impressions. CPM is one of several methods used to price ads. The benefit of using the CPM model is that it can be used to compare costs within and across all advertising mediums. The cost of advertising on one billboard vs the cost of advertising on a different billboard can be compared using the CPM model. In addition, the cost of advertising on a billboard can be directly compared to the cost of advertising on the radio or on the internet. CPM is useful for comparing the relative efficiency of various advertising opportunities. It all boils down to how much does it cost versus the chance of your ad being seen or heard (aka impressions) by 1,000 people.
Cost Per Point (CPP)
ELI5: CPP measures how much it costs to purchase one rating point, or one percent of a specific demo in the population in a specific area. This measurement tool is used exclusively in TV and radio advertising. It’s helpful to evaluate cost based on relative size of the population but the major drawback of using CPP as a measurement tool is that all rating points are not the same. One percent of the population in NYC is a much larger audience than one percent of the population in Tulsa. If you are running a regional advertising campaign, CPM might be a better measurement tool to use.
Cost Per Click (CPC)
ELI5: CPC is the is a KPI model based entirely on the clicks that are made on the ad. The advertiser pays an amount ranging from a few cents to a few dollars for each click on the ad. There is no payment, regardless of number of impressions, if the ad is not clicked. The benefit of this model is that you are not paying for wasted impressions, however, this model can only be used in the digital advertising medium. CPC would be a beneficial measurement if your primary goal is to drive people to your website.
Click Through Rate (CTR)
ELI5: CTR is the percentage of clicks to impressions served. It is one of the basic KPIs to evaluate the performance of a campaign on any of the usual digital channels. The philosophy is the higher the percentage of clicks you get the greater the likelihood of generating more revenue. CTR is calculated by dividing the total number of clicks received by the total number of impressions served over a given period and is expressed as a percentage. “Good” CTRs vary by industry.
With all this in mind, these terms are just the first steps in analyzing media efficiency. Media Planners and Media Buyers do not exclusively use the KPIs when planning their strategies and media mix. The value of each medium in your target audience and geo is analyzed separately, these KPIs are just steppingstones to a deeper strategy and analysis of the campaign’s overall performance.
At A3 Media we are well versed in the many different KPIs used to measure the efficiency of your advertising campaign. We understand how to align the correct KPIs with your business goals. We continually monitor the campaign against those KPIs, so we know when adjustments are necessary. You can trust us to have your best interests in the forefront of all our business practices. Reach out to us to learn more about how we can help you measure the effectiveness of your advertising efforts.