What is CPM? Our weekly fire-sale auction process utilizes the Cost per Thousand (CPM) pricing format. This means that you are making bids on packages of airtime based on how many people (impressions) will hear or see your commercial on average each time it runs. The CPM (cost per thousand) pricing method is the most accurate formula for buying local TV and radio advertising. It is far superior to buying inventory based off spot pricing or household counts. You will not find a single Fortune 100 or Fortune 500 company that buys TV or radio commercials based on household counts or random “spot” price quotes (with no proof of what you are buying) because they are cheap and seem like a good deal.
Here is an example of how to calculate price based on CPM. Let’s say you want to run prime time radio commercials in Amarillo, TX, during the 6AM-7PM time slot. You decide to call a couple of local stations and they send you some price quotes. One station you speak with gives you a price quote of $24.00 per commercial. Based on all the quotes you received, it was the lowest one, so it must be the best deal, right? Since you are a savvy executive and know about CPM, you then ask the sales rep to provide you the Arbitron average impression data (based on 15 minute time-periods) for the 6AM-7PM time slot. Once you receive the data, it shows that they only have 2000 people listening on average during that time period. So using the basic CPM calculation
Average Impressions (AQH) during the time period / 1000, you would come up with a result of the number 2. You would then finish the formula by dividing the price quote by the previous number: Price Quote per commercial ($24.00) / 2 = $12 CPM.
After you have done the calculations, you then determine that the $24.00 price quote you received is not a great deal. In fact, it is a little worse than the local $10.00 CPM average (based on our national competitive intelligence research) in the U.S.
If you would like to see more examples of sales tricks to watch out for, please visit our blog at http://www.wholesaleairtimeauction.com/blog. Three good articles to check out would be:
#1 What is a Fair Price per Spot – The Potato Chip Analogy
#2 Phony Household Counts
#3 Watch out for CUME Impressions, Viewership, Listenership
If you would like to learn more about our weekly fire-sale CPM auction, please click here to go to our Contact Us page.