Budgeting & Media Buying

JMC 222 Media PlanningDepartment of Media & CommunicationHanyang University

CPM & CPP

� Which is more efficient?

� Comparing multiple vehicles requires a standardized criterion(e.g., price/unit)

A’s CPM = (23,500/2.0mil.) x 1000 = $11.75

B’s CPM = (13,500/1.2mil.) x 1000 = $11.25

Magazine Circulation Ad Rate

A 2.0 million $23,500

B 1.2 million $13,500

CPM & CPP

� CPM (Cost-per-thousand)

� The cost to deliver 1,000 people or homes

CPM = -------------------------------------- x 1000

� CPRP or CPP (Cost-per-rating-point)

� The cost to deliver 1% of the target audience

CPP = Ad unit cost / Rating points

Ad unit cost

# of prospects reached

CPM & CPP

� Print mediaFemale Homemakers: 69,405,000

Rating #Target $1p/4c

Reader’s Digest 26.6 18,461,730 124,730

TV Guide 25.4 17,628,870 112,900

Vogue 20.8 14,436,240 103,190

CPM($) CPP($)

Reader’s Digest 6.76 4,689.10

TV Guide 6.40 4,444.88

Vogue 7.15 4,961.06

CPM & CPP

� Broadcast media

Adults 35-44: 30,132,000

Rating $/Ad Unit

Days of Our Lives 3.7 20,000

CBS News 6.2 49,000

Drew Carey Show 11.9 135,000

CPM($) CPP($)

Days of Our Lives 17.94 5,405.41

CBS News 26.23 7,903.23

Drew Carey Show 37.65 11,344.54

CPM & CPP

� CPM based on Gross Impressions (GIs)

CPM

$8.33

$37.50

$25.00

Schedule TargetReached

Insertion GIs Total Cost

Spot TV 600,000 3 1,800,000 15,000

Magazine 400,000 5 2,000,000 75,000

Net TV 800,000 2 1,600,000 40,000

CPM & CPP

� CPP based on Gross Rating Points (GRPs)

CPP

$142.86

$500.00

$444.44

Schedule Rating Insertion GRPs Total Cost

Spot TV 35 3 105 15,000

Magazine 30 5 150 75,000

Net TV 45 2 90 40,000

CPM Comparison by Media

Medium 2004(Won) 2005 2006 2007

KBS-2TV 4,171 4,273 4,896 5,451

MBC 3,658 4,595 5,298 4,956

3,985 4,105 4,806 5,514

Top 3

dailies

17,976 18,236 19,633 19,713

Top 7

dailies

72,488 78,287 87,555 83,294

61,009 61,464 63,776 67,450

SBS

Top 4

economic

dailies

CPM & CPP

� CPM is used to compare the efficiency of individual vehicles

E.G., “Running Man” vs. “SBS 8 News”

� CPP is the tool most often used to calculate the cost of an entire media plan

E.G., Broadcast plan A vs. B

� CPM and CPP must be used on a “relative” basis

E.G., 5,000 (won) CPM becomes meaningful only in comparison to other CPMs like 4,000 and 7,000

CPM & CPP

� It is important to express CPM and CPP in dollars and cents

E.G., 150 CPM (x); $150.00 CPM (o)

� Be cautious about accepting/rejecting media vehicles only on the basis of CPM/CPP

� CPM/CPP reflects only cost efficiency of media; media/vehicles are not equivalent in terms of the quality of impact

CPR

� CPR (Cost-per-reach)� The cost to deliver 1% reach during a period

CPR = --------------------------------------

Ex) Total ad cost spent for 2 weeks = 24 million wonTotal reach for 2 weeks = 50%

CPR = 24,000,000 / 50 = 480,000 won

Total ad cost spent for 6 weeks = 72 million wonTotal reach for 6 weeks = 75%

CPR = 72,000,000 / 75 = 960,000 won

Total ad cost/period

Total reach/period

CPR

� CPR is often used to evaluate the efficiency/inefficiency of an entire media schedule

� CPR tends to increase as the total ad cost increases� CPR is equivalent to the slope of a tangent line to a cumulative reach function

Reach

time

F(x)

F’(x)

Budgeting

� Media budget allocation� By media types� By time periods� By national vs. local coverage

� Budget allocation by media types

Toyota (%) Industry (%)

Network TV 31.70 28.44

Spot TV 28.04 32.05

Syndicated TV 0.58 1.16

Cable TV 7.87 8.03

Total (TV) 68.19 69.68

Budgeting

� Budget allocation by media types

� Toyota’s ad budget is allocated primarily to TV and magazines. The remaining portion (5.89%) can be allocated to other media types like the Internet and brochures

Toyota (%) Industry (%)

Magazines 25.52 18.56

Sunday Mag. 0.40 0.34

Total (Mag.) 25.92 18.90

TV + Mag. 94.11 88.58

Budgeting

� Budget allocation by time periods

0

5

10

15

20

25

30

35

40%

of

Bu

dg

et

Q1 Q2 Q3 Q4

If your product is a seasonal product with large sales fluctuation

Budgeting

� Budget allocation (media x time)

Q1 Q2 Q3 Q4

(30%) (15%) (45%) (15%)

Network TV (30%) $2.52 mil.

Spot TV (30%)

Cable TV (8%)

Synd. TV (0%)

Magazines (20%)

Internet (8%) $.672 mil.

Outdoor (4%)

If your budget is $28 million, $28 million x .30 x .30 = $2.52 million

If your budget is $28 million, $28 million x .30 x .08 = $.672 million

Budgeting

� Budget allocation by time periods

� Network TV budget in Quarter 1

� Quarter budget: $2,520,000

� Monthly budget: $2,520,000/3 = $840,000

� What to expect from $840,000?

� Prime $840,000/$20,000 CPP =

� Daytime $840,000/$6,500 CPP =

� Late fringe $840,000/$17,000 CPP =

42 GRPs

129 GRPs

50 GRPs

Budgeting

� Media flowchart: An example

March April May June July Aug. Sept. Oct. Nov. $ (000)

Net TV 4,000

Cable TV 4,000

Spot TV 1,500

Spot Radio 1,000

Magagine 2,500

Newspaper 1,500

Outdoor 600

Internet * 2,000

Promotions

% Budget 15 8 8 8 8 8 15 15 15

$ (000) 2,565 1,368 1,368 1,368 1,368 1,368 2,565 2,565 2,565 17,100

Any question?