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THE NUMBERS GAME
CPM and Cost-Per-Point are not the same
By Erwin Ephron
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TV and Radio have two standard ways of presenting audience -- as gross impressions, a whole number and as gross rating points, a percent of a market’s population. The currency measure based on impressions is the familiar Cost-per-thousand (CPM). The currency measure based on coverage is Cost-per-rating-point (CPP). The big difference is a rating point counts only impressions delivered to a specific area, a CPM counts all impressions. CPP to CPM
CPM to CPP
Cost-per-point and Spot Media Spot media’s use of cost-per-point isn’t an accident, it’s the correct currency. Spot is market-specific and Cost-per-point emphasizes this ability to reach specific high value areas.
Which is the better measure? The better measure depends on the task. Cost-per-point is the cost of geographically targeted impressions and is most useful for buying spot media like Radio. Rating points are essential for planning weight and estimating reach and frequency for all media.
But the two measurements also have competitive implications. Media with dispersed audiences like Cable TV look much better on CPM than on Cost-per-point. Their geographic area is large so their audience as a percent of the population is small. That means a rating point costs a lot. A spot medium like Radio will do better with Cost-per-point than CPM because its impressions are concentrated in a specific market area. CPM, which counts all impressions, will exaggerate the cost of Radio since Radio impressions delivered outside a market are not usually measured. And the frequent claim that CPMs are more useful because they let us compare the cost of different media is a myth. CPM’s are comparable only for like media. The TV network model is national, other media are local. Advertisers are willing to pay for geographic selectivity when it targets a brand’s markets. Cost-per-point is the only appropriate measure of that.
- April 22, 2009 -
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The recent industry proposal that spot media change from a cost-per-point
to a cost-per-thousand currency measure ignores important differences -- and
has competitive implications that go beyond the numbers. 
Turning a CPM into a CPP is simple. You just have to know how many thousand
viewers or listeners are in a rating point. For example if a market has 1,000,000
adults 18+, then a rating point is in-market impressions equal to 1% of that
or 10,000. If the cost of buying that rating point is $100 then the CPM is
$100/ (10,000/1000) or $10.00. It’s an easy calculation if you know the
population of the market the CPP is based on. 
Turning a CPM into a Cost-per-point is more labor intensive. You first have
to find out how many of the medium’s total impressions were delivered
to the desired market area. For National TV it’s simple. The market is
the U.S.
CPP also simplifies Spot planning. If for example,
a brand needs 100 Adult 18+ points a week to achieve a 40 weekly reach goal,
buying that is simple. To budget this, the buyer takes the CPP of $100 and
multiplies it by 100 and gets the weekly schedule cost of $10,000. You can’t
do this with cost-per-thousand unless you first convert it to cost-per-rating-point. 
CPM is the cost of impressions delivered anywhere and is most useful for
buying national media and for comparing like media. 
Fifty years of TV as the most important medium in dollars has given us CPM-ready
back room system. In the name of efficiency we would like to use a TV CPM currency
measure for all media. That suggests the one measure fits all. It doesn’t.
