Advertising:

Share of Voice:

- A company might want to compare the impact of their advertising with their competition. Share of voice is one measurement used to measure this relative difference. It does not, however, capture the overall effectiveness of the advertising campaign. - Company Advertising Spending / Total Advertising Spending in the Market - Company Impressions / Total Impressions in the Market

Impressions:

- Are the basic unit of advertisement measurement.

Frequency:

- Average Frequency = Average number of times each person who has been reached has an opportunity to see the advertisement. - Frequency (#) = Total Impressions (#) / Reached Individuals (#) - Effective Reach (#) = Number of times a person needs to be exposed to an ad for it to be counted as "effective". - It is important to note that frequency is defined, perhaps non-intuitively, as the average number of times each person reached was exposed to the advertisement. It is NOT the average number of exposures for everyone in a population, whether reached or not. Therefore, if reach is 10% and GRPs are 200, then average frequency is 20. For the 10% of the population who has been exposed to the ad at least once, the average frequency of exposures is 20.

What is the CPM for an ad that generates 20,000 impressions and costs $400?

- CPM = 1000 * Cost of Advertising / Impressions Generated = 1000 * $400 / 20,000 = 1000 * .02 = $20

Impressions =

- Exposures = Opportunities to See

Gross Rating Points vs Target Rating Points:

- GRP: represent the sum of Rating Points over several media vehicles (note, sometimes provided as a %) - TRP: is the same concept as GRPs but replace the total population with a specific target group. Especially important for advertisers who wish to reach a particular audience

Three Common Assumptions (Frequency):

- Linear (Steady progress. As advertising spend increases, the response increases) - Threshold (Complete effect at a certain point or threshold.) - Learning or S-Curve (Accelerating response followed by decelerating marginal effectiveness)

Gross Rating Points (GRPs)

- Rating Points are used to describe the audience or "reach" of a single advertisement or program. For example, if NBC Nightly News has a rating of 20% (or 20 rating points), that means that a single advertisement will be seen by 20% of a population. - When multiple ads are considered, we sum the rating (points) across all ads To Determine Gross Rating Points (GRPs). Although the rating of single advertisement will never exceed 100 rating point (or 100%), GRPs will usually exceed 100 because the advertisement (or advertising campaign) will be shown multiple times and often across different media choices

Reach:

- Reach (#) = People who have been exposed to an advertisement - Effective Reach (#) = People exposed at or above a given effective frequency level (i.e. only registers if a person has seen an advertisement three times)

Phil's Phabulous Olive Oil just completed their launch advertising campaign for their new line of Phlying Phish Oils. They purchased 20 local cable TV ads which generated 25,000 impressions each. The company's advertising agency estimated that the average frequency was 12.5 and that 20,000 people had seen it at least 3 times ▪ What was the reach of the advertising campaign? ▪ If their target population was 100,000 people, what was the GRP for the campaign?

- Reach = Impressions / Average Frequency = 20 * 25,000 / 12.5 = 500,000 / 12.5 = 40,000 - GRP = 500,000 / 100,000 = 500% or 500 GRP

Reach and Frequency:

- The company might want to know how many different people are actually being exposed to their advertisement (known as "reach"). They also might be interested in knowing how often (on average) someone sees their advertisement (known as "frequency"). - By definition then, Impressions are the product of the number of people (Reach) & how many times they see it (Frequency)

Cost Per Impression:

- To measure the cost efficiency of campaigns, advertisers monitor the cost per impression. Given this is likely to be an impractically small number (fraction of a cent) CPM is more often quoted. CPM is just the cost per thousand impressions or the cost per impression x 1000 - CPM: 1000 * Cost of Advertising / Impressions Generated

Phil's Phabulous Olive Oil had one other competitor who also ran a local ad, but using radio instead. The competitor's ad campaign generated 200,000 impressions at a cost of $40 CPM. ▪ What was cost of the competitor's ad campaign? ▪ What was Phil's share of voice based on impressions (recall from Q2 that Phil had 500,000 impressions)?

- We know that CPM = 1000 * Cost of Advertising / Impressions, so... -Cost of Advertising =CPM * Impressions / 1000 = 40 * 200,000 / 1000 = 8,000,000 / 1000 = $8,000 - Share of Voice (impressions) = 500,000 / (500,000 + 200,000) = 500,000 / 700,000 = 71.4%