Cost Per Point (CPP) is an advertising metric that approximates the cost of reaching 1% of a specific target demographic in a geographically defined market. It is a standard measurement for planning budgets in broadcast television, radio, and out-of-home (OOH) media. Marketers use CPP to compare the cost efficiency of various media vehicles and campaign schedules.
What is Cost Per Point (CPP)?
The Out of Home Advertising Association of America (OAAA) defines CPP as “the cost of advertising exposure opportunities that equals one rating point in any geographically defined market”. In practice, one rating point represents 1% of the population within your target market.
Also known as Cost Per Rating Point (CPRP) or Cost Per Gross Rating, this metric allows media buyers to determine exactly how much they spend to deliver their message to each percentage point of their intended audience.
Why Cost Per Point (CPP) Matters
- Cost Efficiency: It enables side-by-side comparisons of different media types, such as comparing the value of a billboard campaign against a radio schedule.
- Budget Precision: Planners use CPP to estimate the total investment required to achieve specific reach goals within a local market.
- Strategy Optimization: By identifying media with the lowest CPP, marketers can reallocate funds to channels that offer higher visibility for less spend.
- Objective Measurement: It provides a numerical value to weigh campaign options instead of relying on subjective choices.
How Cost Per Point (CPP) Works
CPP is calculated by dividing the total cost of the media by the Gross Rating Points (GRP) generated by that media.
The CPP Formula
The standard equation for calculating this metric is: CPP = Media Cost ÷ Gross Rating Points (GRP)
Understanding the Components
To get an accurate CPP, you must first determine the Gross Rating Points. This is calculated by multiplying your media reach by the frequency of exposure.
- Reach: The percentage of the target population exposed to the advertisement.
- Frequency: The number of times that population is exposed to the ad.
- Gross Rating Points (GRP): The total impact value. For example, exposing 20% of an audience (reach) to three billboards (frequency) results in 60 GRP.
Net vs. Gross Media Cost
Calculations often vary based on whether the budget includes agency commissions. Historically, CPP was calculated using Gross Media Cost, which included a 15% agency commission.
The industry eventually moved away from this after the US Department of Justice deemed the standard 15% commission anti-competitive. While most media is now priced at Net Media Cost, some buyers still "gross up" their figures by dividing the Net Cost by 0.85 to maintain traditional reporting standards.
Best Practices
- Compare across channels. Use CPP to evaluate the efficiency of OOH versus TV or radio to see which provides the best market penetration for your budget.
- Check the time period. Ratings are often tied to specific time units, such as an Average Quarter Hour (AQH) in radio. Always verify the timeframe to ensure the rating is accurate.
- Combine with other metrics. Do not use CPP in a vacuum. Integrate it with Geopath ratings or Daily Effective Circulation to get a fuller picture of campaign impact.
- Monitor audience action. Remember that CPP measures the cost of exposure, not the cost of conversion. Use it for reach efficiency, not for measuring direct ROI.
Common Mistakes
Mistake: Using Net Media Cost when the media plan requires Gross Media Cost. Fix: If you need to include a traditional 15% commission, divide the Net Media Cost by 0.85 to "gross up" the figure.
Mistake: Assuming a low CPP automatically means a better campaign. Fix: Low CPP indicates cost efficiency, but if the media placement does not reach your specific target demographic, the value is lost.
Mistake: Neglecting frequency. Fix: A high reach with a frequency of one might provide a good CPP, but it may not be enough exposure to drive message retention.
Examples
Scenario 1: Billboard Efficiency
A marketer has a $25,000 budget for three billboards. If the reach is 20% and the frequency is 3 (60 GRP), the CPP is $416.67. This means it costs roughly $417 to reach 1% of the market.
Scenario 2: Alternative Media Comparison
If the same marketer considers nine elevator placements at a cost of $10,000 with a reach of 40%, the CPP drops to $27.78. In this case, the elevator placements are significantly more cost-efficient for reaching a percentage of the population.
FAQ
What is the difference between CPP and CPM? CPM (Cost Per Thousand) measures the cost to reach 1,000 individual people or "impressions." CPP measures the cost to reach 1% of a specific population. While both measure efficiency, CPP is more common in traditional broadcast and OOH media planning, while CPM is the standard for digital advertising.
Why is 15% often used in CPP calculations? The 15% fee was once the industry-standard commission for agencies. While the standardized commission was eventually phased out for being anti-competitive, the terminology remains in many legacy media buying systems.
Can I use CPP for modern digital campaigns? While some practitioners attempt to apply GRPs and CPP to digital channels, it is generally not recommended. Digital media is better measured through reach and frequency or CPM, as the "rating point" concept is native to established broadcast markets rather than fluid digital audiences.
Does a higher GRP always mean a lower CPP? No. CPP is a ratio. If your media cost increases at a higher rate than your GRPs, your CPP will actually increase, indicating that you are paying more for each percentage point of the audience.
What is a "Rating" in the context of CPP? A rating represents the percentage of a total population reached by a single media vehicle. If an advertisement on a specific station reaches 2,300 people in a population of 100,000, it has a rating of 2.3.
