What are GRPs, Ratings, Reach, Frequency, and Impressions in advertising? How are they calculated? And how do they relate to each other? When creating a media plan, it’s important to have a firm grasp of these often misunderstood advertising terms, even if they are built into your media planning software.
This article aims to give you clear, concise definitions and examples of important advertising terminology: Media Market, Population, Rating, Reach, Frequency, Gross Rating Points (GRPs), Impressions, Cost per Point (CPP), and Cost per Thousand Impressions (CPM).
Media Cost is the price you pay to present your advertisement. There are many different ways to price media including points, impressions, clicks, leads, actions, days, weeks, months, etc. However, it ultimately boils down to the amount you pay to present your advertisement, which is Media Cost. Media Cost excludes the cost to create the advertisement and other costs.
Media Market or Market describes the set of people that could potentially be exposed to your advertisement. The media market is often described using Designated Market Areas or DMAs, which are trademarked by Nielsen. However, Media Market can be any market you define. More on Media Markets…
Population is the total number of people in your Media Market.
Rating is the percentage (0 to 100) of the Media Market that will likely be exposed to your advertisement. Rating is an estimate based on past performance often sourced from surveys. More on Ratings…
Average Persons is the number of people that, on average, will be exposed to each Spot. Average Persons is calculated by multiplying Population by Rating then dividing by 100.
A Spot is a single broadcast of an advertisement. Typically, an advertising placement includes multiple spots.
Gross Rating Points (GRPs)
Gross Rating Point (GRP) is a measure of the size of an advertising campaign by a specific medium or schedule. GRP is calculated by multiplying the number of Spots by Rating. More on GRPs…
Cost per Point (CPP)
Cost per Point (CPP) is a measure of cost efficiency which enables you to compare the cost of this advertisement to other advertisements. CPP is calculated as Media Cost divided by Gross Rating Points (GRPs)
Impressions are the total number of exposures to your advertisement. One person can receive multiple exposures over time. If one person was exposed to an advertisement five times, this would count as five impressions. Impressions are calculated by multiplying the number of Spots by Average Persons.
Cost per Thousand Impressions (CPM)
Cost per Thousand Impressions (CPM) is another measure of cost efficiency which enables you to compare the cost of this ad to other advertisements. CPM is calculated as the Media Cost divided by Impressions divided by 1,000.
Reach is the number of people in the Media Market that will likely be exposed to one Spot. Estimating reach is tricky because when you run an ad multiple times, the same person may see the ad more than once but you only want to count them once in Reach. There are many different methods to estimate reach. Most rely on software, such as Bionic’s Media Planning Software, to calculate reach. More on Reach…
Reach can also be expressed as a percentage, which indicates the percentage of the Population that is exposed to at least one Spot.
Frequency is the average number of times the advertisement will be presented to the Reached Population. One way to calculate frequency is to divide the number of Impressions by the Reach. Another way is to divide GRPs by Reach Percentage.
Example – Broadcasting 5 Radio Spots in Chattanooga
Here’s an example of all of the above advertising terms in action. In this example, we’re broadcasting 5 radio spots at a cost of $500 each to the Chattanooga market.
|Quantity||5||Number of Spots|
|Rate||$ 500.00||Cost Per Spot|
|Media Cost||$ 2,500.00||= Quantity * Rate|
|Media Market||Chattanooga DMA||Name of your market|
|Population||827,900||From your research|
|Rating||2.10||From ratings service such as Nielsen|
|Average Persons||17,386||= Population * ( Rating / 100 )|
|Gross Rating Points (GRPs)||10.50||= Rating * number of Spots|
|Cost Per Point (CPP)||$ 238.10||= Media Cost / GRPs|
|Impressions||86,930||= Average Persons * number of Spots|
|Cost Per Thousand Impressions (CPM)||$ 28.76||= Media Cost / ( Impressions / 1,000 )|
|Reach||83,618||Calculated using algorithm. In this case, we used a binomial distribution model.|
|Reach Percentage||10.1%||= Reach / Population|
|Frequency||1.04||= Impressions / Reach|