NMR: Understanding reach, frequency, engagement, impact and outcomes

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

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

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

Population is the total number of people in your Media Market.

Rating

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

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.

Spot

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 Spotsby RatingMore 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

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

Reach is the number of people in the Media Market that will likely be exposed to one SpotEstimating 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 Percentage

Reach can also be expressed as a percentage, which indicates the percentage of the Population that is exposed to at least one Spot.

Frequency

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.

Item ValueNotes
Quantity5Number of Spots
Rate$ 500.00Cost Per Spot
Media Cost$ 2,500.00= Quantity * Rate
Media MarketChattanooga DMAName of your market
Population827,900From your research
Rating2.10From ratings service such as Nielsen
Average Persons17,386= Population * ( Rating / 100 )
Gross Rating Points (GRPs)10.50= Rating * number of Spots
Cost Per Point (CPP)$ 238.10= Media Cost / GRPs
Impressions86,930= Average Persons * number of Spots
Cost Per Thousand Impressions (CPM)$ 28.76= Media Cost / ( Impressions / 1,000 )
Reach83,618Calculated using algorithm. In this case, we used a binomial distribution model.
Reach Percentage10.1%= Reach / Population
Frequency1.04= Impressions / Reach

 

Understanding reach, frequency, engagement

The concepts of reach and frequency have been mainstays of measuring brand advertising for decades, popularized back in the early 60’s in Leo Bogart’s book “Strategy in Advertising”.  As advertising mediums pre-Internet have been fairly static, the measures of reach, frequency and GRPs have evolved only slightly since the time of Mad Men.

The history of online advertising, however, has been much more tumultuous.  As measurement has moved from impressions to clicks to sophisticated attribution models, the budgets have increasingly moved from “top of funnel” brand awareness building, to “bottom of funnel” demand fulfillment.

It’s not that brand advertising is now a solved problem – far from it, in fact.  Without the constant surveying of consumers, effective measurements of one’s brand awareness and recall is decidedly missing online.

So the concepts of reach and frequency still remain in digital, but they largely ignore much of digital’s strengths: that is, addressability and insights at nearly any scale.

To help address this, we have added a unique set of charts to our standard reporting.  These charts are located in the last tab (titled Charts) of the Audience Map Excel file, and look something like the following:

Slide1

Each dot indicates an audience segment, and the segments are ordered by CTR (or engagement rate).  This is annotated in the illustration below:

Slide2

So the first segment comprises of 1.5MM people at a 19% CTR (this is a real example from one our clients J).  The next segment, at just over 14% CTR, adds about 0.5MM incremental people.  The third highest CTR segment, at 13% CTR, adds another 2MM people, and so on.

In addition, there is a corresponding Frequency value for each segment, which is represented in another chart.

Slide3

Immediately we see that a number of highly engaged audiences (circled in red) have a low average frequency; this could be a cue to allocate or increase budgets to reach those fans more often.

So unlike R/F measures of yesterday, we can chop up audiences into really any level of resolution (male vs. female? Young vs. old?) and inspect to our hearts content.  For every point, we have demographic composition, historical performance, overlapping interests, predicted performance and more.

The Curves in Context

So how do these curves work in a practical context?  We have found that these provide great guideposts for monitoring a campaign.

Slide4

In general, you want curves that are higher and wider: more people seeing your campaigns, and more people engaged with your campaigns.

Slide5

Using this chart, its easy to visually set goals to exceed both reach and CTR by 10% each week.  Pick audiences that have a lot of headroom so that you get more reach, or if there is a new creative insight with a moderately engaged audience maybe push the CTR up.  Or take a top audience and increase their exposure and track the frequency.

All in all, it’s like a chessboard for your marketing war room!

Written by Dan Benyamin

What Does Reach And Frequency Mean? – VIDEO

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