In broadcast media, one of the two ways media buyers and sellers measure cost-efficiencies is by CPP or cost-per-point. Cost-per-points are what keep buyers within their budgets. Buyers rely on Sqad or Media Market Guide to tell them what a CPP should be in an upcoming quarter, by market, by day part. Both services are very reliable in their reporting. CPP are based on the rating for a TV program relative to the cost. Ex. if the program cost $100 and the rating is a 5 then divide it and you come up with a $20 cost per rating point.
A professional media buyer should know what the CPP’s should be for all markets and can negotiate for a lower CPP rate which lowers your cost per thousand which means you reach more people for less money and have a more efficient and more effective campaign. How can a media buyer negotiate off the CPP? When you are buying time, you are buying it off of the program’s rating from a previous time period. Understanding media and the marketplace can give buyers the advantage to negotiating the rates lower. Knowing about new programming that can pull viewers, changes in TV programming, political interruptions, movie premiers, inventory conflicts, etc.
Ex: buyers to this coming Super Bowl will get CPP based off 2009 rating. But good buyers will negotiate and should take into account other factors such as, who will be playing in the super bowl, will the teams bring in that many eyeballs, will there be additional spots leading up that can be purchased, will there be competitive shows to pull viewers? These factors and more can be negotiated for a lower CPP or added value.
The other cost-efficiency measurement is CPM or cost-per-thousand. CPMs remain fairly constant across the country; however, they do vary by day part.
When a media buyer gets an avail sheet back from a television station, for example, that is double the CPM the media buyer believes the CPM should be, it does not really sound an alarm, as the buyer knows there is always room for negotiations and the stations expect the buyers to bring the initial rate submission down.
However, when someone is buying “direct” or without a media buyer they often buy directly from the rate card. Broadcast rate cards can change weekly or even daily depending on inventory. Instead of paying for how many eyeballs will be seeing that spot during that program, you often pay by supply and demand which could run double the amount of the actual value of the spot!
In defense of broadcast, it can sometimes benefit the customer to buy direct. If the media inventory is high, then they offer “fire sales” or buy today offers. Problem with this strategy is that they have high inventory for a reason. The programs have low ratings or it is off season and less people are watching the programming. Most often you pay too much for the CPP/CPM and too much for the schedule. It just appears to be a good deal because it is a cheaper rate than what you are used to paying. If you are buying media direct from the media company, you must know how many people watch the programs that you are interested in purchasing, you must know what demographic groups are watching the programs, you must know the ratings for those programs, you must know what that airtime should cost for your specific market on a cost per point and a cost per thousand basis, and you must know other negotiating tactics to get the best values. Otherwise, how is it possible for you to get the best pricing for your media schedule?
Media buying and planning is very technical and requires a lot of research, experience and understanding of the programs for cable and network. If you want to have an efficient schedule that is also effective, you should have a media buyer that represents your company and not rely on the media company that you are buying from to negotiate the deal. Of course their interests are to charge you the most money for your schedule. What makes their profits higher? Higher rates for advertisers. It would be like having a car salesman negotiate your next car deal for you. Buyer beware!