Understanding Media Math

Advertising is a complex business. Among other tasks, advertisers and marketers must concern
themselves with devising a focused, effective message, that builds and reinforces such intangible
concepts as brand identity, and then planning a method for communicating that message to
consumers.

Planning a method to communicate the message is a particularly complex task. First they have to
choose from among all the media outlets available, from television and radio to a myriad of
potential print publications. Next, they have to decode each medium's unique method of
measuring its reach and influence among consumers.

Media measurements generally fall into two categories: Broadcast and Print.

Each category is divided into myriad sub-categories to measure audience information ranging
from simple concepts relating to the number of people likely to see an ad down to details as
specific as the demographic makeup of the audience.

Additionally, each category has several different ways to assess advertising costs.

Media planners and media buyers use all this information to purchase and monitor advertising
campaigns.

The goal of this tutorial is to enable an understanding of the mathematical relationships behind
media concepts and measures.

Role of the Media Planner and Buyer

Most marketers will hire professional help before launching an advertising campaign. A large part
of that help comes from media planners and media buyers.

Some media planners and buyers work in specialized firms. Often, however, they are a part of a
larger advertising agency. Such full-service agencies can work with marketers from start-to-finish
to devise marketing messages, create advertising to communicate that message, and select
outlets to air the message.

Media experts specialize in monitoring the performance of advertising on various media outlets.
Their first job is helping marketers select outlets that enable access to specific groups of people –
which can be divided by age, income, race, occupation, sex and a myriad of other criteria.

This is primarily the role of the media planner. In addition to picking outlets, the media planner is
responsible for coming up with a schedule that balances a marketer's need to get a message to
consumers, and a marketer's need to stay within his budget. A separate tutorial, called Principles
of Media Planning, deals with the media planning process in more detail.

Once the media planner and marketer agree to a plan, the media buyer takes over. The media
buyer’s job is to actually negotiate rates to run advertising. Additionally, the media buyer tracks
the effectiveness of those advertising runs.

Traditionally, media planners were paid a 15 percent commission on the value of the advertising
they place. In fact, the advertising industry got its start as a media buying service, not a creative
world. The first advertising agencies acted as brokers between marketers and media outlets –
predominantly print and radio outlets at the time.
Some media planners still work on a commission plan, but increasingly, advertising agencies are
using different formula to earn their money. Media planners and buyers are changing with them.

Many advertising and media professionals work on a flat fee system. The fee structure varies
between firms. Generally, however, rates are devised by looking at a firm's billings for the fiscal
year and level of staffing. That way, firms with experience running larger, more complex
campaigns can justify a higher rate.

Typically, the costs for paying the media advisors and advertising staff would already be
incorporated into the media plan.

Television: Basic Measurements

Television has three basic units of measurement:

 Households Using Television (HUT)

 Share
 Rating

Households Using Television

This is the total number of households in a given market that have their television sets on at a
particular time.

The measure is expressed as a percentage of the total number of televisions. HUT can be used
to measure the percentage of the entire country with the television on, or it can be drilled down to
specific markets.

Households Using Television
=  HUT
All Homes with TV Sets (Universe)

For example:

National   Total U.S. TV homes: 100,800(000)

    # of homes with set on: 60,480.0
    HUT = 60%
       
Local   Total TV homes in DC: 1,999,870
    # of homes with sets on: 1,119,927
    HUT = 56%

Generally, HUT is a predictable number. More television sets will be turned on during prime time
(8pm – 11pm Eastern time) and during specific seasons of the year.
HUT is another way of saying, "total available audience." Obviously, households with the
television off will not see a commercial, so it makes no sense to include them in calculations of
Rating and Share.

Share

Share is the percentage of the audience that is using the television (HUT) that is tuned to a
particular station.

Program Audience
= Share
HUT

For example, say six out of ten televisions are turned on (HUT = 60%). Of those six, two
are watching CBS, two are watching NBC, one is watching ABC and one is watching
Fox.

Share Calculation

CBS CBS NBC NBC ABC

FOX Off Off Off Off

In this example, CBS has a 33 percent share. One-third of the televisions in use in a market are
tuned to CBS.

Share is basically a percentage of a percentage. It measures a particular program or network's

piece of the available viewer pie.

Rating

Rating is a percentage of the total television audience (whether or not their television is turned on
at the time) in a given market that is tuned to a particular program.

Program Audience
= Rating
All Homes with TV Sets (Universe)

Rating Calculation
 CBS CBS NBC NBC ABC

FOX Off Off Off Off

To borrow from the Share example above, in a hypothetical market with ten televisions where two
sets are tuned to CBS, CBS has a Rating of 20 percent. ABC, since it has only one viewer, has a
Rating of 10 percent.

Practice

Try the following calculations:

Fact: There are 100,800,000 TV households in the U.S.

Fact: On Sunday, April 16, from 7-10 pm, 64,612,800 homes had their TVs
on.
Fact: 8,064,000 homes were tuned to "Walking with Dinosaurs"
         
Questions: What was the HUT for April 16, 7-10 pm?
  What was "Dinosaurs" share?
  What was "Dinosaurs" rating?

If you know the formulas to calculate HUT, Share and Rating, you only need two of the numbers
to calculate the third.

Television: Other Key Measures

Not content with HUT, Share and Rating, television has several more measures used to gauge
the success of television programming and advertising.

 Performance factors
 Gross rating points
 Reach
 Frequency

Gross rating points, reach and frequency also are used to measure advertising in other vehicles
such as radio, mail pieces and print.

Performance Factors

Performance factors are an index of market performance compared to the national average for a
particular program or station within a time period. It is a tool to measure differences in viewership
in different markets around the country.
For example: "20/20"

National Rating = 16.9

Miami Rating = 17.5
Boise Rating = 15.4

The performance factor for "20/20" in Miami was 104 and in Boise it was 91. This means that the
program had more viewers in Miami than the national average, but less in Boise.

Gross Rating Points (GRP)

This is a measure of the total gross weight delivered by a media vehicle. If a commercial runs
more than once during a program, the audience was exposed to it more than once. Gross rating
points is a tool to reflect that exposure in a way that a simple look at the audience size would not
measure.

One rating point means one percentage point of the coverage base.

For example:

U.S. TV base = 100,800,000

1 GRP Audience of 1,008,000

Since gross rating points are duplicated ratings that measure exposure to an ad, the number can
exceed 100.

Reach

Reach measures the percent of households exposed to a specific media vehicle at least once. It
is also referred to as the unduplicated audience.

For example:

Assume one occasion for each of the following

Program GRPs Reach Frequency

Friends 14.4 14.4 1.0
ER 21.5 21.5 1.0
Will & Grace 8.4 8.4 1.0
Total 44.3 37.0 1.2

The reach of 37 (or net audience) is lower than the GRP's of 44 (or gross audience) because, on
average, some people are exposed more than once (1.2).

How many households are reached with the above schedule? 37,296,000
(37.0% reach x 100,800,000 U.S. television base).
Frequency

The average number of times an audience is exposed to a media vehicle. The average frequency
is not the number of occasions (spots).

For example:

Household Average 4-Week

Daypart # Announcements GRPs Reach Frequency
Prime 19 325 87 3.7
Late Night 24 105 40 2.6
Total 43 430 91 4.7

Though this plan has 43 occasions (spots), the average frequency is only 4.7. Why?

The formula is Reach x Frequency = GRP. Simple algebra says that 430 (GRP) divided by
91(reach) equals 4.7. The frequency is lower because not everyone was watching each spot.

Frequency is an average number, not an absolute one. To determine how many times the
majority of a plan's target audience was exposed to a message, media planners need a
frequency distribution. With a frequency distribution, planners can determine if a message has an
"effective reach."

Effective Reach is the percent of an audience that has been exposed to an advertisement
(frequency) enough times to cause a change in behavior, such as purchasing a product.

Frequency distribution example:

% Audience % Reached N or
# Exposures N+ Exposures
Reached More Times
Total Reach
1 16.6 % 1+ 79.2 %
2 14.2 % 2+ 61.6 %
3 11.4% 3+ 48.4 %
4 9.0 % 4+ 37.0 %
5 6.9 % 5+ 28.0 %
6 5.2 % 6+ 21.1 %
7 4.0 % 7+ 15.9 %
8 3.0 % 8+ 11.9 %
9 2.2 % 9+ 8.9 %
10+ 6.7 % 10 + 6.7 %

In this example, 11.4% of the audience would see the ad exactly three times. 48.4% of the
audience would see the ad three or more times.

Effective reach may be defined as those viewers exposed to the ad three times or more (this will
vary depending on the product and advertising goals).
Analysis Measures

Following are some analysis techniques used to evaluate if a marketing message is effectively
reaching the target audience:

 Quintile Analysis
 Universe Base
 Rating Point
 Audience
 GRPs
 Gross Impressions

Quintile Analysis

Quintile analysis is a measurement to assess the target audience at various levels of viewing an
ad. The heavy to light scale is divided into five parts, hence "quintile." This analysis is used
primarily to determine commercial wear out, meaning that it is over-exposed and the target
audience tunes it out.

There is no industry standard for when a commercial is worn out. However, consumer packaged
goods companies often consider having the quintile with the second highest exposure viewing the
ad 26 or more times to be worn out.

Universe Base

This is the population of the group being measured. The number is expressed in thousands. For
example, a household base of 100,800 is looking at a universe of 100,800,000 actual
households.

Women 18- to 34-years-old would represent a universe of 34,335,000 people.

Rating Point

An audience estimate expressed as a percentage of a target population exposed to an

advertising message.

The formula is:

# of People exposed
x 100 = Rating
Total people in that Universe base

So five rating points would mean five percent of the target audience universe was exposed to the
advertising message.

Audience
The total number of people or households exposed to an advertisement.

GRPs

The total of all rating points achieved for a specific schedule without regard to duplication. For
example, if an ad campaign running in Good Housekeeping earns 25 rating points and the same
ad campaign runs during Friends on television and delivers 13 rating points, the GRPs for the
total advertising schedule is 38.

Gross Impressions

Gross impressions are the raw number of potential times an ad has been exposed to a particular
audience. This is the sum of the gross audiences of all vehicles in the media plan without regard
to duplication.

Impressions are used to compare delivery in different markets. It is also used to compare delivery
between different target markets or demographics.

The formula to find gross impressions is:

GRPs x Universe Base = Gross Impression

The GRP number and the Universe Base must represent the same target audience. Also, GRPs
are a percentage, so multiply the number by .01 before performing this calculation. Impressions
are usually expressed in thousands.

Cost Measurements

Media planners use several basic cost measures to calculate the overall cost of a media
schedule:

 Cost Per Thousand (CPM)

 Cost Per Point (CPP)
 Cost Per Lead (CPL)
 Cost Per Unit (CPU)

Cost Per Thousand (CPM)

This is the cost to deliver a marketing message to 1,000 households (M is the Roman numeral for
thousand). CPMs are used to compare and evaluate the cost efficiency of different media
vehicles. It does not consider qualitative factors such as the value of the environment or synergy
between multiple exposures.

The formula is:

Cost
= CPM
# of Impressions
Cost Per Point (CPP)

This is the cost of reaching one rating point or GRP. In other words, CPP measures the cost of
reaching one percent of a target population.

The formula is:

Cost
= CPP
Rating

Both CPP and CPM are used to calculate the overall cost of a media schedule.

Cost Per Lead (CPL)

CPL is used in direct response advertising campaigns to evaluate the cost for each lead
generated by an advertisement.

The formula is:

Cost
= CPL
# of Leads

Cost Per Unit (CPU)

This is the cost for purchasing a single unit, or advertising spot. The cost for a particular spot is
determined by the rating of the program or time period on the broadcast.

The formula is:

Rating x CCP = CPU

For example:

A thirty-second spot on "Frasier" received an 18.0 rating in New York. The CPP for thirty seconds
of prime time in New York is $800. In this case, the cost for airing a thirty second commercial in
New York during "Frasier" is $14,400. (18 x $800)

Print: Key Measurements

Print publications have their own terminology and audience measures independent of those used
for television and broadcast media:

 Circulation
  Audience
 Rate Base
 Composition
 Coverage
 Comp/Coverage
 Duplication

Following is a brief discussion of each term.

Circulation

This is the number of copies of a particular issue that are sold or distributed. There are two kinds
of circulation: paid and non-paid. Paid publications are distributed to subscribers or sold at
newsstands. Non-paid are distributed free of charge.

Trade publications are more likely to be non-paid, while consumer-oriented publications are more
likely to be paid.

Audience

This is the total number of readers for an issue. Audience is calculated by multiplying the
circulation by the readers per copy (also called pass-along readership).

This tells media planners not only how many issues of a magazine are distributed, but also how
many people read it. Often the audience number will be higher than circulation. This is simply
because a single issue of a magazine can be read by more than one person. The audience figure
gives a better idea of how many people would be exposed to an ad in the magazine.

Rate Base

Rate Base is the circulation number that a magazine guarantees to deliver. Publication
advertising rates are based off this number.

The formula is:

CPM x Rate Base = Unit Cost

For example, if Family Circle has a CPM for a full page of $15.30 and a Rate Base of 5,150M,
then the Unit Cost is $78,795.

Bonus circulation is the number of issues that are delivered over the guaranteed rate base.

Composition

This is the percentage of the total audience of a publication that a specific demographic group
represents. This is useful in targeting advertising to specific demographic groups.

For example:
Cosmopolitan's total audience  = 15,816,000
Cosmopolitan's W18-34 audience  = 7,703,000
Cosmopolitan's W18-34 "%COMP"/TOTAL  = 48.7 %

This means that 48.7 percent of Cosmopolitan's readership is in the 18-34 year-old woman
demographic.

Coverage

A closely related concept is coverage, the percentage of a specific demographic group that is
reached by a publication. This again is a useful tool to target ads to a specific group.

For example:

Cosmopolitan's W18-34 audience  = 7,703,000

Overall W18-34 Population  = 7,703,000
Cosmopolitan's W18-34 % COVERAGE  = 22.4 %

This means that Cosmopolitan reaches 22.4 percent of the population of 18-34 year-old women.

Comp/Coverage

The composition and coverage numbers are usually presented together – it is essentially the
equivalent of a rating figure for print publications.

For Example:

W18-34 Population  = 34,335,000

Cosmopolitan's total audience  = 15,816,000
Cosmopolitan's W18-34 Audience  = 7,703,000
Cosmopolitan's W18-34 %COMP"/TOTAL = 48.7 %
Cosmopolitan's W18-34 % COVERAGE = 22.4 %

This means that there are 34,335,000 18-34 year-old women in the U.S. population.
Cosmopolitan's total audience is 15,816,000. Of those, 7,703,000 (48.7 percent) are in that
demographic group. As a result, Cosmopolitan is read by 22.4 percent of 18-34 year-old women.

If a media planner were looking to advertise to this demographic group, an ad in Cosmopolitan

magazine would reach a significant number of them.

Duplication

This is the percent of the total audience in a print media schedule reached by more than one
magazine. If a media planner can only afford to place an ad in two publications, he wants the
least duplication possible so the ad will reach a greater total audience.

The formula is:

Combined GRPs - Combined Reach
= % Duplication
Total GRPs

For example, suppose a media planner is running an ad in Good Housekeeping magazine

to reach an audience of women 18+ years old. He can afford one other publication,
should it be Family Circle or Woman's Day?

GRPs Reach
Good Housekeeping 22 22
Family Circle 23 23
Total 45 36

Family Circle has 20 percent duplication.

45 – 36
= 20% Duplication
45

GRPs Reach
Good Housekeeping 22 22
Woman's Day 22 23
Total 44 37

Woman's Day has 16 percent duplication.

44 – 37
= 16% Duplication
44

In this case, Woman’s Day would be the better choice since it has a lower level of duplication.

Conclusion

Media planning is obviously a complicated subject. If nothing else, learning all the terminology
and mathematical formulas behind the various measurements takes some time.

Marketers looking to use media advertising as a tool for reaching potential customers would be
well advised to hire professional help for the media planning and campaign tracking. This tutorial
should help make sense of it all, but it is in no way a replacement for having an experienced hand
at the wheel.