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Cost Per Rating Point is only one currency


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By Harshana Weragama 

Will you pump 92 octane petrol at Rs. 145 or 95 octane at Rs. 157 per litre? Will you compromise on quality for quantity just because of an increase of Rs. 2? Or even if the cost was at original price of Rs. 155 where there was a cost difference of Rs. 10? I am sure you would not. For quality of the fuel pumped would ensure that your vehicle performs at its best, which will ensure longer engine life, and better performance in fuel consumption. 

Similarly, are you willing to pay Rs. 9 per 100 g of lime against Rs. 3 for same if the latter comes by compromising the quality where the limes are already close to rotting? I am sure the answer would be no. For you would want a quality product than trying to take quantity home which would end up becoming a waste. Then the question is, “why compromise on quality of a media plan for quantity?”

Benchmarking

Today many a company have started using Cost Per Rating Point (CPRP) as the only benchmark for evaluating plans with wanting to reduce the cost on advertising. This is ever so true with the continuous price increases that advertisers and media agencies face from suppliers that they are working with. In the recent past the average rate of inflation has reached almost 40%.  The belief is that lower the CPRP the better the plan is with being cost effective. 

The reduction of CPRP comes at the cost of compromising quality and effectiveness of media plans presented by agencies to their clients. Whilst, in some instances, clients pressure agencies to reduce CPRP, in some instances agencies have promoted ignorant clients to use CPRP as the base to evaluate a plan to the client’s advantage in the competitive market. The second situation takes place when most agencies are unable to be more strategic in communication planning. If the one evaluating only works with being cost conscious then the end result would be that an agency is selected and a plan is proceeded with, where it is not effective at all. 

Little do we realise that when reducing cost continuously agencies are forced to buy placement of commercials on program not of quality as media stations will not reduce discounts on programs that are performing. Further, in some instances what is being done is to buy commercials placements in programs on channel that are non-performing and hungry for business. 

As bringing down the cost is mostly achieved by placements being done on underperforming programs or channels, we all compromise on reaching the market effectively. If CPRP is used as benchmark and continuing to reduce the CPRP, a brand would suffer in the long run by not reaching the market effectively, and would result in the inevitable death of brand. 

What is forgotten is that no brand operates in isolation. There is always competition. Effective campaigns will always make the brands gain. Further, it would cost more to recover the damage caused than what was originally spent. 

Looking at the past, if one really looks in to the local market, one would recognise brands both local and international who have only relied on CPRP, and have ultimately suffered in the market. Today these brands are spending greater sum of monies to regain their lost status. 

CPRP (Cost Per Rating Point)

It is the representation as to how much am I spending to gain one rating point in a campaign. The calculation is done by dividing the investment made for a campaign excluding tax, by the total GRP’s gained over the plan. CPRP is used as a benchmark to see how efficient we are in gaining a rating point. To be more precise, CPRP helps us understand how cost effective we have been in planning. 

In the Sri Lankan market context CPRP can only be calculated for television, given the limitation of research data for print and radio. However, with advancement of research the calculation may be adapted to radio and print in the future. 

i.e.: Assume that there were two campaigns, where the sum invested and the GRPs gained are as follows:

Campaign A, spent Rs. 1,600,000 with earning 800 GRPs

Campaign B, spent Rs. 1,200,000 with earning 600 GRPs

In both the cases CPRP amounts to Rs. 2,000, and then how would one decide on which campaign is more effective than the other. In terms of investment one would prefer the campaign B over campaign A.

If one was only interested in reducing the investment then I am sure all would agree the Campaign B would be the best option. However, what we all forget is that GRPs which is a part of the calculation of CPRP is a result of reach and frequency. 

Reach

Reach refers to the total number people that the campaign has reached against the population of the defined target audience. Reach of the campaign is also as important factor as CPRP. Given that if CPRP is reduced with sacrificing reach, then a brand would face the consequence of non-achieving of sales targets. This would be due to the fact that the market reach through the campaign is not adequate enough to achieve the marketing objectives set.

Reach of the campaign is calculated by dividing the total number of individuals who are reached from a given campaign by the total number of individuals who are within the defined target audience. 

If a campaign indicates a reach of say 45% then what it means is that you have reached 45% of the target audience. In research when reach is calculated for television, it is represented by the percentage of individuals who have been captured through the television of the total television population of the defined market. Thus, the reach from television in comparison to the overall population of the defined TG would always be lesser. 

Average frequency and effective frequency

As much as reach is important, if the campaign does not have sufficient exposures as commercials to capture the market then once again the campaign would not be a successful. Sufficient exposures would be defined as frequency. In planning there are two different frequencies that can be identified: Average Frequency and Effective Frequency.

Of the two Avg. Frequency is the average number of times that an individual has in seeing the commercials within a campaign. Sometimes this is also referred to as “Opportunities to See (OTS)”. Whilst the OTS gives and average times that an individual has the opportunity to see the commercials the “Effective Frequency (EF)” refers to the number time a commercial should be seen by an individual to perform a desired act. 

The most important factor would be the Effective Frequency, as it defines the minimum times an individual need to be exposed to a commercial considering marketing, creatives, and media factors. 

Insufficient frequency of advertising results in lower TOMA (Top of Mind Awareness). This in return would result in the brand not being within the consideration set when a consumer is in the process of purchasing a brand or consuming a service. 

Ideally brand must consider a combination of reach and frequency levels than thinking about CPRP alone. This would help in ensuring that the brand is strong in communication against the competition to ensure in achieving the marketing goals. 

The process

If a brand needs to advertise then the best would be to first identify what is the effective frequency level a brand must advertise in. Often this would be referred to as 1 +, 3 + or 5 +. It is important to follow a proper scientific model to define the effective frequency level instead of arbitrary decisions being made.

Once the effective frequency level is decided then it’s best that one look at the effective reach that should be build. Identifying an effective reach level will help one recognise at what point the brand should exit advertising on television, and enter in to other mediums to enhance reach by bringing in additional mediums. Further understanding the effective reach would help ensure that we minimise the media waste in placing commercials on television.

Once the each and frequency is identified, then the best would be workout options of media plans with different combinations of channels and programs which will achieve the goals set, where one would be able to ascertain what investment levels are required for each of the options and what would be the GRP’s required to do so. Once these have been obtained then CPRP for each of the options can be worked out and evaluated of which selecting the most cost effective would be the best way forward. 

Remember, cheap is not always the best…

(The writer currently serves in the Capacity of Chief Operations Officer – Pulse Media, an SBU that operates under Media Factory Ltd. He accounts for more than 26 years of experience of which 21 years is from the advertising industry itself. Prior to joining the industry, he worked in money and capital markets, where he gained his first-hand experience analytics and research with by working in two multinational stock broker firms armed with the trading license. Today in addition to serving in the capacity of COO, he is also a visiting lecture of the University of Visual Arts, attached to the University of Colombo, and is a key personal who spearheads the companies training and development arm. In addition to holding a trading license, he is also partly qualified in CIM UK, and has completed a Diploma in Business Management from the Open University of Sri Lanka. He can be contacted on harshana@mediafactory.org.lk.)


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