For professionals working in broadcast networks and media agencies, answering a question like: “What is a rating point?” is fairly easy to answer. Why? Because that’s one of the most important KPIs that they have to deliver to reach client goals, report great numbers and… well make money of course! The rating point is one of the most important metrics that is on the tip of all the media planners and media buyers working in media agencies. Many media and content deals across various global markets are planned on targets based on the rating point. We can safely assume that the global multi-billion dollar broadcast and media industries revolve around the rating point metric.
That was quite a dramatic start, but was well worth it because of the importance that this metric holds. In the most simplest terms, a rating point is a metric to measure the size of an audience reached through a specific media channel. Don’t worry if you are confused, a detailed explanation is going to follow.
Each rating point is equal to 1% and can be defined as a percentage of people (or households) tuned into a TV program (or any other medium) as compared to the population universe (or household universe). To illustrate this further, imagine a hypothetical situation of a country with a population of 1,000 people and with only one TV channel at their disposal; we’re not going to focus on the demographics at this point in time. If 200 people out of the 1,000 population universe of the country are watching the TV channel at 20:00, the rating points at that time will be 20%. Pretty straightforward isn’t it? Now let’s move forward.
A 20% rating point interests one advertiser and he decides to advertise his brand on that TV channel. He wants his media agency to buy advertising space and place his ad spot 4 times between 20:00 and 21:00. Assuming that all 200 people watch TV for exactly one hour straight we can come up with the following media plan:
|Ad Spot||Time||Rating Points|
The total of the rating points comes out to be 80%, which is referred to as the GRPs or the gross rating points. The gross rating points are a cumulative measure of the impressions an advertising campaign generates. The GRPs quantify impressions of a campaign as a percentage of the population reached.
The gross rating points (GRPs) can be calculated by a simple mathematical formula:
GRPs (%) = Reach (audience reached) x Avg. Frequency (times the ad was shown)
Our audience reach was 20% and our average frequency was 4 times per person:
GRPs (%) = 20% x 4 = 80%
Oh and if someone asks you for “Target Rating Points,” don’t panic! Target Rating Points (or TRPs) is technically the same thing but with a slight difference. For target rating points (TRPs) we consider the reach of the advertising campaign achieved by a media vehicle to a specific target audience. Or you can say that the TRPs quantify the gross rating points achieved by an advertisement or campaign among targeted individuals within a larger population.
This brings us to another important discussion: How can a media planner at a media agency *assume* that all 200 people will watch the TV channel for one hour?
For that we have something called the People’s Meter which we will eventually cover in the future. However for your understanding, media agencies are signed up with this tool (People’s Meter) that provides them with an estimate of the audience viewing habits. That’s how the multi-billion dollar magic happens.
I am a beginner buyer with the simple goal of gaining as much value for my client’s dollar as possible. I am working on a TV buy for a client and I am wondering if working on efforts to understand CPP better will be helpful in rate negotiations. If so, do you have any advice at all as to what I can look for and how I can strategize the CPP to work as an advantage?
I’m sorry Mr. Yee Haw for getting back to you very late. CPP is one of the many key elements that you can use for rate negotiations when buying media. But CPP benchmarks can vary from market to market, and industry to industry. Many companies consider multiple factors to arrive at a CPP benchmark which includes historic campaigns, competitor campaigns, media inflation, investment commitments, channel mix etc.
How you want to negotiate based on a CPP is based on what you’re aiming for in terms of media mileage. One possible way to use CPP to your advantage is making it clear to the media representative that he needs to offer you a package deal by offering you a mix of enough media mileage, premium spots, break-bumpers, etc. to ensure your CPP doesn’t exceed X. If it does, you can agree on a penalty in terms of cost or more mileage.