In the field of marketing advertisers, media buyers and the businesses they represent need to know how many people their marketing efforts will reach. This is especially important in costly media such as television, where only a large audience can justify the price of placing an ad. CPR is one metric marketing professionals and analysts use to determine where to place ads and how much is reasonable to pay for them.
In marketing, CPR stands for "cost per rating point." Cost per rating point is the same as cost per point, or CPP. Each point refers to 1 percent of a given market. Independent ratings agencies measure the number of consumers for each media outlet, such as radio stations and television networks, by conducting surveys and monitoring media consumption habits. Advertisers use ratings points and metrics such as CPR, to determine where and when to buy space for their ads.
To calculate CPR you must know the size of a media market, the total cost of placing an ad and the size of the audience for a given time slot, website or periodical. For example, a local television station may reach a potential audience of 10 million people. If that network's ratings show that 10 percent of the audience tunes in for a given show, then the program draws 1 million viewers. A $5 million ad would have a CPR of $500,000 since it would reach 10 rating points of the market. Marketing professionals also calculate wastage, which refers to the portion of the market point that does not have interest in the ad.
CPR is useful for marketers in a number of ways. It allows them to compare the relative cost of reaching one percent of different markets. It also provides a baseline for comparing the cost of advertising in different media. For example, national television networks feature large markets and charge much higher rates than local TV or radio stations, where the market is smaller. However, by calculating the cost of reaching 1 percent of each market, marketing professionals can choose the best medium and time slot based on effectiveness and value.
Another key metric marketers use to measure effectiveness and desirability is CPM (sometimes called CPT), which refers to "cost per thousand" (with the "M" from the Latin "mille" for "thousand"). Although CPM and CPR are related, they are not interchangeable. CPM is a simpler metric that always refers to the cost of delivering marketing to 1,000 media consumers. The value of CPR varies since every market has a different size, and therefore one point in that market reflects a different number of individual consumers.
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