How effective is your advertising campaign?

By: Selena McIntyre

Remember that old saying, “Money doesn’t grow on trees?” Unfortunately with the current condition of the economy we are finding that money is harder and harder to acquire. Jobs are decreasing and the unemployment rates are increasing. This is why it is so important to make the most out of every dollar.

In order to cope with the falling economy, businesses have been decreasing their budgets. Several companies are even cutting their advertising budgets. However, most businesses can not survive without some kind of advertising. With all this in mind, you can see why it is important to spend your advertising budgets as wisely as possible.

Cost per Thousand (CPM)

Since every type of advertising has its own unique price range and reach, it’s hard to effectively compare the prices of each media type. For this reason, advertisers compare the cost of each ad by how much it costs to reach 1,000 people (cost per thousand or CPM.) Here is the formula for CPM:

CPM = Cost of Ad * 1000 / circulation

Unfortunately the CPM for billboards is a little more complicated. Here is the easiest way I have found to figure the CPM for billboards:

  • Multiply the daily traffic by the number of days the billboard will be posted this month (usually 30.)
  • Divide the number you get by 1000. (Save this figure you will need it in a minute.)
  • Divide the cost of monthly rent by the number you got in Step 2.

Here’s an example:
Daily traffic (DEC’s) is 10,000, and monthly rent is $400.00.

  1. 10,000 * 30 = 300,000
  2. 300,000 / 1,000 = 300
  3. 400 / 300 = 1.33

$1.33 is the cost per thousand in this example.

Here is a chart of the average cost per thousand.

Media Types CPM
Billboard – 30-Sheet Poster $2.05
Radio Ad – During Prime Drive Time $8.61
Magazine – One page with 4 colors $9.35
Television Commercial – 30 Seconds on a Prime-Time Network $17.78
Newspaper – 1/3 of a page in black and white $22.95
The information on this chart is from OAAA.

Let’s see how effective your advertising campaign is:

Let’s start by making a list of all your current advertisements. You can do this on a monthly, quarterly, or annual basis. On this list be sure to include a brief description of the ad, the amount of time the ad will be run (exposure), how many people should see your ad (circulation), the price of the ad, Cost Per Thousand, and Profits.

Type of Ad Exposure Circulation Price CPM Profits
Television Commercial
Radio Ad

The number of subscribers for newspapers and magazines is their circulation. To find the circulation of television and radio ads, you must multiply the number of listeners or viewers by a percentage of the air-rating at the time your ad is aired. The circulation of billboards is 1.35 (average number of passengers in each vehicle) multiplied by the actual number of cars that pass your sign in 24 hours (DEC.)

The Bottom Line:

Look carefully at the CPM and Profit column of each ad. These areas will tell you which ads are effective, and which ads need improvement. Compare the ads that are not bringing in good profits to those ads that are. Make the poor performing ads similar to the good ads. Find out how to design effective ads.

You can also take a percentage of the advertising profits to invest in new ads. For example, let’s say your advertising budget is $5,000.00 and your profits (after removing the advertising expenses) are $3,500.00. Let’s also say you used $1,500.00 of your profits to rerun or place more of your best performing ads. All the money you receive from these extra ads is profits. You can keep using the money received from the extra ads to buy new ads and earn more profits.

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One Response to “How effective is your advertising campaign?”

  1. TerranceStency Says:

    Hey Im the newbie here, just wanted to introduce myself, I’m Terrance.
    I think this is a cool forum so I finally decided to make a post.
    At one time I thought about starting my own board but Im glad I found this one instead. >>> Great Info <<<

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