Evaluate the Cost of Advertising
Advertising helps build an audience for your product or service, and allows you to communicate to that audience in a cost-effective way. Evaluating the cost of your advertising campaign, both before the purchase and after, can help you understand what you are getting for your money. Then you can show the owner of the company, your boss or your shareholders that the cost was worth the outcome. The cost per thousand (CPM) formula is one of the core formulas that will help you evaluate the true cost of your advertising.
Instructions
The CPM Formula: Pre-Purchase Evaluation
1. Line up the advertising proposals that you have received and get out your highlighter.
2. Highlight the total cost of the advertising and the number of impressions or distribution of the advertising medium.
3. Write down the cost per thousand formula (also known as CPM). CPM= Cost of Advertising/(Impressions Generated/1,000). This formula will help you evaluate how much the advertising medium costs, based on how many people the advertising will reach.
4. Use the CPM formula by putting the numbers that you highlighted into your calculator as follows: Divide the number of impressions or distribution of the advertising medium by the number 1,000. Take this number and divide the cost of your advertising by it.
5. Complete your formula according to this example: Suppose you are buying a page in a magazine where your advertising cost is $20,000 and the magazine delivers 2,000,000 in circulation. Divide 2,000,000 by 1,000. You get 2,000. Then divide your cost of advertising, $20,000, by 2,000. You get $10. The magazine charges $10 per 1,000 people to whom they distribute your ad.
6. Review your final result. This number is the amount of money that the advertising costs per 1,000 people that receive the medium you are advertising in.
7. Calculate this formula for every proposal that you received. At its most basic level of analysis, the proposal with the lowest CPM is your best advertising deal.
