Does PPM Create A Higher Or Lower Cost Per Point?
April 25, 2008 at 10:18 AM (PT)
RESEARCH DIRECTOR, INC. has completed an examination of how the introduction of ARBITRON's PPM has affected radio cost-per-points. The study examined cost-per-points in the top-10 markets and their associated embedded metros. Cost-per-point (CPP) is the currency that is often used to judge the relative value of a radio station’s inventory.
The study used two years of SQAD data for Adults 25-54, MONDAY-FRIDAY 6a-12m. (SQAD is the service that tracks market cost-per-points). The study shows that the introduction of PPM into a market results in cost-per-points rising significantly. PHILADELPHIA, where PPM became currency in APRIL (MARCH report) has seen a 21% increase in Adult 25-54 CPP. In APRIL, 2007, SQAD reported PHILADELPHIA cost-per-points averaging $257. Eleven months later CPP has risen to $311.
Anything less than a 43% increase in CPP means it's actually down, assuming that 70=100 in the conversion that Arbitron has preached.
Has CPP Remained Flat -- Or Not?
HOUSTON PPM data became currency in JULY (JUNE Report). In the last nine months, CPP has risen from $223 to $312, a 40% increase. In comparision, in markets where PPM is not yet currency, the CPP has remained basically flat ... or does it?
If we are to go by the new adjusted agency planner thinking that 70 is the new 100, it looks as if CPP in PHILADELPHIA is off 15% and HOUSTON is down slightly, just 2%, in comparison to the more familiar diary-based CPP advertisters have been dealing with forever. Looks like not everyone at the agency level has made that adjustment.
Consultant RANDY KABRICH lends his insight, saying the "easiest way to see it is to give an example."
"If the schedule delivers 100 GRPs and costs $20,000, then the CPP is $200 ($20,000 divided by 100). If that schedule now delivers only 70 GRPS and still costs $20,000 then the CPP is now $286 ($20,000 divided by 70), which is an increase of 43%."
"If the schedule delivers 100 GRPs and costs $30,000 then the CPP is $300 If that schedule now delivers only 70 GRPs and still costs $30,000, then the CPP is now $429, which is the same increase -- 43%."
"Bottom line? For the CPP to be EVEN in a 70=100 world, the CPPs have to increase by 43% (which is what 100 divided by 70 equals). Anything less than a 43% increase in CPP means it's actually down, assuming that 70=100 in the conversion that ARBITRON has preached."
"Thus, as diary markets were flat. PPM markets did not even keep pace -- and were down in CPP -- which goes against the statements ARBITRON and the RAB had made for years that PPM would increase the effective CPP because of 'confidence in ratings.' So now radio is paying 65-90% more for a system that is not MRC accredited and according to the report, the PPM markets are not even keeping pace with the Diary Markets!"
RESEARCH DIRECTOR Pres. CHARLIE SISLEN, pointing to his study's numbers, said, "It is a clear sign of market forces ... Radio station rates are based on supply and demand. Cost-per-points are only a gauge. This dramatic rise in cost-per-points clearly shows this."
RESEARCH DIRECTOR Partner MARC GREENSPAN observed that "many in the industry were concerned how the switch over to PPM would affect cost-per-points. Clearly, planners are readjusting their parameters to reflect the new measurement tool. It is our hope that the next wave of released markets will see similar CPP gains."