Question

Topic: Research/Metrics

I Have My Cpm. Now What?

Posted by Anonymous on 11/8/2010 at 10:27 AM ET 100 Points
I have an opportunity to advertise in a new B2B magazine targeting new and existing local businesses. The circulation is 16,000. 12,000 will be inserted into an already established and well read local business newspaper. The remaining 4,000 will be distributed through local business chambers and associations. It is a quarterly publication.

The cost is $165 for a 10"W x 1"H banner placed at the bottom of the page. Along with the print, I get 3 free months placement on the website in the form of an "AdWord" type ad - no banners, graphics, etc.

I've figured out my CPM. I'd like to take it further and see if I can figure out my expected ROI. Is there a way to do this? I keep thinking I am missing a piece of the equation. We've never done print advertising before so I don't have a history of ROI to base any assumptions on.

Thank you!
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RESPONSES

  • Posted by Jay Hamilton-Roth on 11/8/2010 at 1:06 PM Member
    Has there been previous magazines distributed? Can you contact some of those advertisers to understand what their ROI was? Expected ROI is hard to determine, because it's based on your offer, graphics, target audience, placement, and other ads competing for readers' attention.
  • Posted by Peter (henna gaijin) on 11/8/2010 at 1:26 PM Accepted
    It is difficult to make the jump from CPM to ROI.

    ROI requires that you sell products due to the ad (or have some other way to calculate a money value from the ad). You have some information about who the ad will be placed in front of. But how many read the ad and respond is unknown.

    There still are questions about the placement of the ad (will it be on a page where people do read). Also, if this is a truly new publication, there are also questions about the numbers and locations they plan to distribute the magazine with, and what actually happens (less questions on this if they have a few issues under their belt and you can see where those issues went).

    Also a big question related to the effectiveness of the ad you provide. If your ad does not cause people to take an action, then it will have a lower ROI than an ad that does ave a good call for action.
  • Posted by koen.h.pauwels on 11/9/2010 at 5:52 AM Accepted
    Hi Sue,

    Fully agreeing with Peter, the piece you are missing is how much customers or money will be generated because of the ad. I realize this is tough given the lack of history, but you can use reasonable percentages for:

    a) attention: what % of the people exposed to the ad will pay enough attention to absorb its information (eg 50%)

    b) consideration: what % of those attending will include your company into their list of considered providers (eg 50%)

    c) preference: what % of those considering will award your company the business? You need to know your company's competitive position with the target market to answer this one

    d) actual sale: what % of those prefering actually have a need for your product in eg the next 6 months?

    e) how much margin does your company make on each sale?

    At the end, the $ value of the ad to your company =
    extra margin generated - cost of the ad

    (to come up with a % ROI, you need to divide this $ value by the cost of the ad)

    Good luck!
  • Posted on 11/9/2010 at 8:53 AM Author
    Thank you for your informative answers. The quandary was the missing historical data, so there are no averages to consider. I did back into the formulas using our average order value and profit margins to determine how many closed sales are needed to make the ROI appealing. This will help us design a well targeted ad to get people to act on it.

    Again, thank you!
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