MARK 4019

Marketing Math
Agenda

Marketing and Media Math

1. Estimating Demand
2. Calculate Media Metrix
- Percentages
- Indexes
- Weighting
- Reach
- Frequency
- Impressions
- GRPS
- Share of Voice
- CPM
- Impressions
- Digital Metris (Clicks, Page Views, Unique Visitors, Conversion, Cost per
Acquisition)
3. Analyze and draw conclusion from media metrics
Print out a copy of the Media Math Workbook or have it handy on your
computer to complete during the course of the lecture

Listen to the lecture and complete the questions related to the content

At any time feel free to pause the lecture to either complete the questions or
re-listen to a concept

Next class there will be an open book quiz on the concepts covered in this
lecture.

If you have any questions email your professor at any time to get them
answered
 Total Demand for a product or service
◦ Is the total amount that would be purchased by a
specific target group in a specific time under
specific marketing and environmental conditions.

◦ Market category analysis – describe the market for the product category
you are planning to compete in – estimate Market size and growth and
explain the rationale.
 What people say
◦ Survey consumers
◦ Composite of sales force opinion
◦ Expert opinion (e.g. dairy associations)
◦ Customer research (survey grocery trade)
 What people have done – analysis of historical
sales
 What people do - Test Markets
 Marketers often estimate market potential
using secondary data
 In some cases exact figures may be published
by a trade association or another source
 When the desired information is unavailable,
the research may estimate market potential
by transforming secondary data from two or
more sources
 Birth projection for Canada: 331,000
(Statscan)
 Estimate the % of people for whom this is a
first child: 50% (Statscan)
 Estimate the % who will purchase a stroller
◦ 60 % of first time parents (trade associations, in-
house marketing research)
 Multiply by the avg. selling price of strollers:
$180
Market Demand for strollers:
331,000 X 0.5 X 0.6 X $180 = $17,874,000
 Past experience with their marketing campaigns estimates that 65 % of
boys in the target (5-9) in Canada would either see advertising or learn
about the toy from friends within its first year of launch.

Statistics Canada – age group by gender

2011
Canada Male Female Canada Male Female
Age group Persons (thousands) % of total of each group
Total 32,270.5 15,979.5 16,291.0 100.0 100.0 100.0
0–4 1,698.4 868.4 830.0 5.3 5.4 5.1
5–9 1,882.3 963.0 919.3 5.8 6.0 5.6
10–14 2,104.8 1,079.1 1,025.7 6.5 6.8 6.3
15–19 2,145.8 1,099.7 1,046.2 6.6 6.9 6.4
20–24 2,243.3 1,147.5 1,095.8 7.0 7.2 6.7
25–29 2,194.3 1,110.5 1,083.8 6.8 6.9 6.7

= 963000*.65
A Spin Master survey estimated that 80% of boys in the target who saw
the toy in action or heard about it from other sources would ask their
parents to purchase it.

Spin Master has learned that, in general, 50 % of parents or others in

the family will purchase a Spin Master toy that their child requests
within a year, as Spin Master has a strong reputation for toys that have
lasting play value.

The toy will sell for $25.

625 950X0.8X0.5X$25=$6 259 500

Break Even Analysis
 A method of determining what sales volume
must be reached before total revenue equals
total costs.


 To calculate the break even units using this

formula the gross target margin is zero (you
don’t plan to make or lose $$)

 What is the break even # of units of in-line

skates that need to be sold in this example?
 Required sales in volume units =

Total fixed costs ($)

(Unit selling price - variable costs per unit)

Required sales in volume units =
Fixed Costs $4 000 000
Selling Price $195
Variable Cost $90
 Required sales in volume units =
$4 000 000
($195 - $90)

= 38 095 units

Therefore 38 095 units would need to be sold

to break even
 Determining the amount of revenues that can
be expected from a given set of costs.
Used For:
Breakeven analysis – the amount of revenue
necessary to cover both variable and fixed
costs.

To demonstrate the ability of a marketing

plan to increase gross margin (profit)
The costs associated with producing Roller
Blades is as follows:

Selling Price/Unit: $195.00

Variable Cost/Unit: $90.00
Total Fixed Costs: $4 000 000
Gross Margin Target: $8 000 000
 Required sales in volume units =
($4 000 000 + $8 000 000)
($195 - $90)

= 114 286 units

Therefore 114 286 units would need to be sold

to hit the gross margin target
 Media Planning
Process of developing a plan of action for
communicating messages
 to the right people (target)
 at the right time
 with the right frequency.

 Efficiency in media planning can be loosely

defined as gaining maximum impact or exposure
at minimum cost to the client.

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Copyright © 2012 Pearson Canada Inc.

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 Digital Media Planning
 More about consumer involvement; the
consumer controls when he or she sees the
message.
 Mobile communications, like cell phones and
other personal electronic devices, remain in the
experimental stage.
 Digital media strategy focuses on timing and
engagement, rather than reach and frequency.

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Copyright © 2012 Pearson Canada Inc.

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 Media Planning Process
Client provides background
information to agency in the form of
a media brief containing:
 Market Profile
 Product Media Profile
 Competitor Media Usage
 Target Market Profile
 Media Objectives
 Media Budget

7-7 Copyright © 2012 Pearson Canada Inc.

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 The Media Plan
Document that outlines all relevant details
including:
 How a client’s budget will be spent
 Clearly defined objectives
 Rationalized strategies
 Precise execution details

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Copyright © 2012 Pearson Canada Inc.

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Before all of that you need:
• A Basic Understanding of Media Metrics, Media
Math and Audience Concepts

• To be able to assess the variables that affect

media plans and drive decisions

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 By the end of this lecture you should
be comfortable with and be able to
perform basic calculations including:
• Percentages
• Indexing
• Weighting
• Reach
• Frequency
• Impressions
• GRPS
• Share of Voice
• CPM
• Primary Audience
• Pass-along Readership
• Digital Impressions, Clicks, Page Views, Unique Visitors,
Conversion, Cost per Acquisition

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 Percentages
• USED IN ALL FACETS OF MEDIA PLANNING

• Marketing and media audience information rely on percentages.

• Percentages can be expressed as fractions or decimals.

• Media planners and buyers often have to calculate percentages

from a set of raw numbers.

• For example if you knew there were 1 million adult viewers for a
television program and that 650,000 of those viewers were adult
women you could calculate that 65% of adult watching the show
were women.

• 650 000/1 000 000*100 =65%

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 WORKBOOK
Q1

What are some

of the learnings
you can derive from
this % information?

Media planners and

buyers often need to
calculate % from a set of
raw numbers
Canadian Living Reader Data 2014
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 Workbook Q1

• List 3 finding you can derive from percentages

by looking at the Canadian Living data.

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Canadian Living Reader Data 2014
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 Complete the Percentage section
in your Media Math workbook

WORKBOOK Q2
• You have completed research on competitive media
spending for major brands in the fast food burger
restaurant category. You have found that McDonald’s
spent $13 million last quarter while Tim Hortons spent
$11 million. Wendy’s spending was $6 million, Burger
King spent $5 million and all other fast food burger
advertisers spent a total of $11 million in the same
quarter.
• What is the percent breakout of media spending during
the quarter for each brand?
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% Breakout of Media Spending
Per Brand

MD 13 28%
Tim's 11 24%
Wendy’s 6 13%
BK 5 11%
Other 11 24%
46 100%

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Calculating an Index

The index is a very important mathematical tool

used to analyze and understand numerical data.
The index gives us a way to relate two numbers.

The formula for calculating an index is simple.

• For Number A and Number B:
• Index AB = (Number A / Number B) x 100
• After calculating, simply round the number to the
nearest ones place.

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 Indexing

• Media planners frequently index certain

numbers to other base numbers.

- This is used to determine how far a number is

above or below a benchmark

- Index numbers are shown as whole numbers

and the base number is always indexed at 100

Ronald Geskey, Media Planning and Buying in the 21st Century 3rd Edition, 2015

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Indexing
Example – Hot Sauce:
If 35% of 18 to 34-year-old adults (this is the subset %) used
hot sauce in the past six months and 20% of all adults (this is
the base %) used hot sauce in the past six months and you
wanted to know how much more likely 18 to 34's were to use
hot sauce you could index the two numbers by dividing the
subset percentage by the base %

= 35/20 * 100
= 175

Therefore the incidence of hot sauce used in 18-34 is 75%

higher than the general population. You might conclude from
this that they are a desirable target for this condiment.

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 Indexing
• Indexes can also be developed against an average.
The following example indexes actual quarterly sales
to the quarterly average.
Quarter Sales Index
JFM=2502/3313*100
JFM 2502 76 = 75.5
AMJ 2250 68 = 76

JAS 3500 106

OND 5000 151
3313 100

• This type of analysis might help schedule media

weight throughout the year.
Ronald Geskey, Media Planning and Buying in the 21st Century 3rd Edition, 2015

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 Complete the Indexing Section of
your Workbook
• I will do the first one with you

• The 2005 sales index is calculated as

• =300 (2005 sales)/250 (2000 sales, the year we are indexing to) *100

• = 120

• That means 2005 sales have a 120 index over 2000 sales

- in 2005 20% more products were sold than in 2000

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Go Ahead and Complete Q

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 Complete the Indexing Section of
your Workbook

Year 2000 2005 2010 2015

Sales Index
100 120 150 133

Profit Index
100 150 167 200

Ad Spend Index
100 208 180 156

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Another Indexing Workbook
Question
• 4. Buffet Magazine reaches 1.2% of all adults
in Canada and 5.5% of people classified as “Big
Eaters”.

• Calculate the index of Buffet Magazines target of

big eaters versus the total adult population and
explain what the index is measuring.
• =5.5/1.2*100
• Index 458

• What does this number mean?

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 Weighting
• When conducting media analysis it is often
necessary to weigh or adjust raw numbers so that the
numbers you are working with more accurately
represent true media marketing values on which to
make decisions. This is called weighing.

• You should consider weighting raw numbers

whenever they don't provide an accurate or realistic
estimate of the value you are trying to measure.

– target audience segments

– geographic market areas
– seasonal periods etc.

Ronald Geskey, Media Planning and Buying in the 21st Century 3rd Edition, 2015

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 Weighted Audience Example
Magazine A reaches 1 million women and 1 million men but
women are five times more likely to buy the product you are
advertising in that magazine it would be a good idea to weigh
this information.

Magazine A the 1 000 000 women that read the magazine will
be weighed at 100% and the 1 000 000 men will be weighed
at 20% given the information above (give women are 5X more
likely to buy the product you are advertising).

Therefore the weighted audience is

(1000 000)+(1000000*.20)
The weighted audience would be 1 200 000

Ronald Geskey, Media Planning and Buying in the 21st Century 3rd Edition, 2015
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Complete the Weighting
Questions in your workbook

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 Weighting Question

• 5. If a television program has and audience of

1 000 000 people with 65% of the viewers being
in your target for your product (18-34 year olds).
Of the other audience members only 25% of
them will be interesting in your product.

• What is the weighted audience?

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Answer
• 1000000*.65= 650000 (weigh these people at
100%)

• 1000000*.35= 350 000, only 25% of these

people are interested in your product so
• .25*350 000= 87 500

• Weighted audience is 650 000+87 500= 737 500

• Therefore the audience is 1 000 000 but the

weighted audience is 737 500

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 Media Variables Continued…

Media planners often define the

communication goals of a media plan using
the interrelated concepts of reach,
frequency, impression and gross rating
points.

 Reach: how many?

 Frequency: how often?
 Impressions
7-11
 GrossCopyright
rating © 2012points
Pearson Canada Inc.

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Reach versus Frequency

• Reach-The total unduplicated audience

exposed to a message one or more times in a
period (week).
• Reach can be expressed as individuals or
households , and can be expressed as a
absolute number or a percentage.

Copyright © 2012 Pearson Canada Inc. 2

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 Reach

• Simple Math Facts

• If there were 10 people in your
target market and 4 tuned in what
would be your reach? As a
percentage?
• 4 or 40%

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Reach Formula

Reach = # of target group tuned in

# of target group in area

= 4
10
= 40%

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 Reach vs. Frequency

• Frequency-The number of times one is

exposed to a media vehicle over a period
(week).

• Advertiser has no way of knowing if exposure to a

vehicle results in exposure to ad.

• Therefore, one exposure to the vehicle constitutes

reach.
• This does not help determine frequency required
to make an impact.
– Precise determination requires consideration 2
of creativity of ad, receiver involvement, noise,
etc.
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 Frequency

The average number of times an

audience is exposed to a message
over a period of time (week).

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Frequency

• Simple Math Facts

• If there were 10 people in
your target market and 4
tuned and were exposed to
the ad the number of times
indicated below, what would
be your average frequency?

2
4
12
6

4+2+12+6=24
24/4=6
Avg. Freq=6
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 Frequency Formula

Frequency = Total Exposures

Reach

= 24
4

= 6

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5. Reach versus frequency
What to Consider ?

• Reach – whether the message should be

seen or heard by more people
• Frequency – whether the message
should be heard less people (reach) but
more often (frequency)

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 Marketing Factors Determining Frequency

Marketing Factors

Usage Cycle
Brand Loyalty Brand Share
High
High L=Low F High BS=Low F
Usage=High F

Brand History Purchase

Share of Voice
Cycles
New High Comp=High Target Group
Short
Brands=High F F Cycle=High F
2
© 2007 McGraw-Hill Ryerson Limited

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 Impressions

Impressions, or total exposures, are the

total number of commercial occasions
multiplied by the total target audience
potentially exposed to each occasion.

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Impressions
Simple Math Facts
• If there were 10 people in
your target market and 4
tuned and were exposed to
the ad an average of 6 times
what would be your total
Impressions?
Reach#*Frequen
cy
= 4*6
=24

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Impressions Formula

Impressions = Reach x Frequency

=4 x 6
= 24
(Reach = the number of individuals or households)

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 Gross Rating Point - GRP

The GRP is the dominant metric in how some

advertising (mostly TV) is bought.

The GRP is recognized as the top “currency” for

planning and buying TV and other forms of traditional
media.

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GRPs
Gross Rating Points (GRPs)
• It is a measure of the size of an
advertising campaign by a specific
medium or schedule
• GRPs are calculated by multiplying
Rating by Frequency based on the total
audience the media schedule may reach.

GRP = Reach % x Frequency

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 Example

• If your television schedule reaches an

average of 30 percent of total TV homes six
times over a one-week period, your schedule
would deliver 180 gross rating points (30 x 6)
is the total of cumulative reach.

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Gross Rating Points - GRPs

• Simple Math Facts

• If there were 10 people in
your target market and 4
tuned and were exposed to
the ad an average of 6 times,
what would be your GRPs
be?
Reach = 40
2 Avg.
4
12 Freq=6
6 40*6=240
GRPs=240

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Complete the Reach, Frequency,
Impressions and GRPs Section in your
Workbook
Scenario 1 Scenario 2 Scenario 3
# of target 75 000 155 000 100 000
exposed
(Reach as
whole #)
# of target 100 000 500 000 700 000
group in area
Impressions

Reach %
Frequency 6 2 8
Weekly GRPs

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 Let’s Calculate
Scenario 1 Scenario 2 Scenario 3

# of target 75 000 155 000 100 000

exposed
# of target 100 000 500 000 700 000
group in area
Impressions or 450 000 310 000 800 000
Total Exposures
per week 6-9
Reach % 75 31 14

Frequency 6 2 8

Weekly GRPs 450 62 112

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 Share of Voice
– The share of total advertising impression that a brand
gets

– It is a way to measure a brand’s presence and to gauge

how visible a brand was within an advertising medium
during a specific time period

– It is usually represented as a percentage of the total

exposures.
The equation is:
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Ad impressions included on proposal
Copyright © 2012 Pearson Canada Inc.
Total ad impressions available for unit during relevant period

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Share of Voice Example

Advertising
April 2016 Impressions SOV

The Hilton 1000000 49%

The Sheraton 600000 29%

The Marriot 450000 22%

Total Impressions 2050000 100%

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Complete the SOV Section in you
workbook

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 SOV Q 7 Answer

Share of
Voice
Advertising
Impressions SOV
Sobey's 250000 34%
Metro 125000 17%
Longos 350000 48%
Total Impressions 725000 100%

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Relative Cost Estimates

• The value of any strategy can be

determined by how well it delivers the
message to the audience with the
lowest cost and least waste.

• Relative cost: Cost paid for the ad

relative to the audience reached.

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CPM and CPP
• Cost-Per-Thousand (CPM) And Cost-Per-Point
(CPP) are two methods of evaluating media
efficiency or relative cost.

• CPM is a ratio based on how much it costs to

reach a thousand people.

• CPP is a ratio based on how much it costs to buy

one rating point, or one percent of the population
in an area being evaluated.

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 CPM Formula
Cost Per Thousand
Cost of ad space
CPM = X 1000
Circulation (Reach)

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Relative Costs
Particular Medium Selection
• For example, to help media planners select the
specific publications to go in for Print executions
they use a CPM analysis.

• CPM – the cost incurred in delivering the

message to 1000 individuals

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Example
• If an ad costs $38 000 to place in a magazine
that has a monthly circulation of 400 000
readers per copy the CPM is:

CPM= ______$38 000_____ X1000

400 000
= $95

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This Means
• The cost incurred in delivering a message to
1000 people is $95 (this is the CPM)

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 Comparing Magazines
Homemaker’s Chatelaine Canadian Living

Rate $20,640 $38,605 $29,160

Circulation 689,088 763,778 551,884
CPM $29.95 $50.54 $52.83
Source: CARD, September 2008

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 In your workbook Based on the following
information which magazine is most
efficient in terms of cost (CPM)? First
Calculate the CPM then compare.

Home And House and Home Canadian Design

Garden
Monthly 375,000 285,000 220,000
Circulation

Full page (4C) $45,000 $38,000 $25,000

Ad Cost

CPM

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 Home And House and Canadian
Garden Home Design
Monthly 375,000 285,000 220,000
Circulation

Full page (4C) $45,000 $38,000 $25,000

Ad Cost

CPM $120

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 Home And House and Canadian
Garden Home Design
Monthly 375,000 285,000 220,000
Circulation

Full page (4C) $45,000 $38,000 $25,000

Ad Cost

CPM $120 $133.33 $113.63

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 Primary Audience

The primary audience is the audience generated by

subscribers or news stand buyers.

- The primary audience or readers see a large

percentage of an issue as pages spend more time
reading it and are interested in the content and also
have the highest probability of add exposure

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 Secondary Audiences
Pass along readers are those outside the
purchasers family who are exposed to a
publication. (ex. hair salons doctors offices and
libraries)

- pass along readers may not read the

publication as thoroughly
- they tend to spend less time with the
magazine so the advertising exposure is
probably much lower.

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Sometimes you have addition information
that allows you to weigh the data to get a more
accurately

Example – If a magazine has a circulation of 150 000

and a pass along reader ship of 1.2 per copy what is
the total audience if the pass along readers have a
50% weighting?

= (150 000)+ (1.2 (150 000)*.5

= 150 000+90 000
Total Audience = 240 000

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 In your workbook, recalculate the CPMS with the
new readers per copy information using a
readers per copy weighing at 50%

Home and House and Canadian

Garden Home Design

Monthly Circulation 375000 285000 220000

Readers Per Copy 0.5 1.1 1.3

Full Page Ad Cost $45,000 $38,000 $25,000

New CPM

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 Home and House and Canadian
Garden Home Design
Monthly
Circulation 375000 285000 220000
Readers Per
Copy 0.5 1.1 1.3
Full Page Ad
Cost $45,000 $38,000 $25,000
Total
Audience 468750
New CPM $96

= (375 000) + (375 000 *0.5*0.5)

= 375 000 + 93 750 $45 000/468 750 *1000
= 468 750 = $96

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 Home and House and Canadian
Garden Home Design
Monthly
Circulation 375000 285000 220000
Readers Per
Copy 0.5 1.1 1.3
Full Page Ad
Cost $45,000 $38,000 $25,000
Total
Audience 468750 441750 363000
New CPM $96 $86 $69

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 Cost Per Point

• CPP is a ratio based on how much it costs to buy

one rating point, or one percent of the population
in an area being evaluated.

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Cost Per Point - CPP

• If it costs 50,000 to place an ad on tv

and the program has a reach of 6%,
the cost per point is:

• CPP=Cost to Place an Ad /Program

Rating
• CPP=$50,000/6=$8,333

• Try the CPP question in your Work

book
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 CPP Calculation

• = $8000/9%

• =$888.89

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 Digital Media Planning
 More about consumer
involvement; the consumer
controls when he or she sees the
message.
 Digital media strategy focuses on
timing and engagement, rather
than reach and frequency.
7-6
Copyright © 2012 Pearson Canada Inc.

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Key On-Line Metrics

• Impressions
• Clicks
• Visitors
• Unique Visitors
• Page Views
• Conversion

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 On-Line Impressions

• Sometimes called a view or an ad view, is a term that

refers to the point in which an ad is viewed once by a
visitor, or displayed once on a web page.

• The number of impressions of a particular

advertisement is determined by the number of times
the particular page is located and loaded.

• If your ad appears before a user that counts as an

impression.

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 Clicks
• When a mouse clicks on an ad or link, it takes the user to
a page on the website.

- When the user is exposed to your ad and you divide it

by the number of clicks (users actually clicking on your
ad) the result is a click through rate (CTR)

• CTR provides a measure of your ads ability to provoke

interest.

To note CTC means cost per click

• – you determine this number by how much you spend on
your internet advertising campaign and then comparing it
to the clicks the ad received
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 Visitors and Unique Visitors

• Visitors refers to the total number of on-line users

who arrive at the website, some of whom may have
visited the site more than once.

Unique visitors are those who visit a website

counting each person only once during the reporting
period. This is relevant to advertisers as a measure
of the sites true audience size.

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 Page Views and Conversion

• Page views are the gross number of times particular

pages are accessed without regard to the number of
different individuals accessing the page.

Conversion is the number or percentage of visitors to a

website who go on to take action.

• For example, this could be making a purchase or filling

out a form to request information.

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 Analyzing Internet Metrics
Try Question 10 a and b in your workbook

Example Definition

Impressions 100 000 exposure to the ad

Clicks 2000 click on the ad

Visitors 2000 land on the site

Page Views 6000 pages viewed by the visitor

Conversion 400 request information or buy

What is the conversion rate in this example? (the % of visitors that took some action on the site)

What is the click through rate (CTR) in the table?

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 Example Definition

Impressions 100 000 pass by the ad

Clicks 2000 click on the ad

Visitors 2000 land on the site

Page Views 6000 pages viewed by the visitor

Conversion 400 request information or buy

What is the conversion rate in this example? (the % of visitors that took some action on the site)

=400/2000*100
20%

What is the click through rate (CTR) in the table?

=2000/100000*100
= 2%

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Analyzing Internet Metrics
Per Click Analysis

• A company is trying to calculate the cost of

conversion for its on-line advertising campaign

• It is placing 4 ads in total

• Fill in the following chart to see what their cost

per conversion is for their campaign

• Which of the ads is most effective?

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Fill in the Attached Chart

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Ad Impressions CTR % Clicks Cost/Click Total Cost Coversions Cost/Conversion

1 10000 2.50% 250 $0.50 $125.00 10 $12.50

2 50000 1.50% $0.25 12

3 40000 0.50% $0.75 10

4 15000 0.25% $0.30 2

Total 115000 0.96% $0.38 34

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 Comparing 4 On-line Ads

Ad Impressions CTR % Clicks Cost/Click Total Cost Coversions Cost/Conversion

1 10000 2.50% 250 $0.50 $125.00 10 $12.50

2 50000 1.50% 750 $0.25 $187.50 12 $15.63

3 40000 0.50% 200 $0.75 $150.00 10 $15.00

4 15000 0.25% 38 $0.30 $11.25 2 $5.63

Total 115000 0.96% 1104 $0.38 $419.52 34 $12.34

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 Which Ad is Most Effective?

Ad Impressions CTR % Clicks Cost/Click Total Cost Coversions Cost/Conversion

1 10000 2.50% 250 $0.50 $125.00 10 $12.50

2 50000 1.50% 750 $0.25 $187.50 12 $15.63

3 40000 0.50% 200 $0.75 $150.00 10 $15.00

4 15000 0.25% 38 $0.30 $11.25 2 $5.63

Total 115000 0.96% 1104 $0.38 $419.52 34 $12.34

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 Congratulations!
• You have now completed the media math lecture

• Now what??

• If you have any questions at all on the content

contact your professor via email

• Come prepared next week for the open book

mini midterm on marketing math and the creative
brief
• Just a reminder your computer cannot be used
for the math section.
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