Determing the Right Level of Online GRPs
ADOTAS – As Goodway Group rolled out our online GRP (gross rating point) tool, the first nine out of 10 questions we received centered around understanding what the right level of GRPs actually is for online. As with almost everything else related to online, rather than citing theory, there is a real-world way to identify this number, learn from it and plan better for future campaigns.
Before we begin, I’d like to set up an analogy.
Let’s say you have entered a contest purely for money-making purposes and you’re paid $1,000 for each mile you run. However, your body requires one bottle of water for each mile you run or you will literally collapse at the half-mile mark of the next mile.
Adding one more kink, the cost of water doubles with each mile you run, starting at $1 for the first mile, going to $2 on the second and so on. Since this isn’t a test, I’ve created a chart here that will help you visualize your total earnings per mile when you take these factors into account.
Obviously, after you’ve run 10 miles you’re going to choose not to buy another bottle of water — you’d actually lose money if you continued on. So why was it worth a brain bender this early in the morning just to get to talking about reach and frequency online? This is because the exact same principle applies to both metrics.
We work with a significant number of automotive OEMs and dealer groups so I’d like to use an automotive example here to illustrate how to calculate optimal reach. But, before we get there, one more brain bender. Here is how many people in the U.S. are truly going to shop for and buy an individual vehicle this month.
However, if you’re marketing the new Ford subcompact, you know that someone considering a large SUV is not going to be shopping your segment. So, generously saying that a consumer will shop every single vehicle in four of the 19 common vehicle segments, we have 0.11% of the U.S. population shopping for a specific vehicle at a given time.
Even if we hit all 231,491 people with a 20 frequency, we’re looking at around 4.62 million impressions nationally as an auto advertiser’s in-market budget for the month — about $25,000 on an ad network.
So why not cut budgets by 98% and stop there? Here’s where reality takes over theory, and how you can better plan your online campaigns.
Using the example above, a 0.11% reach really should do the trick. However, using the running contest analogy above, I can tell you from real world experience that it is still profitable for an auto marketer to reach consumers well beyond this narrow universe and still convert users to participate in generating key performance indicators. In fact, we’ve seen reaches of more than 50% still generating great numbers.
How could this be, since it defies all logic? A few reasons:
- First, there is no site, network, platform, or tool that will deliver you that exact 0.11% of users. There will always be spill.
- Second, people are in-market much longer than one month. Research has shown that many consumers shop six months out, and some shop as far as 12 months out.
- Third, many folks who think they’re going to buy new go to the dealership with that intent but end up buying used.
- Finally, the reasons “why” aren’t as important as the statistical facts. The point at which more reach raises your eCPA higher than your goal is where you want to limit your reach.
The same science applies to frequency. Each campaign will have a different frequency level at which another impression costs more to show than it is worth to generate a profitable eCPA. We’ve never seen conversion rates actually drop with greater frequency, no matter how high we go — the question is whether it’s worth it monetarily to continue to increase frequency.
Just like the $1,000 per mile didn’t drop in the example above – there were still winnings – it became unprofitable to keep running. In most cases the point at which it’s no longer profitable to serve additional impressions occurs between a 6x-8x frequency. It’s also important to note that this is per message, so if you are running multiple messages, you’ll need this kind of reach and frequency for each message, not overall.
While this was certainly not a simple, “Go for 50% reach and 8x frequency,” it’s statistically a sure-fire way to know where your reach, frequency and, as a result, GRPs should end up to be at the optimal level.
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