Thursday + Gregory Huffstutter = The Ad Man Answers
Q: What are your thoughts on parking garage advertising? I like that you can target a certain demographic, but the CPM seems high.
-- Warren Lindgren
Q: We have a "new" ad product which is basically a better place to put a billboard. However, we are having a very difficult time calculating our CPM numbers to make them attractive versus other forms of media. Would you mind looking at our product and giving me your advice on how we should set our rates for national advertisers?
-- Art Dewberry
A: The Ad Man has received several questions like this in the past… and is always happy to help for a small cut – say 35% – of future revenues. (Acceptable forms of payment: stock options, gold bullion, and PayPal.)
Seriously, though, pricing CPMs (Cost Per Thousand Impressions) for new media placements is a tricky business, and can be shaped by inventory demands, economic climate, lead time, spend levels, and lunar polarity.
As we speak, the housing/credit meltdown has thrown TNT into the collective advertising pond. Companies are shedding personnel and slashing projected revenues, which trickles down to lowered ad budgets, which shrinks demand on ad space, which drives layoffs in the ad sales community, which means everyone’s scrambling to stay in business.
So if you’re buying, now’s the time to hammer out a great deal with a low CPM.
On the flip side, if you’re selling a relatively unproven advertising vehicle – like parking garage or golf tee-box advertising – you may need to “drop your pants” (to use common advertising slang) in order to attract new accounts.
In a normal economic climate, static (non video) outdoor advertising should have a CPM around $1-$5. Therefore, if your parking garage has an estimated monthly traffic count of 50,000 impressions, the price range per ad placement should be somewhere between $50-$250 per month.
But remember, impressions measure DUPLICATED AUDIENCE. So when you hear a parking garage has a monthly traffic count of 50,000 that does not mean 50,000 different people a month will see a poster mounted inside. It could represent the same 1,250 people driving in and out of the garage every workday. (1,250 people x 2 daily trips past the poster x 20 workdays per month = 50,000 impressions).
And that’s the problem with many specialty forms of outdoor advertising… you wind up reaching the same people over and over.
Take the tee-box advertising example. Most golfers are loyal to a small cluster of courses, and use the same range to hit balls. So if Lexis were to advertise their new SUV on the mats of El Dorado Golf Course, they would be delivering unique advertising impressions to a few casual duffers who hit El Dorado once a month. But the hard-core golfers who play three rounds a week would get multiple exposures to the same advertising message, and may eventually tune it out.
This is where client priorities come into play. Lexus may have identified golf fanatics as their best customers, so they’d be happy having wear-out levels of advertising impressions against their target. Other high-end brands – Ralph Lauren, Rolex, Callaway, Williams & Sonoma, Titleist, Palm Springs Tourism – might come to the same conclusion, and suddenly tee-box advertising is sold-out a year in advance. Then the vendor can start inching their CPMs to the higher end of the $1-$5 range.
Most advertisers, however, are looking for a balance of reach and frequency. So they’d rather hit a higher % of people 3-6 times, rather than a few individuals seeing the same advertisement 25 times a month. A client like McDonald’s, for example, would be a bad fit for tee-box or parking garage advertising. McDonald’s is all about mass marketing, so they gravitate to other forms of outdoor, like bus-side advertising, that isn’t shown to a narrow demographic.
As buses travel through a city, they display advertising to a broad audience – bikers, pedestrians, passing cars – new potential customers every second. Transit advertising usually has a CPM around $3, so if you’re about to price your media placements over that rate, ask yourself: “Why would anyone pay more for my service than the huge exposure they’d generate from buying the side of a bus?”
If you happen to sell tee-box advertising, and are about to pitch the Rolex account, the answer could sound something like this:
“For $275, you could buy one bus side that generates 85,000 monthly impressions ($3 CPM), but we’ve found a study that shows only 5% of audience reached by transit advertising has a household income high enough to purchase your watches. So really, of those 85,000 monthly impressions, only 4,250 would do you any good, which means your target CPM soars to $65. With tee-box advertising, however, 80% of the people exposed to your ad will have a household income over $100K. We only charge $20/month per tee-box, so even though our 5,000 monthly impressions looks low compared to bus sides, you’d get a $4 CPM against a high-income, targeted audience.”
That’s media math at its finest.
(My apologies to any authors if the above paragraph pulled a muscle in the left side of your brain.)
This exercise can be translated to all kinds of media placements. If you’re the seller, play up your strengths. For tee-boxes, there’s the fact that you stand over the advertising placement for a long stretches of time, compared to the mere seconds you’re exposed to a freeway billboard (unless you happen to be driving the 405 freeway in LA, in which case, entire rounds of golf are often quicker).
For parking garages, those are usually attached to a place of business, so you have the advantage of passer-by’s being minutes away from their computer. Products that target the white-collar crowd – Blackberry, Starbucks, DKNY – are a good fit, especially if the ad directs people to a website that can be surfed during one’s lunch hour.
If you’re selling static ad space, you wouldn’t want to have CPMs over $5, because then you start competing with more dynamic forms of advertising. Digital outdoor – rotating billboards or full-motion video playing on TV screens inside your health club, elevator, taxi, drug store, etc. – typically have CPMs in the $5-$10 range. And once you get over a $10 CPM, you start competing with radio, TV, and mass-market print, which are more established, have better measurement tools, and guarantee audience delivery.
As mentioned earlier, the current economy is shaking up the advertising landscape. So all of the CPM ranges I just gave are now in flux. If you’re selling tee-box, or any form of specialty outdoor advertising, you may need to offer a $0.50 CPM, throw in free months, pay for production, and dance a cha-cha to attract national advertisers right now.
Remember, it’s always easier to sell new advertising when you’ve got legitimate brands (“Polly’s Pancake Shack” does not count) already using your space. So call in favors, make a few sweetheart deals, and hope you’ve got enough money in the bank to ride it out until advertising budgets thaw.
Gregory Huffstutter has been punching Ad Agency timecards for the past dozen years, working on accounts like McDonald's, KIA Motors, Suzuki Automotive, and the San Diego Padres. His first mystery, KATZ CRADLE is on submission while he's working on the sequel. The first 100 pages of his novel are linked here. For general advertising questions, leave a comment or send e-mail to katz @ gregoryhuffstutter dot com with 'Ask The Ad Man' in the subject line.
That is very good and I agree with you.I guess maybe focusing on the technology used to transmit the ideas isn’t really the point.I think you need Ad men 2.0 working in a place called Ad Agency 2.0.I also watched Rise of the Ad Man, and I started pondering along the same lines.Thanks for sharing with us.
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