The CPM Formula
Learning how to calculate CPM can be easy. The CPM formula is your ad spend ÷ by measured impressions. Then multiply that number by 1,000.
For example, if an advertiser spends $5 to reach 1,000 people, their CPM would be $5.
Who knew you’d need to improve your math skills to be a good marketer?
What is CPM in marketing
CPM stands for “cost per mile.” It’s a way of measuring how much it costs to get your ad in front of 1,000 people.
If you’re wondering why “mile” is used, it’s an old advertising term that just stuck around. And even though it doesn’t make sense anymore, CPM is now used to measure the cost of all kinds of advertising, from online ads to TV commercials.
What is a good CPM
A good CPM varies depending on your platform, goals, and budget. So we looked for a good answer but couldn’t find a perfect range or average.
For example, on Facebook, CPMs can range from $5 to $20. On Google AdWords, CPMs can be as low as $2 or as high as $50. Local TV spots can have CPMs as low as $10 or as high as $100.
If you’re paying less than $10, you’re doing well if your goals are being met. If you’re paying more, you may want to reevaluate your campaign.
CPM vs CPA
Both CPM and CPA have their place in an effective marketing strategy. But it’s essential to know the difference to choose the right metric for your goals.
The difference between CPM and CPA is that CPA stands for “cost per action.” So you’re only paying for results, like clicks or leads.
But with CPM, you’re paying for ad impressions, whether anyone takes action on your ad or not.
So, consider using CPA when your goal is to get people to take a specific action, like clicking through to your website or making a purchase.
CPM vs CPC
CPM is different from CPC, or “cost per click.” CPC is a metric that measures how much it costs to get someone to click on your ad.
Again, CPC is best suited for campaigns where the goal is to get people to take a specific action, like making a purchase.
When to use CPM
The best time to use CPM is when your goal is brand awareness. CPM can be a good option if you want to reach a large audience and don’t necessarily need people to immediately take action on your ad.
CPM can also work well if you’re running ads and other marketing efforts, like Public Relations or content marketing. CPM can help supplement your other marketing efforts and ensure your brand is top of mind.
CPM can be a good option for a brand manager looking to reach a large audience and build awareness for your brand. However, remember that you may not see an immediate return on investment (ROI) with CPM campaigns.
How to measure the effectiveness of a CPM Campaign
There are a couple of ways to measure the effectiveness of CPM campaigns.
You can also look at how much traffic you’re getting to your website from your CPM campaign. If you see a significant increase in website traffic after running a CPM campaign, that’s a good sign that people are seeing and responding to your ads.
Finally, keep an eye on your brand awareness metrics. After a CPM campaign, you can measure whether more people know about your brand and what you offer.
CPM campaigns can take longer to show results, but if you see an increase in brand awareness after running a CPM campaign, that’s a good sign that your campaign was effective.
The benefits of CPM advertising
One benefit of CPM advertising is that it’s a cost-effective way to reach a large audience. This is because it allows you to pay for ad impressions rather than clicks or conversions.
Even if they don’t take action on your ad, you get your brand in front of many people. CPM is best suited for brand awareness campaigns.
Another benefit of CPM advertising is that it’s a more predictable way to spend your advertising budget. With CPA or CPC, you’re only paying for results. With CPM, you know exactly how much you spend on ad impressions.
In some cases, CPM advertising can help you better manage your budget and forecast your ad spend.
The challenges of CPM advertising
But the biggest challenge with CPM advertising is that you’re paying for ad impressions, whether anyone takes action on your ad or not.
Meaning CPM can be less effective in generating leads or sales. That’s why CPM is best suited for brand awareness campaigns rather than lead generation or sales campaigns.
Another challenge of CPM advertising is that it can be more expensive than CPA or CPC.
So, CPM may not be the best option if your goal is to generate leads or sales. CPA or CPC may be a better choice.
Tips to Lower CPM Costs
Here are some tips to help you lower your CPM costs:
- Target a specific audience: When you target a specific audience, you’re more likely to reach people interested in your product or service.
- Use relevant keywords: When you use relevant keywords, you’re more likely to reach people interested in your product or service.
- Use negative keywords: When you use negative keywords, you’re less likely to reach people who are not interested in your product or service. Again, this can help you lower your CPM costs.
- Use retargeting: Retargeting is a way to reach people who have already shown an interest in your product or service.
- Optimize your ad campaigns regularly: The best way to lower your CPM costs is to test different ad campaigns and optimize and see what works best for your business.
Wrapping up: How to calculate CPM
CPM advertising can be a cost-effective way to reach a large audience and build awareness for your brand. However, remember that you may not see an immediate return on investment (ROI) with CPM campaigns.
If you want to measure the effectiveness of CPM campaigns, there are a couple of ways. For example, you can look at how much traffic you’re getting to your website from your CPM campaign or measure whether more people are aware of your brand after running a CPM campaign.
CPA or CPC may be better options if your goal is to generate leads or sales. However, CPM advertising can still be valuable to your marketing mix.