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Today, digital advertisements serve as catalysts for creating positive word-of-mouth and driving profits. Effective advertising strategies can accomplish even better results, such as broadening the audience and increasing impression share. The latter revolves around determining the cost-effectiveness of your digital efforts, also known as CPM marketing.
As an essential aspect of digital advertising, CPM marketing is frequently used in numerous traditional promotional efforts. Advertising agencies and companies use it to calculate the impact of their ads.
Simply put, CPM marketing can be a potent tool for any company seeking to reach millions of prospective clients if used correctly.
Now, without going overboard, how do you assess the efficiency of your digital output and email marketing CPM or the number of impressions translated into conversions? CPM, as well as several other marketing metrics, are used to accomplish this.
In this article, we’ll look at the role of CPM in marketing, its importance for email marketing campaigns, and how to negotiate, maximize, and reduce it.
What Is CPM in Digital Advertising?
In simple terms, the CPM marketing metric implies paying for ad views, and it is mainly used in digital advertising and web traffic marketing. Most businesses familiar with Google Ads know that this platform generally operates on a CPM or CPC basis.
What does CPC mean? CPC, otherwise known as cost per click, is traditionally used to measure the performance of PPC campaigns, helping brands understand the costs required to acquire a single lead or prospect through their advertising efforts.
As for email marketing campaigns, it’s crucial to examine costs and engagement — in other words, calculate and compare CPM, CPA, and CPC email marketing metrics.
What does CPM mean? CPM, also known as cost per mille or cost per thousand impressions, is a pricing model and ad metric that allows businesses to evaluate the cost-effectiveness and the impact of their ad campaigns.
What is an impression? A unit of measurement is called an impression. Every ad impression is recorded when the ad unit is served or viewed online or in-app.
Since there are two kinds of impressions — viewable and served — it’s essential to explain the difference. A served ad impression is an automatically displayed ad, and a viewable impression is an ad that real users view.
Given that ad impressions are so small, they are typically measured in thousands. For that reason, CPM (a cost-per-thousand impressions model), as opposed to CPC (a cost-per-click model), measures a greater awareness level of a company.
How Does CPM Work?
When running a CPM ad campaign, a business pays a publisher a fixed fee per thousand impressions received by his ad units on a website or app.
How does it work? A publisher charges the advertiser a set fee for every 1,000 ad views on the website. For instance, if a website charges $3 CPM, advertisers pay $3 for every 1,000 times the advertiser’s ad placement appears on a web page.
But remember that CPM does not guarantee that visitors will interact with an ad unit. For that reason, businesses often use CTR (click-through rate) as another success metric in a CPM ad campaign.
On top of that, the CPM marketing metric is frequently used for campaigns to boost brand awareness. Targeting specific demographics is rare when running such CPM campaigns. But that’s one of the reasons why some high-traffic websites charge higher CPMs than smaller, low-key sites.
How To Calculate CPM in Marketing
Let’s start immediately with an example. Here’s a short rundown to calculating CPM:
- Find a CPM rate: Let’s assume the rate is $4.40.
- Multiply the CPM rate by the number of impressions: Let’s assume the ad was viewed 8,000 times, resulting in 8,000 impressions. Now for the math: $4.40 x 8,000 impressions = 35,200.
- Divide the result by 1,000: We get 35.2 by dividing 35,200 by 1,000. It means that the total cost of the ad campaign is $35.2.
However, the calculations may be more complex regarding email marketing campaigns. The industry, the email list, and targeting preferences frequently determine the pricing. A targeted list, for example, implies higher open and click rates and, therefore, will have higher email CPM rates.
To ensure that their initiatives are automated, brands frequently implement email marketing solutions from email vendors. The CPM price quote will be based on the email quantity sent annually, with monthly or per-campaign billing options.
There’s no denying that every marketer wishes to optimize email marketing CPM and achieve high ROI successfully. For that reason, businesses implement email and SMS marketing solutions like Phonexa’s E-Delivery.
Brands equipped with multiple E-Delivery features, including behavioral segmentation, multi-channel distribution, and split testing, can maximize their email marketing and sales potential and gain control of their email data dynamically.
7 Common Factors Affecting CPM
Let’s examine in more detail the seven common factors that tend to affect CPM rates and CPM email campaigns.
|Factor #1. Supply & Demand 📈||It’s no secret that macroeconomic and microeconomic factors influence the demand, and the supply (or inventory) is represented by locations (websites, apps, or feeds) where digital assets can be displayed. |
So, where does CPM marketing stand with these variables?
Advertisers want their products to appear on websites and apps that drive high-quality prospects. The problem is the crowded market and multiple advertisers bidding on the same inventory, which makes it more expensive and increases the CPM.
|Factor #2. Seasonality 📅||CPM generally increases at certain times of the year. Since retail stores compete fiercely for traffic during holiday and sales seasons, advertisers tend to invest more in their ad and email marketing campaigns. Significant sales typically occur during winter and summer on holidays and special occasions like Easter, Christmas, Black Fridays, Cyber Mondays, Valentine’s Day, etc. |
Naturally, seasonality is a significant factor that is difficult to control. But every business bids around those times of the year to reach a bigger audience and make a sale.
|Factor #3. Ad Platform 📢||Every social platform where businesses place ads impacts the CPM rate. While the cost per platform varies, the CPM ranges from most expensive to least expensive on popular platforms like Snapchat, TikTok, or Facebook.|
|Factor #4. Target Audience 🎯||Reaching the right audience is crucial for establishing long-term customer relations and increasing sales. In an attempt to get every consumer without specific targeting, businesses might face sky-high CPMs, increased marketing costs, low sales, and customer frustration. |
But it’s important to understand that more specific targeting will result in higher CPMs. The CPM rate depends on multiple factors, including geographic location, age, gender, and customer interests.
On the bright side, creating customer profiles and segmenting your audience is a surefire way to make your ads seen, increase ROI, and boost sales.
|Factor #5. Campaign Goals ✅||Campaign goals also tend to impact CPM rates. Understanding what you wish to achieve with your campaigns is crucial for the success of your marketing initiatives. |
For instance, if you need to achieve top-of-the-funnel awareness, your principal goals are reach and brand awareness. Suppose your goal is customer consideration, then in the middle of the funnel. In that case, your campaign needs to focus on diverse variables, including customer engagement, traffic influx, lead generation, app installs, etc.
The CPM is generally lower for top-of-the-funnel goals and rises as you focus more on bottom-funnel targets.
|Factor #6. Geography 🗺️||The industry and the country your business operates in directly impact the CPM rate. The CPM value is directly proportional to the population of the countries you’re targeting and your industry or niche. For instance, the United States and France typically have higher CPM rates and more aggressive ad bidding.|
|Factor #7. Format of Ad Creatives 🎨||Dynamic and video ads attract more attention than static ad creatives. More attention from consumers translates into more impressions, which automatically reduces CPM. |
As a rule of thumb, your ads, whether static or dynamic, must correspond to the format and size required by the publisher. But there is also the issue of quality. Decent graphics and clear marketing messages ensure that your audience responds well to campaigns and avoids reporting them.
What Is CPM in Social Media?
Launching a social media ad campaign demands two objectives: achieving the desired outcome like registrations, email subscriptions, or app installs while spending the least amount of money possible.
What Is CPM on Facebook?
It’s no secret that a variety of factors can affect the cost of a given Facebook ad. Whether you deal with targeting, ad placement, or ad creatives issues, raising brand awareness or driving installs through Facebook ads can be challenging.
It requires reaching out to either a very narrow or extensive audience segment. A solid customer profile is one of the best approaches to ensure that you’re applying suitable targeting options.
Naturally, advertisers want their ads to be viewed as often as possible. If that’s your goal, you must optimize for CPM on Facebook. But how can you do that? Here are several tips that you might find helpful:
- Improve your ad creative or copy
- Fine-tune your targeting
- Try changing the target audience
- Focus on the Facebook ads relevance score
This way, Facebook will place your ads in front of a high-intent and relevant audience within your budget.
What Is a Good CPM for Facebook Ads?
When analyzing any ad platform, marketers must first establish its average CPM. In the last five years, the average Facebook ads CPM has ranged from $11.2 in 2017 to $14.9 in 2021. During the COVID-19 pandemic, the rate fluctuated dramatically, dropping 30% from $11.5 in February 2020 to $8.82 per month later in March.
But how is CPM calculated on Facebook? Facebook typically multiplies the total sum your company spent on the ad campaign by the number of impressions it received. The result is your CPM.
As for the ad’s relevance score, Facebook determines it by analyzing the expected interactions between launched ads and your target audience. If the platform believes your ads are irrelevant, it will not display them to your audience.
But how does Facebook ad relevance relate to the CPM? The answer is simple: the higher the CPM, the lesser the relevance score.
CPM Marketing and Google Ads
Most advertisers launch marketing campaigns via Google Ads, hoping that viewers will click on their ads. But that’s rarely the primary goal. Chances are they want a large number of consumers to see their ads. If that’s the case, bidding on cost-per-thousand viewable impressions (vCPM) is an excellent choice.
vCPM bidding implies bidding on how frequently your ads appear in a viewable position on the Google Display Network. As an advertiser, you decide how much you wish to pay for viewable ads, regardless of whether they are clicked.
However, CPM and vCPM are frequently confused. Here’s how they differ:
- CPM is crucial for defining how much you should spend on advertising because it encompasses all ads displayed on the website.
- vCPM implies viewed ads rather than ads served, meaning advertisers are charged based on 1,000 viewable impressions of the ad placed.
CPM Marketing and YouTube
YouTube offers a Partner Program, enabling participants to use Google Analytics and see which videos make the most money and which revenue streams are the most lucrative.
CPM is one of the critical metrics in this case, but it is based on playback. YouTube videos can have various ads, including pre-roll, mid-roll, and post-roll advertisements. The cost for video playbacks that include one or more ads is the principal focus of playback-based CPMs. Besides, it’s frequently higher than traditional CPM.
Here’s an example: Let’s assume your video was viewed 6,500 times. One thousand of these views included one ad, and 400 others had two ads, making up 1,400 views with ads. It means there were 1,800 individual ad impressions but only 1,400 monetized playbacks.
If an advertiser paid $8 total, the cost per impression would equal $0.0044.
The calculation: $8/1,800 ad impressions = $0.0044
The CPM would equal $4.44.
The calculation: $0.0044 x 1,000 = $4.44
The playback-based CPM would equal $5.71.
The calculation: $8/1,400 monetized playbacks x1,000 = $5.71
Content creators get a percentage of what advertisers spend when their ads appear on your video. In other words, the more money a content creator makes, the more an advertiser pays for that ad.
Ultimately, the CPM indicates how valuable and beneficial advertisers find your videos and audience in accomplishing their business objectives.
What Is CPM in Advertising?
CPM rates can vary tremendously depending on which platform or email list you’re looking at. Sometimes it’s impossible to predict what email CPM rates to expect. So, what does CPM in advertising mean?
Naturally, email CPM is a critical metric to track. The efficiency of sponsored content, including email ads, is determined by ROI.
It’s no secret that CPM is used to determine email ad rates. That means a $700 campaign sent to the email list of 35,000 subscribers will cost you $20 per click. But if you spend the same $700 on emailing 65,000 subscribers, the CPM will drop to $10.77.
Negotiating Your CPM Rate
Companies that send many emails can negotiate the email CPM rates with their ESP. In most cases, the CPM price quote is calculated based on the average number of emails expected to be sent annually.
If a customer sends a higher or lower number of emails than specified in the contract, the difference will be balanced out at the end of the contract.
Maximizing Your CPM Rate
When you know a vendor’s email CPM rates, you can optimize your email marketing campaigns for the best ROI. To begin, ensure that you have a clean email list. Also, review your campaigns’ performance and frequently list engagement, especially if you are being billed per campaign or the number of contacts in your database.
CPM in Email Marketing Campaigns
In email marketing campaigns, CPM refers to the cost of sending a thousand email messages. Also referred to as CPT (cost per thousand), this pricing method is used by email service providers (ESPs) to cover the cost of the mail server, bandwidth, hosting images, deliverability services, and bounce management.
Apart from CPM, businesses must implement lead tracking and management solutions to measure their email marketing software initiatives’ success accurately.
Most email service providers set their prices based on CPM. However, vendors who also offer creative and consultancy services may incorporate hourly or license fees.
Most email service vendors offer their services on a tiered pricing structure. Usually, email CPM rates will go down as the number of emails sent goes up.
The total number of emails sent is generally calculated over a specific time period (month or year). With some ESPs, customers can purchase credits, meaning the CPM would be calculated per purchase rather than per campaign.
Let’s look at an example of a tiered price structure:
- Sending 1 – 10,000 emails may cost $15 ($0.0015 per email)
- Sending 10,000 – 50,000 emails may cost $12 ($0.0012 per email)
- Sending 50,000 – 250,000 emails may cost $10 ($0.0010 per email)
Some ESPs may follow different pricing structures. For example, the CPM rate may be based on the number of contacts in the client’s database. Other popular pricing methods include subscriptions and flat fees.
Why Should Marketers Use CPM?
Since all CPM marketing strategies are targeted, they may only be suitable for some small businesses looking to cater to specific local audiences. They only work well if your business needs quick, measurable results to support your marketing budget.
To ensure that you lay a solid base for a CPM marketing strategy, you need to focus on and understand the following about your business:
- Company’s overall objectives and how CPM marketing can assist you in measuring them
- Specific goals for your new approaches and CPM strategy
- Suitable methods to follow up on your freshly created consumer engagement and brand awareness
But remember that it’s not the best approach to rely solely on CPM marketing. While CPM strategies can produce excellent results, the best way to leverage CPM marketing is to combine it with another type of marketing, like retargeting or email marketing. That way, you will successfully follow up, nurture, and convert leads into new clients.
Finally, let’s take a closer look at the four approaches that can help you significantly reduce CPM.
4 Proven Ways To Reduce CPM
1. Monitor Your Click and Open Rate
Email marketing campaigns sent to broad and generic audience lists typically have a lower open rate. Phonexa’s E-Delivery can help your business improve deliverability and increase open rates through automated A/B testing, behavioral segmentation, and ESP integrations.
2. Define Your Target Audience
Social media channels offer a wide range of tools for defining an ideal audience for your brand. Such platforms as TikTok, Snapchat, and Facebook allow targeting based on customer demographics, purchase histories, interests, etc.
3. Optimize Ad Frequency
Narrowing the target audience is only one part of the equation. Brands should also avoid high ad frequency not to frustrate the audience. Otherwise, they will stop engaging with ads, resulting in more lavish total spending.
4. Leverage A/B Testing
A/B testing can help businesses determine which ad creatives, subject lines, or copy work and which do not. For instance, marketers can run two subject lines concurrently to see which performs better. The winner can then be compared to a third option to see if the winner line can outperform it.
A/B testing can also be used to test images, CTAs, headlines, and other ad elements. Ultimately, by fine-tuning your ads over time, you can increase their performance, climb the ranks, and lower your CPM.
There’s no denying that CPM is critical to the marketing ecosystem. It is an essential metric that allows businesses to evaluate the performance of their ad inventory and determine how to improve their revenue stream.
Using appropriate marketing automation tools and CPM marketing strategy is key to competitive advantage, especially if you’re looking to gain insight into brand recognition and ad viewability and identify the best approaches to broaden your audience.
Schedule a consultation to learn more about how Phonexa’s E-Delivery can help you figure out the best CPM strategies for your email marketing campaigns, improve deliverability, and drive inbox performance.
Frequently Asked Questions
What does CPM mean in marketing?
CPM in marketing means cost per thousand impressions and specific strategies to increase brand awareness. This awareness prepares prospects and visitors interested in the brand’s solution.
What does CPM stand for in marketing?
CPM stands for cost per mille, and the term ‘mille’ means a thousand ad impressions served to or viewed by the audience. Marketers use CPM for various ads, including email marketing campaigns.
What is a good click-through rate for email marketing?
CTR is typically averaged across all industries since every industry has its distinct audience. For instance, in 2018, the average email CTR was around 7%, and today, the number averages between 3-5%, but it still depends heavily on the industry.
What is CPM marketing?
It is a paid ad option allowing businesses to pay for every thousand impressions served or viewed on a web page and in-app. CPM rates differ depending on the platform, channel, audience, and industry.
How much does email marketing cost per month?
The average monthly cost brands pay email marketing agencies ranges from $300 to $500. While it depends on the agency’s services, the pricing is typically tiered based on the email volume and email list size. At the same time, enterprises can pay from $2,000 up to $12,000 monthly.
What is CTR in email marketing?
CTR, or a click-through rate, is the number of individuals who click on a hyperlink, CTA, or image within a specific email. Marketers calculate CTR by dividing the quantity of clicks a particular email receives by the number of delivered email messages.
What are CPM impressions?
CPM impression is a metric that tracks how many ad views or engagements an ad receives.