CPM explained: comparing the cost of reaching 1,000 people

Key takeaways

CPM, or cost per mille, is the cost of reaching 1,000 people with an advert. It is the one figure that lets you put a leaflet, a radio spot and a social advert side by side. It measures how expensive an audience is, not whether the advert worked.

• CPM = cost ÷ people reached × 1,000.
• A £500 drop to 5,000 homes has a CPM of £100.
• A low CPM is only cheap if the audience is the right one.
• Use CPM to compare prices, and cost per enquiry to judge results.

What is CPM?

CPM stands for cost per mille, mille being Latin for thousand. It is the price of 1,000 impressions, an impression being one occasion on which an advert is shown, delivered or heard. Media owners and social platforms both quote it, which makes it the common currency of advertising.

• Social media marketing vs traditional advertising: what works better for SMEs?

How do you calculate it?

Divide the total cost by the number of people reached, then multiply by 1,000. Include production in the cost if you want the true figure.

• 1. Take the total cost, for example £500.
• 2. Take the audience, for example 5,000 households.
• 3. Divide: £500 ÷ 5,000 = £0.10.
• 4. Multiply by 1,000: a CPM of £100.

What does CPM look like across channels?

CPM varies enormously by medium, which is the first thing the calculation teaches. Using the indicative costs in this series as illustrations: a leaflet at 6p to 15p per home has a CPM of £60 to £150, and a mailed letter at 60p to £1.20 has a CPM of £600 to £1,200. Broadcast and paid social are usually far lower, often in single or low double figures.

• How much does advertising cost a UK small business?
• Leaflets vs social media ads: which wins local customers?
• Direct mail vs social media: reaching customers by name

Why is the cheapest CPM not always the best buy?

A low CPM buys a large audience, and most of it may be wrong for you. Regional radio reaches people forty miles away for pennies each. A letter to a past customer costs a pound and goes to exactly the right person. Attention differs too: a leaflet handled at the door is not the same as a post scrolled past.

• Targeted vs mass advertising: paying only for likely buyers
• Advertising frequency: how many times must people see an ad?

How do you adjust CPM for waste?

Work out an effective CPM by counting only the people who could buy. If a station reaches 100,000 listeners but only 10,000 live in your service area, divide the cost by 10,000 instead. The figure rises tenfold and becomes honest.

• Remove people outside your area.
• Remove people who could never use the service.
• Recalculate on the remainder.

• The advertising channel scorecard: pick where to spend

Where do the audience numbers come from?

Social platforms count impressions for each advert. Traditional media use industry estimates: RAJAR for radio listening, BARB for television and JICMAIL for mail. Print titles quote circulation, ideally audited. Ask which figure you are being given and for which area, because estimates and counts are not the same thing.

• What is traditional advertising? A plain guide for small firms

What should you use alongside CPM?

Use cost per enquiry and cost per customer alongside it. CPM tells you what the audience cost. The others tell you what it produced. Paid social can be tested from £300–£500 a month, which is usually enough to get a first cost per enquiry to compare with a traditional quote.

• Cost per lead by channel: comparing social media and offline
• How to compare advertising ROI across online and offline

When is CPM the wrong measure?

CPM is the wrong measure for channels that are not about reach: a trade show, a sponsorship or a phone call. It also misleads for very small, valuable audiences, where a high CPM is exactly what you should expect to pay.

• Trade shows vs social media: where B2B leads come from

What does this look like in practice?

A pattern we see when owners compare media for the first time: the option with the biggest audience figure looks like the bargain. Once the audience is cut down to people inside the service area, the small local option with the high headline CPM frequently turns out cheaper per real prospect.

• See client work
• Social Media Marketing for UK businesses

Next step

Take your last two advertising invoices, find the audience each claimed and work out both CPMs. Then cut each audience to people you could actually serve.