How to calculate the CPM formula

Most commonly, the marketing and advertising industries use the CPM formula to compare the cost of each promotional medium. The CPM formula acronym represents cost per mille, with mille meaning thousand by Latin definition. Because of this, and for obvious reasons, it is sometimes called the CPT formula.

The CPM formula measures the cost in terms of efficiency. It does not measure the effectiveness of the promotional activity.

Why do we need to calculate the CPM?

In the same way small business managers monitor their overheads to ensure operating efficiency is achieved, the clever ones also insist that their promotional activities perform cost-efficiently.

Of course, the only accurate way this can be performed, is by way of measurement. So they assign appropriate metrics to gauge performance. On a global scale, the CPM formula is the most widely used efficiency indicator for this purpose – across all mediums – including print, broadcast, outdoor, and of course, digital.

The benefits of calculating a campaign’s CPM are particularly useful in the sense that various mediums can be evaluated against each other for their relative affordability. The example below illustrates how to calculate the CPM for a magazine print advertisement.

CPM formula example

Before we begin, it’s crucially important to remember that the CPM formula does not consider the marketing message’s effectiveness. In other words, the CPM measures cost, not performance.

Let’s say we wish to calculate the CPM for a Woman’s Day magazine advertisement. In this example, we’ll presume the cost of the campaign is $16,300.

Next, we then multiply this figure by 1000, which gives us the figure of $16.3 million ($16,300,000).

Our next task is to divide this figure by the promotional vehicle’s target audiences’ claimed readership. Through secondary research on the Internet, we discover this equals 807,000 readers each week.

We perform the calculation and determine that this ad will cost us $20.20 per 1000 readers. The CPM calculation, therefore, equals $20.20.