What formula can determine best pricing for magazine print ads, based on production cost?
I have a 32-page magazine that is a companion to a web site my company just purchased. The production cost is being supported by 4 main advertisers, but there are 12 pages that go unsold each month. There is a lot of opportunity for sales, and I want to make sure that the Ad Rate Sheet I build is optimal.
This is a good question that requires a rather in-depth answer. Ok, I'll cut to the chase. Magazine ad rates are based on a concept known as CPM or Cost Per Thousands. You might be wondering, why the ‘M’ and not a ‘T’? Well, the ‘M’ is in reference to the Roman numeral M which is 1,000. You will also come into contact with this ‘M’ when you receive an offset press printer’s quote for your magazine. You will see somewhere near the bottom: "Addl M’s" or Additional Thousands. This is in regard to the cost for printing an additional thousand magazines over your quoted print run. When you’re creating your ad rates, you want to consider the CPM which is the cost associated with reaching a thousand readers. Now, this is not an exact science but you will find, once you’ve analyzed media kits from possible competition, that the average CPM for many consumer magazines teeters around $100 but it can vary widely predicated upon a magazine's total circulation, market, influence, competitors, etc. What does this mean?
Let’s say that you have a magazine circulation of 15,000. The open rate, the rate that an advertiser would pay for just one ad placement in one issue of your magazine, for a single page 4 color ad would be $1,500 dollars (100 X 15). Do you follow me? This is just a general example but the CPM can vary greatly between similar magazines based upon the demographic they serve, if it’s a niche market, value added offers, etc. I highly recommend that you get at least 10 different media kits from publications that are similar in scope to your magazine. Another factor to take into consideration will be your CPI or Cost Per Issue. The CPI is all the costs that are directly associated with the production of each copy of your magazine. Essentially, it is the net cost for each copy of your magazine; not the cover price! What do I mean? Well, let’s take this general example of some costs associated with producing each issue of a magazine with a print run of 15,000: 1) Graphic Artist: $1,200 2) Stock Photography: $350 3) Freelance Articles: $250 4) Misc. Expenses: $300 5) Offset Printing: $10,000 Total: $12,100 Now, let’s take this number and divide it by the print run: 15,000. When we do this, you will get this number: 80.666. Thus, the CPI is 80.6 cents. So, the net per copy is just under 81 cents. You can further divide this number by 32 and you'll get 2.53 or just over 2.5 cents per page. This will give you a better picture of possible profit margins per page, per copy and per issue of your magazine. You will have to take into account all these factors when determining your ad rates per dimensions and page. This, of course, is just a rough sketch, if you will, but the CPI will be instrumental in not only determining your ad rates but also your cover price and is an obligatory component of your business plan!!