GRPs measure the total of all Rating Points during an advertising campaign. A Rating Point is one percent of the potential audience. For example, if 25 percent of all targeted televisions are tuned to a show that contains your commercial, you have 25 Rating Points.
If, the next time the show is on the air, 32 percent are tuned in, you have a total of 25 + 32 = 57, and so on through the campaign. The word "gross" reflects that the calculation double-counts (actually multiple-counts) the audience; that is to say, it is possible to reach a percentage higher than 100.
GRPs could also be applied to other media besides television: radio, print, billboards, the web, and so on. If you attach a United Way banner to your corporate headquarters building, and 3 percent of your target population drives by the billboard twice every day for 120 days, then GRPs = 3 x 2 x 120 = 720.
Media planners calculate total Reach-Advertising, average Frequency-Advertising, and GRPs as part of the planning of a campaign. The goal is to obtain the highest possible GRPs at the lowest possible cost, while remaining focused on the same target market. After the campaign, you can calculate actual Reach x Frequency = GRPs to produce a permanent record.
This is a fundamental navigational metric. That is to say, it is a metric that cannot, by itself, measure your program's profitability, but CAN help you steer your program toward higher profitabilty. It is a coarse measurement of how you approached your target audience and how you spent the budget.
By itself, it provides no analysis – for example, it provides no evaluation of an outlet's credibility with the audience. It counts each outlet in terms of total circulation, listenership, viewership, etc.
It can underestimate the value of a magazine that reaches a relatively small number of people many of whom are opinion-makers, fashion-gurus, and other thought leaders, or consumers who are avid participants in the kinds of products and services you offer.
On the other hand, it can OVERestimate the value of a big-circulation magazine that does not reach many of those kinds of consumers. It's a matter of quantity vs. quality.
It doesn't even mean that everyone you counted even saw your message. For example, many television viewers whose receivers were tuned to "your" program may have been in the kitchen or bathroom when your commercial was on the screen.
And many people may have driven by your United Way banner without looking at it. For further reference, see Wikipedia.