Advertising-To-Sales Ratio

AAA

DEFINITION of 'Advertising-To-Sales Ratio'

A measurement of the effectiveness of an advertising campaign calculated by dividing total advertising expenses by sales revenue. The advertising-to-sales ratio is designed to show whether the resources a firm spends on an advertising campaign helped to generate new sales. A high advertising-to-sales ratio indicates that high advertising expenses resulted in low sales revenue; this could mean the campaign was not successful. A low ratio may indicate that the advertising campaign generated sales.

INVESTOPEDIA EXPLAINS 'Advertising-To-Sales Ratio'

Businesses often run a variety of marketing campaigns on different mediums (newspaper, websites, radio, etc.) at one time, which can make it difficult to determine which campaigns, if any, were responsible for new sales. Close tracking of promotions can show which mediums perform better with certain ads, and the advertising-to-sales ratio could give insight into the effectiveness of the advertising spending. Some companies do not require as much advertising, such as utility companies, so comparisons should be made between similar companies. Some advertising campaigns are designed to foster long-term support, so looking only at the short-term results might not reflect the long-term benefits of great advertising.

RELATED TERMS
  1. Parasitic Advertising

    A type of marketing that promotes one product at the cost of ...
  2. Consumer Reports

    An evaluation of a new product, or a comparison between products, ...
  3. Promotion

    1.In terms of a career, a promotion refers to the advancement ...
  4. Marketing

    The activities of a company associated with buying and selling ...
  5. Value Proposition

    A business or marketing statement that summarizes why a consumer ...
  6. Rollout

    A slang term for the introduction of a new product or service ...
RELATED FAQS
  1. What are the key differences between marketing and advertising?

    The key differences between marketing and advertising are based on how each term defines a separate function in the process ... Read Full Answer >>
  2. How does Jeff Weiner make money from LinkedIn?

    LinkedIn CEO Jeff Weiner creates revenue for his company from user subscription fees, advertising and marketing operations, ... Read Full Answer >>
  3. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion of its cash flow ... Read Full Answer >>
  4. What is the difference between product differentiation and price discrimination?

    Product differentiation and price discrimination are two strategies used in marketing and economics. Product differentiation ... Read Full Answer >>
  5. How do I calculate the degree of operating leverage?

    The degree of operating leverage is a measure used to evaluate how a company's operating income changes with respect to a ... Read Full Answer >>
  6. Why should investors pay attention to a corporation's selling, general and administrative ...

    Selling, general and administrative expenses (SG&A) are significant elements of many companies' income statements. These ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Public Relations: Offering Businesses A Competitive Advantage

    To maximize the sales potential of any business, a public relations program should be part of the master marketing plan.
  2. Professionals

    Sales Director Career Provides Daily Challenge

    Find out what you need to do to close the deal on this investment management position.
  3. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  4. Retirement

    Generational Marketing: Harvest The Whole Family Tree

    Attract new clients by tailoring your message to specific age groups.
  5. Economics

    Understanding Green Field Investments

    A green field investment refers to a company, usually a large multi-national corporation, building a new facility in a foreign country.
  6. Investing News

    Cost-Free Connection Of Target Groups To Marketers

    ZipDial spotted a niche marketing opportunity in the area of “missed calls” and developed a business around it. Here is how ZipDial works and its benefits.
  7. Economics

    Explaining Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent.
  8. Personal Finance

    How WhatsApp Makes Money

    In short, WhatsApp makes money just $1 at a time.
  9. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.
  10. Economics

    Vietnam -- New Asian Hot Spot For Tech Investment

    Vietnam now has a rapidly expanding tech sector that's attracting investors from around the globe due to low business costs and highly skilled workers.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center