What is the 'Advertising-To-Sales Ratio'

The advertising-to-sales ratio is 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.

BREAKING DOWN '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. Advertising Elasticity Of Demand ...

    A measure of a market's sensitivity to increases or decreases ...
  2. Advertising Appropriation

    The portion of the total marketing budget that is allocated to ...
  3. Comparative Advertising

    A marketing strategy in which a company shows how its product ...
  4. Marketing Campaign

    Specific activities designed to promote a product, service or ...
  5. Flighting

    An advertising scheduling strategy in which a business alternates ...
  6. Tailored Advertising

    Marketing and advertising campaigns that place emphasis on the ...
Related Articles
  1. Small Business

    Bye, Mad Men: How the Net Is Changing Advertising (FB, TWTR)

    The Internet and digital media are changing the way companies advertise and market themselves. More targeted, varied and faster advertising is possible.
  2. Small Business

    How is Programmatic Advertising Changing Media?

    Understand what programmatic advertising is as well as the technology that drives it. Learn about the top four ways programmatic advertising is changing media.
  3. Small Business

    Trends And Growth In The Digital Advertising Industry

    The rapidly expanding digital advertising industry is leading a shift towards content and demanding forced innovation.
  4. Small Business

    How The Internet Web Ad Industry Works

    Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
  5. Small Business

    How To Calculate ROI Of A Marketing Campaign

    To make the most of your marketing spend, you need to know how to measure its results.
  6. Small Business

    Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  7. Investing

    Mobile Advertising to Surpass Desktop in 2017

    Arriving a year earlier than previously predicted, mobile advertising will overtake the desktop advertising spends in 2017
  8. Small Business

    Launching a Twitter Ad Campaign for Your Small Business

    Learn how to launch a Twitter ad campaign for your small business, and discover the best practices for optimizing your Twitter ad campaigns.
  9. Investing

    Why Facebook Is Free to Use (FB)

    Learn why Facebook is free to users, and understand how the company makes more money by charging advertisers than it would if it charged users.
  10. Insights

    How the TV Advertising Industry Works

    Things have definitely changed since the early days of “Mad Men,” when one TV ad could change the world—or at least change a company’s sales numbers.
RELATED FAQS
  1. What are the key differences between marketing and advertising?

    Understanding the role advertising plays in the marketing mix will help business owners define their promotional strategies ... Read Answer >>
  2. How important is advertising revenue in the Internet sector?

    Learn about the importance of advertising revenue in the Internet industry. Find out how much Internet firms rely on advertising ... Read Answer >>
  3. What metrics are used to gauge the effectiveness of a marketing strategy?

    Understand why companies need sound marketing strategies and how they are able to accurately measure effectiveness of marketing ... Read Answer >>
  4. Which KPIs (key performance metrics) should I use if I want to attract new customers?

    Learn about some the key performance indicators (KPIs) that companies can most profitably utilize to enhance their effectiveness ... Read Answer >>
  5. How does Facebook (FB) make money?

    Examine third quarter 2014 revenue data for Facebook and increases in advertising, mobile advertising, daily active users ... Read Answer >>
  6. Can I make money advertising on my car, or is it a scam?

    Are car wrap advertising companies legitimate? Some companies are scams, but some car wrap companies offer legitimate ways ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center