‘Ad to Sales Ratio’ (or Advertising to Sales Ratio) is a measurement of effectiveness—typically of an advertising campaign—determined through expressing the relationship between sales and money spent. By dividing the total advertising expenses by the sales revenue, it allows to derive average advertising costs and hence to ensure better and more strategic planning. More specifically, the ad to sales ratio is designed to show whether marketing or advertising campaign costs have been successful as a function of both delivering new revenues and how these revenues relate to the cost attributed. For instance, a low ratio may indicate a positive ROI in generating efficient revenue, however, varied marketing mediums and efforts may require short vs. long-term views in evaluating effectiveness of a particular marketing campaign or effort. Additionally, since advertising to sales ratio also helps tracking market segment trends, new companies can leverage industry related projections, to understand what their average/initial marketing spend should be.
We always work towards ensuring that our strategies are data driven and results-focused. Hence, when determining a netamorphosis client’s website platform budget within the netamorphosis growth process, we apply an ad to sales ratio as a budget mechanism, for cost planning and control, as well as, a performance management tactic. This allows us to ensure that incremental (new) revenues as well as profitability—defined as a net income rate—are achieved within a 3-year time period