Advertising-To-Sales Ratio
Categories: Metrics, Company Management, Financial Theory
Don Draper's third favorite ratio, coming in right after blood alcohol level, and one that the censors won't let us mention by name.
The ad-to-sales figure allows companies to measure the value of their marketing campaigns. It tracks the cost of an advertising campaign versus the sales of the products involved.
In a somewhat counterintuitive situation, you actually want the number to be lower. Remember, the advertising expenses are at the top of the ratio, so you are dividing expenses by the sales figure. So low ad expenses and high sales - the ideal situation - would lead to a low result when the advertising-to-sales ratio is figured. If the number comes out big - high expenses and low sales - the marketing manager might want to polish his or her resume.
The big idea here: if you don't need to advertise (like, how much do Google and Facebook and other great companies advertise?), then you shouldn't. Great products speak for themselves. Sometimes literally. Looking at you, Siri.
