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What is an Advertising Sales Ratio?

The success of an advertising campaign is determined by the amount of new business generated by it.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 November 2014
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One of the most important ways to gauge the success of an advertising campaign is by the amount of new business that is generated by the advertising. In order to help accurately evaluate whether any given campaign can be judged successful, the application of the standard advertising sales ratio is employed. Essentially, the advertising sales ratio is the relationship between the amount of resources invested in advertising campaigns compared to the amount of new business that is generated as a direct result of the campaign. Here is some information on the type of detail that the advertising sales ratio can provide, and how using the ratio method can help improve the effectiveness of future campaigns.

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Because the advertising sales ratio is a means of comparing the amount of rewards received to the expenses associated with the advertising effort, use of the ratio method can quickly identify if a particular campaign is generating results. The figures may indicate that the campaign is not living up to the results that were expected. If that is the case, then the advertiser has the opportunity to replace the campaign quickly, without incurring further low returns on the investment. At the same time, the ratio will clearly show whether a campaign is beginning to build momentum. If that is the case, the advertising strategy may need nothing more than some minor retooling to hasten the influx of new business. Knowing what the actual returns are will help the advertiser to know what needs to happen next in order to produce the desired results.

The advertising sales ratio is also a great way to qualify the viability of specific customer markets within a campaign, and devote resources to those where there is potential for new business. For example, if an analysis of the total sale generation indicates that the campaign is performing very well with one sector of the target audience, but is producing no results with another sector, then refocusing the efforts on sectors that are responding to the campaign will increase the generated sales. Thus, the advertiser can stop wasting resources on areas where no revenue can be reasonably expected, and provide more attention to areas where a return on the investment can be reasonably expected.

The advertising sales ratio can also be used to streamline the advertising process, by removing any elements that are not performing well. For instance, if newspaper ads are not performing well, but online ads are producing a great deal of new business, then shift the focus away from newspapers and eliminate the costs associated with print ads. The end result will be fewer expenses on the front end, and a higher percentage of return on the back end.

Employing the principle of the advertising sales ratio can provide data that will strengthen the advertising campaign. By using the data to focus on target audiences that will respond with new business and to evaluate the advertising methods used as part of the campaign, the advertising sales ratio allows the advertiser to get the highest return for the resources spent in the effort.

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hyrax53
Post 1

The advertising to sales ratio can be closer than you might think. Some types of stores, like grocery stores for example, work on a very tight profit margin. A failed advertising campaign or bad set of price promotions can sink a store that is already not doing well, while a successful one can lead to a store's expansion.

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