How To Determine
Marketing Spend to Sales Ratio

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You know you have to spend money to make money. But how much do you need to spend on advertising and sales and how do you know you’re getting a good return on your marketing investments?

No two companies have the same sales and marketing needs, but you can start by calculating your marketing to sales ratio and comparing it against industry standards. Then, track your spend to find ways to boost your marketing budget return.

Determining how much you should spend on marketing

No two businesses have the same sales and advertising needs. The SBA recommends that businesses spend 7 to 8 percent of gross revenue on advertising. That’s if you’re making less than $5 million in yearly sales and your net profit margin is around 10 percent. Many young businesses spend up to 25 percent, while others spend much less. The amount you spend will vary depending on industry and how effective your marketing campaigns are. Increasing spend doesn’t guarantee more sales, but smart spending can have a big influence on how productive your advertising budget is.

Calculating your marketing to sales ratio

To calculate your marketing to sales ratio, simply divide your marketing costs by sales revenue. Include traditional marketing costs like print, television ads, and billboards; digital marketing costs like social media, email, content marketing, and SEO; and branding costs like public relations, events, influencers, and sponsorships. Then, break it down by determining how much you’re spending on each of these avenues to begin to track your marketing spend in detail.

Tracking marketing revenue

Before you increase ad spend, it’s helpful to track marketing productivity over time. Marketing budget returns vary widely based on the platform you’re using and the type of product or service you’re advertising. Many companies offer affordable in-depth tracking, giving you highly specialized reports to help you determine exactly where your marketing budget is making the most difference. This is particularly helpful when creating a digital marketing plan.

Determining optimal marketing spend

Whether you choose to track your own marketing returns or opt for professional help, ultimately, you’ll have to do some experimenting. Testing out new marketing channels, increasing advertising spend in high performance areas, and generating new ways to boost your brand will allow you to compile valuable marketing data. Over time, you can build a plan that will help you reach your marketing goals.

If you have additional questions or are looking for the key insights your business needs to profitably scale, schedule a free consultation with Journicity today.

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