Know-How Exchange : Strategy

Hi coflmichael.

I can't speak for other categories, but I can give you some insights into the category in which we work.

We sell 'digital content'. in other words, the product is delivered online.

No shipping costs, and development costs are fairly small although we do have ongoing royalties for some content.

We are typically spending anything up to 50% on ad costs.

It is all about bringing qualified traffic.

We run banner ad and google campaigns on a CPC basis and we run affiliate campaigns with email marketing on a CPL basis.

We currently generate around $1m per month in revenues and we spend close to half of that on acquisition of traffic.

of course with other categories, ie hard goods that have a COGS and delivery cost, the story is very different in terms of reaching ROI.

In the end however, it is not really important what percentage is spent. What is important is that ROI is reached at a satisfactory level.

Hope that is of some help.

BTW - with regards to the above comments, the Chinese have a great saying. "The best time to make money is when there is blood in the streets". In other words, the loss of others is your gain, it is indeed a perfect time to start your new agency.

Good luck,

Matthew

There are no averages. The rule is to spend as little as possible to sell as much as possible at the highest possible profit, and that rule transcends all categories.

Let me give you an example to illustrate just why averages are so useless in marketing. "The average consumer has one ovary and one testicle". How does that help you design clothing, or market a new cologne? It doesn't.

You need to drill down and make your segments meaningful, then analyse each business model and value proposition per target segment to understand what will work.

Not everything has a balance that WILL work. That's why some businesses fail.

Come back with some more specific examples of what you are trying to understand, and the people here will try to be more helpful.

Alternatively, read a lot of annual reports to find out what companies spend versus their gross revenues.

Or, look at advertising campaigns, online, TV, radio and other media, to see who seems to be spending the most money, and target them. And good luck!

Hope that helps.

There IS a source which lists A:S ratios by SIC classification:

Schonfeld's Advertising Ratios & Budgets "report covers over 4,800 companies and 300 industries with historical 2008 advertising budgets, 2009 ad-to-sales ratios and ad-to-gross margin ratios, as well as 2009 and 2010 budget forecasts and growth rates. Use it to track competition, win new ad agency clients, set and justify ad budgets, sell space and time or plan new media ventures and new products. Includes industry and advertiser ad spending rankings and data on over 300 major foreign companies. Bought by major advertising agencies, media companies, advertisers and libraries."

To see a sample report, to get more information or order, go to:

https://www.saibooks.com/adv-ind-sector-ratios.html

For related info you can also go to www.AdAge.com to view their 2009 annual report ranking the 100 leading national advertisers by total US advertising spending.

Good luck!
-Steve