December 10, 2018

Renting

Advertising is largely a rental platform ... you rent space or paper or a click, and it's your job to demonstrate that you made a good investment.

The smartest companies tend to have low ad-to-sales ratios. In other words, the smartest companies do not need to rent attention, they generate their own attention.

Facebook ad-to-sales ratio in 2017? 11.6%.

Alphabet/Google ad-to-sales ratio in 2017? 11.6%.

Well isn't that interesting?

Apple last disclosed marketing spend in 2015. Their ad-to-sales ratio that year? 3.5%.

Amazon's ad-to-sales ratio in 2017:  5.6%.

Wayfair ad-to-sales ratio in 2017:  10.3%.

A typical cataloger somehow possesses a 22% - 33% ad-to-sales ratio. Yeah, how the heck is that possible in a modern world?

And retail isn't much different ... instead of renting clicks or paper or 30-second slots you are renting real estate

If you have to rent more than 15% of your sales (effectively passing pure profit to third parties), you've got problems.

If a competitor spends 10% less on marketing than you spend, then the competitor has 10% of sales to spend on everything else to out-compete you.

And if your response to this is "yeah, but if we don't spend the money we don't get the sales", then you have absolutely messed up your business and need to start a new marketing plan, don't you?

In 2018, there's too many initiatives that require money. Marketing cannot consume 25% or 30% of annual sales.

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