Expert: Sean Trapani - 9/3/2009

Question
Is there a suggested % of gross sales in a retail store that should be spent on advetising?
We own a sportshop ( hunting and fishing) and are unindated with radio, newspaers, highway sign offers, even placements, pen and pencil sale people.

Answer
Hi, Barb


The percentage of sales to marketing usually depends upon the industry, the market and the individual dynamics of the market. Some industries, like cosmetics (with very high margins) have ad budgets of 20-30% of sales. Other industries run much leaner.

As for the "retail" industry, I again have to give you a "it depends" response. A standard allocation, I'm told by the marketing prof's, is usually between 3-12% (taking into account all the factors above). The true gauge is your success. Start with 5%. Measure your ROI. Then keep adding to it. (Maybe a point or half point per year). You will find a sweet spot of diminishing returns.

Now, the other issue is the salespeople. My recommendation is that you have a yearly advertising plan, and leave a small portion for impromptu opportunities (sponsoring a Little League teams or something like that). Then, if you are bothered by ad sales people, simply tell them that you plan your ad budget/flight schedule in one specific month, and ask them to call back then.

"Sorry, but we've already allocated our ad budget for this year. Please check back next March (or something like that)."