Which industries have the highest cost of acquisition of sale

Which industries require the highest spend on marketing

[Macro]

If you're selling something in a niche in the IT hardware industry it is possible to sell several million pounds worth of equipment with no spend on ads i.e. no advertisements in print media, no Adwords, no other online ads.

Are there any other industries like that? And which industries require a massive amount of marketing spend as a percentage of the sale value?

[dickbaker]

Some industries that spend massive amounts of money as a percentage of sales are pharmaceuticals, automobile manufacturers, cosmetics (skin care, lipstick, eye makeup, etc).

Industries that spend relatively little include farm machinery/equipment, construction equipment, shoe manufacturers, boat and boat motor manufacturers.

Just my .02 based on experience in advertising.

[Macro]

interesting, I would have thought that the nautical business would require a lot of adspend as it's difficult to reach that audience except via specialist magazines (and online of course)... but I don't have any experience of that industry.

Anybody else in an industry that squeezes you to spend quadzillions on ads to get your sales?

[dickbaker]

Hi, Macro. When I speak about the boat and boat motor business not spending much, I'm talking about production costs. Since the industry has been hurt badly for several years, they've cut back on what they pay for photography, art direction, printing, etc. Whether they still pay top dollar for magazine insertions is something I don't know.

Good luck with your research.

[percentages]

Generally speaking a supplier should budget 10% to 25% of gross sales for advertising costs. It all depends upon the industry and techniques used.

I spend 0% on advertising costs (not real), but the IRS doesn't allow me to write-off my own time!

[Undead Hunter]

Hi Percentages:

You wrote that 10% - 25% of gross sales should go to advertising...

Can you point me to any sources for that data? I'd love to include that data for a number of clients.

[percentages]

>Can you point me to any sources for that data? I'd love to include that data for a number of clients.

If your clients are U.S. based they should already understand how most professionals pay at least a 25% advertising cost......some pay way more!

Not wishing to be unkind, but if you are U.S. based and don't know how it works......ask one of your "friendlier" clients, they will explain it. The way it works is complex, and needs a "live" conversation to get to the bottom line.

If you are not U.S. based then my numbers are most likely not appropriate for you. Certainly in the EU advertising costs are a lower percentage of G.P.

p.s. I see I wrote 25% of gross sales in my first post.....that was an error....should have been 25% of Gross Profit.

[Undead Hunter]

Yes, I'm US based. But different sectors look at it differently. I'm talking about an agriculture sector, a business that does $60 million gross sales... NOT gross profit.

Up to 25% of gross profit... their margins are slim, but there's no way they spend that much. Not even a 1/10 of that.

Professionals. That's maybe the key phrase here. Oftimes the people that get pushed up the line have no "professional" experience elsewhere, just ag-related. And I think they're clueless to what other companies in other sections are doing. More internal training is needed.

End result is me sitting across from them trying to explain why a website costs what it does. Should really be avoiding this people...

[Macro]

This is an unusual twist. I didn't realise that US companies would have to pay a higher % for marketing. But maybe that makes sense.

How do you work out a percentage of GP if you don't know your gross profit? Surely GP's calculated only at the end of the year.... and, as they say in the finance industry, past performance is not an indicator of how things will pan out in the future.

I suppose businesses in services industries will pay a much higher % than businesses selling goods.

[eWhisper]

I suppose businesses in services industries will pay a much higher % than businesses selling goods.

Service industries have a different set of overhead costs. While they don't have to ship products, keep huge inventories on hand and pay for that storage space, they often have a higher number of employees that make a decent salary over product distribution businesses (One RN can cost the same as 2-3 dock workers), and insurance costs that are significently higher than a business will ever carry.

In several health care industries, I know people who spend up to 50% of revenue in advertising. These are often optional surgeries/enhancements (i.e. laser eye surgery, hair replacement).

Sometimes they also calculate the willing spend in how much it will cost to get the 'last patient'. Is it worth a 35k yellow page ad to make 50k in revenue since you'll be getting those sales over the competition. Such sales might only end up breaking even, but as the low paid health care workers (i.e. regular office workers who make $6-10/hr) end up with some OT because of those, the companies will sometimes go ahead and run such ads to generate more income for their employees who love OT.