Marketing Expense as a Percentage of Total Revenue
Definition: Total expense incurred by the Marketing department (wages, benefits, overhead, campaign expenditures, etc.) divided by total revenue earned by the company over the same period of time, as a percentage.
Discussion: The Marketing Expense as a % of Total Revenue key performance indicator (KPI) is a measure of marketing expense relative to the total revenue of the company. It can be interpreted as the marketing growth factor, or how much of revenue is being funneled back into marketing. A high Marketing Expense as a Percentage of Total Revenue ratio can be an indication that your marketing department exists as an inefficient cost center rather than a driver of revenue and profitability for your firm. Companies should strive towards a lower Marketing Expense as a Percentage of Total Revenue by cutting out wasteful and ineffective programs, especially if it appears that the capital invested in marketing can generate higher returns elsewhere. In highly competitive industries with low consumer switching costs, such as Consumer Packaged Goods, a larger investment in marketing programs and campaigns may be required to keep up with peers.