E-commerce Insights: Multichannel Planning Is a Complex Endeavor

One rule of thumb that emerges from the square root assumption is that marketers maximize their marketing contribution dollars by spending half of their effective margin on advertising. For example, a marketeter selling products with 45 percent cost of goods sold and 12 percent other variable expenses should aim for an advertising-to-sales ratio of (1⁄2) x (1 - .45 - .12), or 21.5 percent.