The Economics of Online Marketing

So a gift cataloger with a 50 percent average margin may select a 30 percent A/S for its ad efficiency target. A retailer with slimmer margins — say computers or electronics — would choose a lower A/S target.

If you sell products with widely differing margin structures, you may be wasting an opportunity if you apply a single A/S target to all your advertising efforts. Setting a single target may lead you to over-advertise your lower-margin products, while under-advertising your higher-margin products. To combat this, either fold actual margin data into your online marketing management process or apply different A/S targets at the product-category level.