percentage-of-sales method

percentage-of-sales method

a rule of thumb used for determining a firm's SALES PROMOTION budget. The budgeted amount is calculated as a percentage of the product's past or projected sales revenue. See BUDGETING.
References in periodicals archive ?
According to the popular percentage-of-sales method, you base your budget upon the average relative spending within your industry; the formula is promotional spending divided by sales revenue.
Before proceeding to test the model, it is appropriate to set this research within context since promotional budgets are not always determined by the percentage-of-sales method.
However, it should be said that the percentage-of-sales method has a serious logical flaw, in that it suggests that sales determine promotional expenditure, rather than vice versa.