In today’s economic landscape, arts organizations face the constant challenge of maximizing income while managing tight budgets. One vital concept that can clarify your financial decisions and improve your marketing and fundraising effectiveness is Cost of Sale (CoS).
In this blog, we'll help you understand what Cost of Sale is, how to calculate it, why it matters, and some practical tips to implement it at your organization.
Cost of Sale refers to the total expenses directly associated with selling your tickets, memberships, or donations. This includes marketing costs, sales staff salaries, commissions, credit card fees, and any other expenses that support the revenue generation process. It's also sometimes known as 'Cost per Sale', but means the same thing.
Put simply, it’s the price you pay to earn each dollar/pound/euro of income.
Calculating Cost of Sale is straightforward but requires careful tracking of all expenses directly tied to your revenue-generating activities. To find your Cost of Sale percentage, use this formula:
Cost of Sale (%) =
(Total Sales-Related Expenses ÷ Total Revenue Generated)
For example, if you spend $10,000 on marketing, staff commissions, and fees to generate $50,000 in ticket sales, your Cost of Sale is:
($10,000 ÷ $50,000) = 0.2 (as a percentage: x100 = 20%)
(for every $0.20 spent, your return is $1 in sales)
Tracking this regularly helps you see which campaigns or channels are most cost-effective and where you might reduce costs or shift resources for better results.
Understanding your Cost of Sale helps your organization answer critical questions:
Without clarity on CoS, you might be investing heavily in tactics that drain resources without generating sustainable income. Or worse, chasing one-time sales instead of building recurring revenue from loyal patrons.
“When you understand the Cost of Sale by channel and audience segment, you can start to direct your expenditure to where it has the most meaningful impact on your recurring revenue,” - Tom Stickland, Senior Consultant
The ideal Cost of Sale is highly situational and depends on multiple factors, including:
These questions help you understand what Cost of Sale percentage makes sense for your context. For example, organizations with a loyal audience might operate efficiently with a lower CoS, while new or growth-focused campaigns might accept a higher CoS as part of their investment in audience building.
Calculate your Cost of Sale regularly: Track expenses related to all sales channels and campaigns to get an accurate picture.
Analyze by segment and channel: Know which audience segments and communication channels deliver the most value at the lowest cost.
Invest in retention: Lower your Cost of Sale over time by focusing on audience loyalty and repeat visits, which cost less to maintain.
Plan strategically: Use CoS insights to balance programming (the “Magnets & Honey” approach), marketing, and development efforts to attract new audiences while nurturing existing ones.
In the sections that follow, we’ll explore these three common budgeting approaches, highlighting their strengths and pitfalls, so you can identify where your organization fits, and how to take the next step.
This is the simplest and most common approach: setting the same marketing budget for every production or campaign regardless of differences in demand or sales potential.
What happens here?
Practical Tip:
If your organization uses flat budgeting, start by tracking Cost of Sale per show to identify where spend is inefficient. Even small shifts toward more responsive budgeting can improve results.
This method uses the organization’s average Cost of Sale as a budgeting baseline but adjusts spend per show according to expected demand or strategic importance.
What happens here?
Practical Tip:
Review past campaigns to establish your average Cost of Sale. Use this as a target but adjust based on audience insights, production profiles, and ticket sale pacing.
The most effective approach treats each production uniquely, setting marketing budgets based on its specific potential, strategic importance, and ongoing sales data.
What happens here?
Practical Tip:
Develop dashboards that track Cost of Sale and sales velocity in real-time. Use this data to make timely adjustments to marketing budgets, targeting your highest returns.
Good measurement alone isn’t enough:
“What gets measured gets managed.”
The best organizations don’t just measure Cost of Sale, they use it actively to make smarter decisions, allocate resources efficiently, and maximize sustainable revenue growth.
Start tracking your Cost of Sale and use it to make smarter, data-driven decisions that deepen audience loyalty and maximize your impact.
For tailored support on analyzing your Cost of Sale and crafting the most effective Cost of sale budgeting strategy for your organization, reach out to us.
Let's work together to direct your expenditure to where it will have the most meaningful impact on your recurring revenue.