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One example answer is that if your gross margin is anything under 10%, you shouldn't spend $100m in advertising for $1mm in marginal revenue.

Doesn't happen often in software, of course.



I admit you have lost me here - why should one not make that investment?


Let's say your gross margin is 9%.

You spend $100K in advertising. You get an additional $1000K in revenue, on which you make a 9% profit. You bank $90K profit from this.

You're $10K worse off for having done that advertising.


OK - not so used to terms like "gross margin" ;-)




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