What is the Marketing Efficiency Ratio (MER)?
Marketing Efficiency Ratio (MER) is a broad performance metric that measures the overall effectiveness of your marketing spend by comparing total revenue to total marketing expenses.
Here’s how MER can help you improve your marketing performance:
- Holistic view: Tracks the overall performance of marketing efforts, not just individual ads.
- Budget control: Helps e-commerce businesses ensure ad spend aligns with revenue growth.
- Scalability indicator: A consistently positive MER signals potential to scale campaigns profitably.
💡 MER vs ROAS: Unlike ROAS, which focuses on specific campaigns, MER evaluates how efficiently your entire marketing budget drives sales.
How to calculate MER?
Formula
Marketing Efficiency Ratio = Total Sales Total Marketing Spend
What do the results mean?
- MER > 5: Strong efficiency. Your marketing drives significant revenue growth.
- MER between 3-5: Solid but could be optimized.
- MER < 3: Marketing spend is high relative to sales, requiring strategic adjustments.
Example
An e-commerce store spends $20,000 on marketing and generates $100,000 in sales.
MER = 100,000 / 20,000 = 5
This means for every $1 spent, the store earns $5 in return.
How can you use MER to measure marketing performance effectively?
Here are our advices to use MER so you can get a full view of your marketing picture:
- Track overall performance: MER gives a holistic view of all marketing efforts, including SEO and organic growth, not just paid campaigns.
- Focus on trends, not details: Use MER to spot trends from budget changes or new channels, but rely on specific KPIs (like ROAS or CAC) for detailed performance tracking.
- Combine MER with other metrics: Pair MER with conversion tracking, ROAS, and CAC to separate organic growth from paid efforts and get a full view of marketing efficiency.
When should you not use MER?
In some specific cases, MER may not be the right metric:
- New product launches: MER might seem low during initial launch phases when spend outpaces returns.
- Short-term campaigns: For brief sales or promotions, focus on ROAS or CPA for clearer insights.
- High-volume brand awareness campaigns: MER may undervalue long-term brand-building efforts that don’t immediately drive sales.
