What is MER?
The Marketing Efficiency Ratio (MER) is a key metric used to measure the success of digital marketing campaigns. It is calculated by dividing the total revenue generated by a particular marketing campaign by its cost. This helps businesses understand how efficient their marketing investments are. MER allows for comparisons between different campaigns and can be used to identify areas for improvement.
While there are similarities between MER and Return on Ad Spend (ROAS), which measures the profitability of a specific ad campaign, there are also important differences. While ROAS focuses solely on one particular campaign or advertisement, MER looks at an entire portfolio of marketing activities or campaigns taken as a whole over a period of time. This allows marketers to gain insight into the overall effectiveness of their mix of different strategies over time and uncover areas where they can improve their performance. For example, if one channel is performing well but another is underperforming, the comparison provided by MER could help to identify opportunities for optimization and re-allocation of budget accordingly.
Another difference between ROAS and MER is that while both measure increased efficiency from marketing investments, ROAS takes into account mainly direct returns from those investments, such as sales or leads generated from ads, whereas MER takes multiple factors into consideration including website visits, page views and brand awareness improvements as well as more direct results like sales increases or cost savings due to automation.
MER provides marketers with an invaluable tool for gauging the success of their efforts over time and across different channels in an effort to maximize marketing efficiency and return on investment (ROI). By taking into account multiple factors beyond just ad spend, it allows businesses to adjust their strategies in order to optimize performance while also uncovering previously undiscovered opportunities for improvement.
What is an example of MER?
A specific real-world example of Marketing Efficiency Ratio (MER) is when a business spends £2,500 on paid media and generates £10,000 in revenue. Applying the MER formula (£10,000 ÷ £2,500) shows that the MER is 4, or 4x. Another example is when a business spent $10,000 on marketing activities over a given period and generated $25,000 in revenue during that same time period, the marketing efficiency ratio would be 0.4 ($10,000 / $25,000).
MER is calculated by dividing total sales revenue by total marketing spend across all channels. It is a North Star metric that measures the overall performance of digital marketing efforts. MER helps businesses understand marketing costs as a multiplier of revenue generation. It is not meant to guide media-buying decisions at the ad or campaign level but instead helps businesses uncover marginal aMER to answer the question of when the next dollar of advertising stops making money.
A high MER does not always translate to high profitability, and there is no one “good” MER as it depends on several factors such as business size, industry, marketing strategy, and profitability goals. However, a lower MER indicates more efficient marketing, and businesses aim to avoid an MER less than 1 as it represents a loss.
