There seems to be a never-ending stream of acronyms in marketing, but the most recent acronym that many businesses are interested in is MER. As a digital marketing agency we have adapted to the MER ratio to effectively report to clients the overall effects of their marketing efforts. So what exactly is MER?
What is the Marketing Efficiency Ratio (MER)?
To put it simply, MER is total revenue (for your business) divided by total ad spend for all channels (Facebook, Google, etc.). MER is the average ROAS across all channels.
MER allows you to take a step back and look at the snowballing effects of your marketing strategies over time. Using a marketing efficiency ratio can help you see the value of all of your strategic decisions as it clearly shows you your total average return on ad spend across all channels.
MER allows you to measure how efficiently your marketing assets generate revenue for your business over time. SEO content is a great example of how assets can continue to benefit a business long after the initial investment in them. For instance, it may require an initial investment to develop a blog, but that blog may still be pushing consumers through the marketing funnel for years after, providing a long-term benefit to the business.
MER in businesses
( 1 / MER ) represents the % of top-line that’s being invested in marketing-related efforts.
Typically, most well-established companies see a low 5-10% of top-line being invested, whereas new startups normally see 30%+ as they aim for market penetration and growth.
You should always set a MER goal with a client. Above your MER goal, if you can increase your budget, afford to pay more for customers, or make awareness investments – it’s a sign that you may be underinvesting in the growth of the business.
What is a good marketing efficiency ratio benchmark?
In e-commerce, higher production costs typically result in a higher Marketing Efficiency Ratio (MER), with a ratio of 5.0 or above being favourable, indicating advertising expenses are 20% or less of total revenue. Calculating MER is straightforward for various periods, such as the last three or six months, by analysing media spending from paid channels and corresponding revenue within these intervals.
So why is MER important?
MER is crucial to any business as it allows you to see the value of your marketing efforts, and alter your marketing strategies if needed in order to benefit your business.
MER will become even more important to many businesses as Facebook marketing is being hindered by tracking restrictions across iOS devices and the removal of third-party cookies coming into place. The marketing efficiency ratio’s approach to performance will help businesses to determine the overall effect of their marketing tactics, and help them make key strategic decisions for their long-term growth.
How can I improve my MER?
Improving MER can be achieved by either increasing the revenue generated from campaigns or decreasing the cost of marketing efforts. This could involve optimising ad spend, refining target audiences, improving ad creatives, or enhancing the product or service offering.