Marketing Efficiency Ratio (MER) looks at how much total revenue a business has generated compared to the total spend on all marketing activities. This is similar to ROAS but it differs in two key ways: instead of looking at simply ad revenue, it looks at overall revenue and instead of just ad spend, it can also include the money spent on platforms such as Klaviyo bills and AWIN commission. I.e. if it’s a marketing cost, include it.

The great thing about MER is that it simply takes into account known factors - how much money you have made, your ad spend and your platform costs. Your MER is not affected by different platforms having different attribution models (e.g. when Google Ads and GA4 Google paid revenue figures are different from each other).

How To Calculate Marketing Efficiency Ratio

MER = Total Revenue / Total Marketing Spend

E.g. If you have generated £100k in revenue and your total spend across all of your marketing platforms (Google Ads, Meta Ads, Klaviyo plan, Semrush bill, AWIN bill and commission) came to £20,000:

MER = 100,000 / 20,000 = 5.0 

This shows that for every £1 you are spending on marketing efforts and platforms, you generate £5.

What is a Good MER?

At risk of saying “it depends”... it depends. What is considered a good MER will depend on the business and current goals. A MER of 3.0 or more could generally be seen as good as it suggests that for every £1 the business spends on its marketing, it generates £3.

The Problems With MER

It Ignores Profit

Something to note about MER is that it does not tell you how profitable your business is, it only tells you how much revenue has been generated from marketing spend. Businesses with lower profit margins can need a relatively high MER just to break even, whereas businesses with higher margins can afford to have a slightly lower MER and still remain profitable (this is why it depends). Let’s look at 3 hypothetical businesses:

Higher Isn’t Always Better

We have already seen above how different businesses can remain profitable with different MERs. Similarly to ROAS, a high MER might just be the result of low marketing spend. If you haven’t spent a lot on your marketing but have generated a lot of revenue, yes you are technically being efficient, but it could mean that you are missing out on new opportunities due to underspending on marketing.

What Can We Do For You?

As your digital marketing agency, we are constantly monitoring your marketing efficiency ratio to ensure that your marketing efforts are efficient. We also go that extra step to ensure that you are not just generating a return, but also a profitable return on your marketing investment. If you are ready to enhance your overall marketing strategy, get in touch with a member of our team.