The Definitive Guide to Marketing Efficiency Ratio (MER)

June 5, 2024
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We’re done with ROAS.

Return on Ad Spend never really made sense— even if you were only advertising on one platform, the in-app reporting was probably only 70% accurate at best.

So ROAS is out.

Instead, your team needs to know your marketing's impact on real business outcomes: that’s your return on marketing.

Aka your MER — Marketing Efficiency Ratio.

MER looks at your total revenue vs. total marketing spend.

It cuts through the noise of vanity metrics and channel-specific KPIs to answer the only question that really matters:

Are you driving profitable growth?

In this definitive guide, we'll dive deep into why MER is the metric you need to be tracking, how to measure and optimize it, and how to use it to win the war of attention in your market.

As Tier 11 VP of Traffic Strategy, John Moran bluntly puts it:

ROAS is the devil 👿.

It’s a bold claim. Here’s why we stand by it.

ROAS can’t handle omni-channel measurement.

The core issue with ROAS is that it's too focused on individual channels and campaigns.

It tells you how much revenue a specific ad spend drove, but it doesn't account for the full customer journey and all the touchpoints that contribute to a sale.

We all know what the customer journey really looks like.

In no particular order, your customers might…

  • See a YouTube ad
  • Google your brand
  • Google your product
  • Compare prices on Amazon
  • Visit your website
  • Check your socials… then get distracted
  • See your YouTube ad AGAIN
  • Visit your website again
  • Finally convert

ROAS would only credit that sale to the last touchpoint, ignoring all the steps that came before.

This is especially true now that GA4 only offers two attribution models: last click and “data-driven.” 🙄

MER solves this by looking at your marketing holistically. It doesn't care which specific channel or campaign drove the first, last, or 100th click.

It only cares about the overall efficiency and effectiveness of your marketing in driving revenue growth.

Did 👏 your 👏 marketing 👏 work 👏

Real-World Example

Story time.

A tea infuser brand was running YouTube ads that showed a pitiful 1.09 ROAS in Google Ads.

Taken at face value, you'd assume the YouTube campaign was a flop…

For every dollar spent on YouTube, you collected $1.09? Not worth your time.

But, when looking at total revenue across all channels, the picture was very different.

The brand's overall MER was a healthy 3.5.

What happened?

The YouTube ads were driving a huge uplift in Amazon sales, which Google Ads wasn't capturing.

As John explains:

“Attribution is based on ‘could the platform track it?’ And if it did, how much of it could it track?”

In this case, Google Ads was only seeing a small slice of the pie.

Yet another reason we built Data Suite. Never trust in-app metrics.

Winning the War of Attention

The tea infuser example illustrates a key point: the goal of marketing is not to drive a specific ROAS on a specific platform.

It's to win what John calls "the war of attention."

Your ads might not always drive immediate click-throughs and purchases.

But if they're making your brand and products top-of-mind for potential customers, they're doing their job.

Those customers might later search for you on Google or Amazon when they're ready to buy.

MER captures this by looking at the total revenue generated in relation to total marketing spend, regardless of where the final sale happened.

It's a much truer reflection of your marketing's impact.

The Amazon Puzzle Piece

For many ecommerce brands, Amazon is a huge piece of the omnichannel puzzle.

But it's also a black box when it comes to attribution.

Let's say you're running Google Ads and seeing a 2.28 ROAS.

Not bad, right?

But if 80% of your sales are actually happening on Amazon, that ROAS is only telling 20% of the story.

Again, this is where MER comes in.

By looking at total revenue across all channels—including Amazon—in relation to total ad spend, you get a much more accurate picture.

In the example above, the brand's MER was 3.19, even though Google Ads showed 2.28.

That delta represents all the Amazon sales driven by the Google Ads that weren't being captured in Google's ROAS.

As John puts it:

“Top line media efficiency ratio, all cash in, how much do we make everywhere, is going to be influenced by new customers, returning customers, referral customers...things coming from affiliate, things that are coming from Amazon.”

How to Calculate Marketing Efficiency Ratio

Calculating your MER is straightforward. Simply divide your total revenue by your total marketing spend over a given period:

MER = Total Revenue / Total Marketing Spend

For example, if you generated $1,000,000 in revenue on $200,000 in marketing spend last quarter, your MER would be 5:

$1,000,000 / $200,000 = 5

This means that for every $1 you spent on marketing, you generated $5 in revenue.

So how do you actually use MER to guide your marketing decisions? The key is benchmarking.

Benchmark first.

Take a snapshot of your key metrics—MER, nCAC, nMER, etc.—during a period when your business is healthy and profitable.

These become your benchmarks.

Then, as you monitor performance over time, you can compare your current metrics to those benchmarks.

The goal is not to chase an arbitrary ROAS number, but to maintain (or improve) your benchmarked MER.

MER steady, Meta down

Let's say your benchmark MER is 3.5, and your Facebook ROAS is 1.23.

If your Facebook ROAS dips to 1.1 but your MER holds at 3.5, that's ok!

It likely means Facebook is playing a key role upper-funnel, and the sales are being captured elsewhere.

Meta up, but MER down

Conversely, if your Facebook ROAS spikes to 2.0 but your MER drops to 3.0, that's a red flag.

It likely means you're over-investing in bottom-funnel at the expense of upper-funnel channels that were filling the pipeline.

Most importantly, your MER benchmarks should be informed by your specific growth objectives and unit economics.

Work backwards from your revenue goals to determine the MER you need to hit to achieve profitable growth.

Making MER Your North Star

Embracing MER as your primary performance metric requires a mindset shift.

It means moving away from a siloed, channel-specific view of marketing and instead treating your efforts as an integrated system with a singular goal:

Driving incremental business value.

This shift starts with getting buy-in from your full marketing team and key stakeholders.

Everyone needs to understand:

  • What MER is
  • Why it matters
  • How their individual efforts contribute to it

Regular reporting and performance reviews should center around MER, with tactical metrics and KPIs laddering up to this overarching measure of success.

Operationally, an MER-centric approach requires:

  • Tight coordination across channels
  • Close collaboration with creative and brand teams
  • Robust data infrastructure to track full-funnel performance

It's not always easy, but the payoff—a marketing machine that reliably and efficiently drives business results—is more than worth it.

Marketing is in its MER Era

In the new era of digital marketing, efficiency is the name of the game.

Consumer attention is fragmented, competition is fierce, and budgets are under constant scrutiny. In this environment, vanity metrics and siloed optimization won't cut it.

Marketers need a clear, consistent way to quantify and improve their impact on real business outcomes.

This is the promise of Marketing Efficiency Ratio.

By making MER your north star, you ensure that every dollar and every effort is aligned towards what matters most: profitable, sustainable growth.

Is it a perfect metric? No.

There will always be nuances, caveats, and contextual factors to consider.

But as a unified measure of marketing productivity, MER is the best we've got—and it's a damn sight better than ROAS.

So if you're ready to leave the vanity metrics behind, to embrace full-funnel optimization, and to make every marketing dollar work harder, MER is your path forward.

Measure it, benchmark it, optimize for it, and watch your results soar.

Need help? Tier 11’s got you.

Our team of performance marketing experts lives and breathes MER optimization. We'd love to show you how it can transform your business.

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