If you’re driving yourself crazy trying to individually track every marketing metric and link every click to an ad, strategy, or channel, consider simplifying things by prioritizing marketing efficiency ratio (MER).
While all of these individual metrics are important, they fail to tell the whole story of your marketing efforts in the same way that MER does. However, your MER is only accurate if you’re accurate with the numbers you give it, so be thorough to ensure you end up with the correct ratio.
The Many Metrics of Marketing
As businesses are spending more on marketing, each company wants to make sure their marketing spend is effective, and they’re not wasting their budget. However, this often requires monitoring and tracking a variety of metrics.
You have to know your customer acquisition costs (CAC), return on ad spend (ROAS), conversions, customer lifetime value (CLV), click-through rate (CTR), and many others.
While each of these metrics reveals important information about certain channels, tactics, and platforms, they may fail to bring it all together to help you track overall marketing success.
It may also be overwhelming to deal with so many percentages, ratios, and numbers. If you want a simple yet useful way to track your marketing effectiveness, consider MER.
MER Gives an Overall View of Ecommerce Marketing Effectiveness
MER is often seen as one of the most important metrics for marketers to get a straightforward and uncomplicated look at how effective and efficient their marketing is. Essentially, it’s a simple metric that compares your total revenue to the total amount you spend on marketing.
It’s not a substitute for the other marketing metrics, but it gives a broad view of the organization as a whole in terms of marketing, instead of one that’s more precise. To get your MER, you just need to divide your total revenue by your marketing spend.
So if you make $100,000 a month and spend $30,000 on marketing, your MER would be 3.33. This means that for every $1 you spend on marketing, it normally brings in $3.33.
It’s similar to ROAS, but instead of just evaluating a single campaign or channel, it’s calculating the return on your ad spend for the entire organization.
Ensuring Your MER is Accurate
While MER is a crucial metric for sellers of all shapes and sizes to calculate and monitor over time, you need to put work in to ensure it’s accurate. To do this, you need to ensure all of your marketing costs are accounted for, including advertising, affiliate/influence payments, marketing software, production, agency fees, and others.
If you leave even a few of these out, it may give you skewed results. Also, make sure to stay consistent month to month. If you change up the costs you include in the calculation frequently, you’ll end up with results that are all over the place.
What is a Good and Bad MER?
A good MER is generally considered anything from around 3.0 to around 5.0. On the contrary, anything under 2.0 is generally seen as poor, and as you get closer to 1.0, it may be time to press the panic button.
This is because a 1.0 MER basically means your company is breaking even on marketing, which almost certainly means you’re losing money once you add in your other non-marketing costs.
However, a good or bad MER isn’t really a fixed number, as it depends heavily on things like your margins, size, goals when it comes to growth, and even industry.
For example, a business with higher costs may need a higher MER to stay afloat and still generate a profit, while a company with less to pay for can get by with a lower MER.
Similarly, an established brand that’s been around for a long time may have a higher MER than a new brand. This is largely because brands that are already established and have dedicated customers may need to spend less on marketing, while new companies are likely putting a ton of this profit and revenue towards expanding their reach by advertising heavily.
Our Take
Balancing Precise and Broad Approaches in Marketing
While zooming out and taking the broad approach by considering your MER is great, it’s also still important to be precise and get into the details. Remember, MER complements these metrics and doesn’t replace them.
In a perfect world, you need to make sure to consider MER and other broad marketing metrics to see the overall marketing effectiveness and health of your organization, while also zeroing in on your different channels and strategies to see which ones are doing the best and which need some work.
Finding this balance is often the sweet spot that lets you understand both the overall marketing success you’re having and also gain insights into what specifically is working and what isn’t.
