What Does MER Stand for in Marketing, and Why Should You Care?

If "Oh no, a new metric I have to pay attention to" was your first thought while reading this headline, you're not alone.

As marketers, we're practically inundated with numbers, KPIs, and acronyms, with little differentiation between which ones we should know and which we can ignore.

Unfortunately, MER is a metric you can't refuse to learn in 2023.

In this post, we'll dive into what MER is, why it's cropping up in marketing meetings across the globe, and, most importantly, how you can improve yours.

Andiamo!

What is MER in marketing?

In the context of marketing, "MER" typically stands for Marketing Efficiency Ratio. It is a metric used to determine the effectiveness of marketing campaigns and investments. Essentially, it measures how well your marketing expenditures translate into sales and revenue.

The formula to calculate MER can be represented as:

MER= Total marketing revenue/total marketing spend

For example, if a company spends $10,000 on marketing and, as a result, generates $50,000 in gross revenue during the same time period, the MER would be: 50,000/10,000=5.

This means that for every dollar spent on marketing, the company generated $5 in gross revenue.

What is the difference between MER and ROAS?

For those of you who are already familiar with ROAS (or Return on Ad Spend), you may be wondering how the Marketing Efficiency Ratio is different, given they have a similar calculation.

In fact, MER is also known as Blended ROAS, making it even harder to distinguish the two.

While they might seem similar at first glance, they have distinct differences:

Calculation. MER looks at the total amount of revenue divided by the total amount spent. While this can include your advertising budget, it also includes any additional marketing expenses (cost of design services, etc.). ROAS only looks at the amount spent on a specific campaign and how much was generated as a result.

Uses. ROAS is great for looking at the profitability of a single campaign or strategy. MER, on the other hand, can help you determine how much impact your overall marketing efforts are having on your business.

Why should you care about MER?

Unless you have an unlimited marketing budget with a CMO who doesn't care if any of your campaigns are profitable, you need to care about your Marketing Efficiency Ratio.

Marketers are being pushed to tie marketing efforts to revenue generated more than in previous years, and those that can't will likely see their budgets slashed.

In fact, 71% of CMOs state they lack the necessary budget to execute all of their plans for 2023.

By using MER, you can present an easy-to-grasp (and revenue-relevant) metric to stakeholders or senior management as evidence that marketing investments are generating a positive return.

Aside from being able to justify your marketing efforts, MER can also help you hone in on what's working and what's not and can be applied to all areas of your strategy.

Wondering if your content creation strategy is fiscally sound? MER can help.

Want to finally prove to management that those TikTok dances are impacting your bottom line? MER has your back.

By keeping the pulse on the profitability of all your efforts, you'll be able to diagnose, debug, and solve any issues that are preventing you from reaching your revenue goals.

What is a good marketing efficiency ratio?

Stating what a 'good' benchmark for any metric is a tough task, as every industry, vertical, platform, and strategy will have a completely different answer. MER is no different.

In the most basic sense, a MER of 2 shows that your efforts are at least more profitable than your expenses, so it's safe to set this as your most basic goal. (Though things like your total profit margin can mean you might need a MER of 3 or 4 to remain in the green).

It's also important to take into consideration the type of strategy and funnel stage your audience is in when deciding if something is truly profitable.

For example, producing high-quality content like eBooks or videos can be expensive upfront. While the direct return may not be immediately evident, they position your brand as a thought leader and authority in your space, which can lead to longer-term benefits when you're looking at revenue that's coming from organic searches that fed through these pages.

The role of MER in marketing campaign evaluation

Now that you know what the Marketing Efficiency Ratio metric is and why it's important, it's time to do the hard work: giving MER its place in your marketing strategy.

Overall there are 3 main places where you should always be referring to your MER: when setting priorities, optimizing budgets, and looking at the impact of MER on customer acquisition.

Utilizing MER when setting priorities

MER makes a great guiding light when looking at your yearly marketing priorities list, and it's an easy way to start using the metric.

Start off by establishing a clear baseline of your current MER across various campaigns and channels, which acts as a foundational reference for future strategies.

High-performing initiatives with consistent MER values should be at the forefront of your priorities, receiving a more significant portion of resources and budget.

Conversely, for channels or campaigns with lower MER, a deeper analysis is necessary. There, you'd want to decide if it's worth fixing or if you want to remove it from your to-do list permanently.

At the end of the day, marketing can change on a dime. We've had a first-hand view of this while watching the X debacle (or whatever we're supposed to be calling Twitter these days). 

Therefore important to keep an eye on the MER of your campaigns, making necessary adjustments based on real-time feedback.

The role of MER in optimizing budgets

MER is one of the harshest critics when it comes to determining if something is worthwhile. While some marketing metrics like brand sentiment and likes can be 'fluffy' and truly hard to tie directly to revenue, MER pulls no punches.

So, if a campaign has a high MER, it's like a green light for marketers to put more money behind it. This means when planning future campaigns, historical MER data can guide expectations and budget allocations for the fiscal year.

On the other hand, if an activity should have a higher MER and it's underperforming, you can use this as a sign that you need to identify and improve this portion (which typically requires more resources)—or, as we mentioned above, drop it entirely.

The impact of MER on customer acquisition

If you were asked right now how much impact your marketing campaigns had on customer acquisition, would you know the answer?

If not, MER can help you find just that.

MER implies that for every dollar spent on marketing, there's a greater return in revenue. If marketers are running campaigns specifically aimed at customer acquisition, a rising MER can indicate that these campaigns are successfully attracting and converting new customers, and you're in the clear.

Diving deeper, it's a game-changer to calculate MER for individual channels, like social media or email blasts. This way, marketers can pinpoint which avenues are the star players in acquiring new customers and, even more importantly, be able to prove it to the C-suite.

What can you do to improve your MER?

If the first thing you did when learning what MER is was to go calculate your own, I want to start by giving you a round of applause.

And while I hope you found some fantastic numbers when doing so, chances are you also found a few duds, too.

But worry not: we've compiled a list of the top 7 things you can do to improve your MER across the board.

1. Set up a marketing dashboard to keep an eye on MER. If you leave a leaky pipe alone long enough, it can cost you thousands of dollars in water damage—and MER is no different. If you're not actively monitoring this metric across all areas of marketing, you'll likely find yourself in the same position. Start by creating a digital marketing dashboard using a dashboard reporting tool that has your MER front and center, and make sure to keep an eye on it at all times.

Luckily, your friends here at Madgicx have your back with One-Click Report.

With One-Click Report, you have access to crucial metrics like MER, ROAS, Net Profit, and Customer Acquisition Cost across Shopify, Facebook, Google Analytics 4, and TikTok right at your fingertips.

Wither 15 pre-made (but customizable) templates at the ready, you can get a bird's eye view of all your marketing channels and strategies all in one place.

Better yet, you can share access to these reports with your teammates, colleagues, and even clients without them having to have a Madgicx account.

And while this would be a pricey tool anywhere else, you can get started for just $29/month.

2. Immediately optimize underperforming channels. If you see something isn't performing as it should, you need to knuckle down and analyze which aspects are working and which aren't. Things like A/B testing, for example, can help identify the most effective messaging, design, or call-to-action.
3. Reallocate underperforming budget. Sometimes you just won't have the budget to do everything you want to do. If you find yourself between a rock and a hard place, shift your budget from low-performing channels to those with a higher MER.
4. Improve your creative content. High-quality, relevant content can significantly impact engagement rates and conversions (and, therefore, MER). Ensure your content, whether ads, blog posts, or videos, is compelling and relevant to your target audience.

And if you’re not graphically inclined (like me), you can always use services like Madgicx’s Sparkle to get a helping hand.

Sparkle has a team of on-demand design professionals ready to help you create that next ad, email, or even video. Just submit your design request, and you’ll receive your design in as little as 48 hours—all for one flat fee.

And if the offer seems too good to be true, you can always try Sparkle for free.

5. Leverage retargeting. Potential customers typically need multiple touchpoints before converting. Retargeting campaigns can help remind these individuals of their interest in your product or service, increasing the likelihood of conversion.
6. Focus on Customer Lifetime Value (CLV). In some cases, it might be worth accepting a lower MER in the short term if it means acquiring customers with a high lifetime value. Focusing on long-term relationships rather than just immediate conversions can be more profitable in the long run.
7. Invest in MER training. The biggest issue you will run into with MER is getting everyone on the same page about what it is and how to use it. Investing in training around the metric to make sure everyone is on the same page and is able to access the data within your marketing analytics tools.

Conclusion: MER is an essential tool in marketing

As we learned today, MER is more than just a number—it's a barometer for the health and effectiveness of our marketing endeavors, illuminating the value we get for every marketing dollar spent.

But recognizing its importance is just the first step.

As we navigate the ever-evolving world of marketing, let's keep the lessons of MER close to heart. With understanding, focus, and consistent action, we can ensure that our marketing not only resonates but also delivers tangible results.

Here's to smarter, more efficient marketing adventures ahead.