A term you might be hearing in marketing conversations is MER. In this article, we look at one of our favourite metrics most businesses should be measuring.
MER stands for either Media Efficiency Ratio or Marketing Efficiency Ratio, depending on how you measure it. Simply, MER looks to provide an ROI on your total marketing spend for a given period. It's a simple tool to quickly analyse how your marketing is performing across your whole funnel rather than relying on in-app metrics.
There are two main ways you can calculate MER. Marketing Efficiency Ratio equals total marketing revenue divided by total marketing spend (media spend, marketing salaries, and agency fees). Media Efficiency Ratio equals total marketing revenue divided by total media ad spend. Marketing Efficiency Ratio includes the headcount and agency costs while Media Efficiency Ratio looks purely at ad spend. These formulas are just a starting point, as you may wish to make your own adjustments like only analysing new customer revenue.
The digital world has become more opaque for tracking and attribution following privacy changes and ad platform developments. Campaigns in platforms like Meta and Google have become broader and more automated, leveraging AI and machine learning, leading to attribution challenges. Campaign types like Pmax in Google and Meta's Advantage Plus often expand their placements and audience targeting. Their bid strategies will also typically lean heavily into warm traffic, inflating ROAS. Advertisers are left with a scenario where multiple platforms and campaigns claim credit for a single conversion, when the truth is they all played a pivotal role. Privacy changes like Apple's iOS 14.5 update and regulations like GDPR shifting towards a cookie-less future have also made tracking more difficult.
The biggest danger of not measuring MER is that if you just rely on in-app metrics like ROAS in Google Ads and Meta, you may see amazing results, but your business isn't seeing more money in your bank account at the end of the month. Marketers might also pause or change some campaigns because the in-app metrics look poor, but the truth is that the campaign might be doing a lot of the heavy lifting with cold traffic or brand awareness while other automated campaigns claim credit for the conversions. MER will provide a cold hard ROI number that is a more accurate representation of the dollars in your bank account at the end of each month.
We find the easiest way to measure MER is to automate cost and revenue metrics into a Google Sheet. You can of course manually do this at the end of each month. Attribution tools like Triple Whale or Wicked Reports are third-party software that can also help you analyse the effectiveness of your marketing funnel. We recommend starting with MER and then consider spending money on a third-party tool.
On top of measuring MER, we believe advertisers should turn the clock back and use their gut instinct and intuition to measure performance. Speak with customer service staff, clients, agencies, and partners to get more insights on what's working well in your industry.
