MER CALCULATOR
In marketing, ROAS and MER are two key benchmarks for assessing campaign performance and profitability. Understanding the differences between these metrics is vital for marketers and business owners looking to optimize their advertising and digital marketing strategies.
What is Marketing Efficiency Ratio (MER)?
Marketing efficiency ratio (MER), also known as media efficiency ratio, measures the overall performance of your marketing strategy or campaign. It evaluates the profitability of marketing efforts by comparing total ad spend to total revenue.
Although similar to ROAS, which measures returns from specific ad campaigns, MER assesses the efficiency of all marketing efforts combined. This helps determine the effectiveness of your entire marketing strategy.
Why it's important to track MER
One key benefit of tracking MER is its holistic view of total revenue generated from all marketing efforts, rather than focusing on the performance of individual campaigns. This comprehensive approach provides a more forgiving and accurate assessment when certain campaigns don't perform as well as others in terms of immediate revenue.
For instance, a Paid YouTube campaign might increase brand awareness during a sale period or serve as a top-of-funnel activity. If a viewer later searches for the brand and makes a purchase two weeks after seeing the ad, the revenue is typically attributed to Paid or Organic channels. In this scenario, MER is the appropriate metric to understand the long-term value of brand awareness activities. Unlike ROAS, which might label the YouTube campaign as underperforming, MER captures the broader impact of all marketing efforts combined.
Which metric is best for you - MER or ROAS
MER and ROAS are key metrics for evaluating marketing campaigns but focus on different aspects. MER (Media Efficiency Ratio) measures the proportion of total marketing expenses to revenue, offering a holistic view of overall marketing efficiency. It is calculated by dividing total revenue by total ad spend and is useful for assessing brand awareness activities.
ROAS (Return on Ad Spend) measures the revenue generated by a specific ad campaign relative to its cost, calculated by dividing campaign revenue by its cost. It tracks campaign performance over time, aiding in resource allocation decisions.
Both metrics have limitations: MER doesn't consider product costs, shipping, taxes, or overhead, and ROAS may not reflect overall revenue growth due to the revenue floor. Neither provides actionable insights on their own.
To get a complete picture of marketing effectiveness, use MER and ROAS alongside other metrics like customer lifetime value (LTV), revenue floor, and conversion lag (TTC).