Marketing Efficiency Ratio (MER) - do you use it?

[Brendan-Optily]

Curious if anyone looks at their Marketing Efficiency Ratio (MER) which is calculated as Total Sales / Total Ad Spend? 

MER is the ratio between your total sales and total ad spend. If your total sales revenue in a period is $10,000 and your total ad spend is $2,000, then your MER is 5.0.

MER is different to ROAS in that ROAS only takes into account sales that are directly attributable to ads; typically reported by the ad platforms themselves.

MER gives the bigger picture of your overall marketing efficiency and your real capability to scale.

For example, if your Gross Margin is 10%, then on $10,000 sales you're achieving $1,000 gross margin. If you're spending $2,000 on ads in the same period (MER of 5.0), then this is clearly not a profitable or scalable business.

The curious thing about MER is that it is not linear. The more high margin your business, small shifts in margin don't have a big impact on your Breakeven MER. However, if you're a low margin business, then you really do need to watch your MER as you can quickly drift into unprofitability. 

This image explains that a bit better I think:

Thanks!

[SocialAutoPost]

Yes, the Marketing Efficiency Ratio (MER) is a useful metric for measuring the efficiency of a company's marketing efforts. By comparing total sales revenue to total ad spend, the MER can help identify whether a company's marketing efforts are generating a positive return on investment (ROI) and whether they are scalable.

However, it's important to note that the MER is not a perfect metric, and it has its limitations. For example, the MER only considers direct sales revenue and ad spend, and it does not take into account other factors that can impact the profitability of a business, such as production costs, overhead expenses, and taxes. Additionally, the MER does not provide any insight into the effectiveness of specific marketing channels or tactics, which can make it difficult to identify areas for improvement.

Despite its limitations, the MER can still be a valuable tool for businesses to use when evaluating the efficiency of their marketing efforts. By regularly tracking and analyzing their MER, companies can identify potential areas for improvement and make more informed decisions about how to allocate their marketing budget.

[Brendan-Optily]

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@SocialAutoPost wrote:

Additionally, the MER does not provide any insight into the effectiveness of specific marketing channels or tactics, which can make it difficult to identify areas for improvement.

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Agree fully there @SocialAutoPost. How do you tackle that, especially across multiple ad channels?