Question 1

What is Marketing Efficiency Ratio (MER)?

Accepted Answer

Marketing Efficiency Ratio (MER) measures the overall effectiveness of marketing spend by comparing total revenue to total marketing costs. It provides a holistic view of marketing performance across all channels and customer types. The formula is: MER = Total Revenue / Total Marketing Spend. For example, if your business generated $100,000 in revenue with $20,000 in marketing spend, your MER would be 5.0. Unlike channel-specific metrics, MER captures the full business impact of your marketing investments.

Question 2

What's the difference between MER, aMER, and nMER?

Accepted Answer

These metrics measure marketing efficiency from different angles: MER (Marketing Efficiency Ratio) uses total revenue divided by marketing spend to show overall efficiency. aMER (Attributed MER) uses only revenue attributed to paid channels, helping evaluate direct marketing impact. nMER (New MER) focuses on new customer revenue, measuring acquisition efficiency specifically. Using these metrics together provides a comprehensive view of both overall marketing performance and specific growth drivers.

Question 3

What is a good MER?

Accepted Answer

A good MER varies by industry, business model, and growth stage. Generally, a MER of 3.0 or higher is considered good for established businesses, while growth-focused companies might accept lower MERs (1.5-2.5) to prioritize expansion. Subscription businesses often start with lower MERs but improve over time as recurring revenue accumulates. E-commerce typically targets 3-4x, while SaaS companies may accept 1.5-2.5x during growth phases and aim for 3-5x at maturity.

Question 4

How is MER different from ROAS?

Accepted Answer

While similar, MER and ROAS differ in scope: ROAS (Return on Ad Spend) specifically measures revenue generated from advertising spend only. MER (Marketing Efficiency Ratio) takes a broader view by including all marketing costs (creative, agency fees, team salaries) and all revenue (including organic). MER provides a more comprehensive view of marketing efficiency. ROAS is typically higher than MER since it excludes non-advertising costs that MER accounts for, making MER a more conservative and complete efficiency metric.

Question 5

Why is my aMER lower than my MER?

Accepted Answer

aMER (Attributed MER) is typically lower than overall MER because it only counts revenue directly attributed to paid marketing channels, excluding organic and direct revenue. This difference actually helps quantify the 'halo effect' of your marketing - the gap between attributed revenue and total revenue often represents brand building and organic growth influenced by your marketing efforts. A large gap may indicate strong brand equity or attribution challenges that need addressing.

Question 6

How can I improve my marketing efficiency ratios?

Accepted Answer

To improve your marketing efficiency ratios: 1) Optimize campaign targeting to reduce wasted spend, 2) Improve creative performance to increase conversion rates, 3) Enhance your product/market fit to boost customer value, 4) Refine your pricing strategy, 5) Invest in retention marketing to increase customer lifetime value, and 6) Improve attribution to better understand which channels drive results. Additionally, consider implementing incrementality testing to measure true marketing impact beyond last-click attribution.

Question 7

Should I include organic revenue in my MER calculation?

Accepted Answer

Yes, including organic revenue in your MER calculation is recommended as it provides a complete picture of marketing effectiveness. Marketing efforts often influence organic channels through brand awareness and consideration, even when not directly attributed. However, it's valuable to calculate both MER (with all revenue) and aMER (attributed revenue only) to understand the full spectrum of your marketing impact and identify potential attribution gaps.

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Marketing Efficiency Ratio (MER) Calculator

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Marketing Efficiency Ratio Calculator

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