Marketing Efficiency Ratio (MER) sometimes feels like another piece of marketing lingo to remember, but it’s actually a fairly important indicator of how marketing as an overall business function is performing.
While it might seem complicated, and conflated with ROAS, that’s not the case. It’s just revenue divided by total marketing spend. So if you generated £40,000 in revenue from £10,000 of marketing spend - your MER is 4. And on its own, that tells you the spend generated four times its value back in revenue. But what that doesn’t tell you, is whether that’s any good.
MER vs. ROAS - they aren’t the same
If you’ve been on the internet listening to digital marketers, or you’ve run ads for any period of time, you’ll have already heard about ROAS. ROAS is your return on ad spend, the specific number a campaign or channel generated divided by what the campaign or channel cost.
MER and ROAS are often used interchangeably, but they’re fundamentally different and mixing them up is where confusion starts.
ROAS lives inside a single channel; it tells you whether your Meta or Google campaign is earning back what you’re putting into it. So it’s the right number for deciding what to scale, pause, or rework at campaign level.
But what it can’t do is tell you whether the business as a whole is in good shape because it only sees the money in and money out for that specific campaign or channel. And typically channels credit themselves very generously with sales they created with multiple channels often crediting themselves with the same sale.
ROAS also says nothing about revenue that comes from organic, search, direct, word of mouth, radio or email; all of which a business relies on to generate sales.
MER doesn’t have the same blind spot because it’s not attributing anything. It’s simply everything the business brought in divided by everything spent on marketing across all channels at once. So while MER is not the metric to use to decide which specific channels deserve which budget, it’s a better one for answering the wider question of: is marketing paying for itself?
There is no universally healthy number
Businesses often want benchmarks, but with MER, there is no benchmark because it’s contextual. Whether an MER of 4 is strong or weak depends entirely on your margin. A business with thinner margins might need a MER well above 4 just to be profitable once costs are covered. A business with high margins might do well on an MER of 2. Comparing to another business or a generic industry benchmark without accounting for your own margin is comparing the wrong thing.
What it’s actually useful for
MER is best used to track your own trend over time rather than chasing somebody else’s number. If your MER has been sliding for a few months, then that’s worth investigating. And when investigating why your MER is sliding, look at why - not just the ratio itself. Sometimes there are factors that affect MER like rising ad costs, what’s happening in the industry, a weaker offer, a slower website - and each need a different fix.
What MER doesn’t tell you
MER blends every channel and every customer together so it can actually hide as much as it reveals. A business could have a healthy overall MER while one channel is bleeding money and another is carrying the whole result. It also says nothing about a customer’s LTV (lifetime value). So while your MER can look find on paper while the business is acquiring customers, but those customers might not come back.
The important takeaway
MER is a useful early-warning number but it’s not the final verdict. You should track this against your own history, read it alongside your margin and treat a change in the ratio as a prompt to investigate.
When you’re deciding what a number is telling you, remember it’s answering a different question to ROAS. The latter will tell you what to do with a particular channel, and the former will tell you if the whole thing is working.