The Marketing Efficiency Ratio (MER) is a metric which measures how efficient a company’s marketing campaigns are at driving sales.
How to calculate MER?
MER is calculated by dividing the total sales revenue by the total marketing spend. For interpretation this means, when investing a marketing budget of XMarketing, the sales revenue is XMarketing x MER.
MER vs ROAS
Unlike Return On Ad-Spend (ROAS), MER is not calculated on a campaign basis and also does not require attribution, i.e. when calclulating MER one does not require to know where the sale came from, or in other words which campaign triggered the purchase.
Advantages of MER and how to use MER for budgeting
Continuously measuring MER helps to estimate the marketing budget needed given a certain sales target. I.e. marketing budget is calculated by dividing total sales target by MER. For example given a historical MER of 5 and a sales target of 50 million, marketing budget should be 10 million.