Marketing Efficiency Ratio (MER) is a financial metric that measures the effectiveness of a company’s marketing investments by comparing the cost of marketing to the revenue generated.
How to calculate MER
MER = sales revenue / marketing spend
The formula for calculating MER is simple: divide your total sales revenue by your marketing spend across all channels. This gives you an idea of how much of your revenue is being spent on marketing.
How to use MER and what does it tell you
MER is expressed as a ratio and can be used to evaluate the effectiveness of a company’s marketing efforts. By tracking MER over time, businesses can identify trends in their marketing investments and adjust their strategies accordingly to optimize their marketing ROI. Whether you’re driving visitors to your website via Facebook and Google Shopping or generating sales on Amazon, the money spent on advertising affects revenue on a daily basis.
MER can also be used to evaluate the impact of paid advertising on revenue. By calculating the total revenue divided by the total paid ad spend from all channels, businesses can take a more holistic view of paid advertising’s impact on revenue rather than channel-by-channel profitability.