“In the year of the lord 2025, we do not use ROAS.” That was the position of one agency media buyer during a conversation about the Marketing Efficiency Ratio (MER). The data-driven advertising metric has been around for many years but is now reaching mainstream or at least revered status.
That is an exaggeration, of course. ROAS remains the default choice for how online advertisers rate a campaign. Heck, even last-click attribution is still in play.
But MER is gaining adoption as an alternative and preferable option to other metrics, although there remain disparities in how it’s applied from brand to brand.
What is Marketing Efficiency Ratio (MER)?
The MER equation is straightforward: Total revenue / Total marketing budget.
It is also sometimes referred to as “blended ROAS.” And on Amazon it’s akin to the metric “total advertising as a cost of sales,” which is non-jokingly referred to as TACOS.
ROAS is a metric to establish the attributable returns campaign by campaign. How much did a particular creative and package of media generate?
MER takes a broader perspective. It doesn’t just connect impressions to conversions or sales. MER takes in the entire marketing spend and compares that to the entire company revenue during that period. In other words, all sorts of halo effects or random consumer behaviors could affect the MER of a campaign regardless of how any given campaign performs. If a product has a viral moment on TikTok and sales shoot through the roof, MER is going to look great, because the brand is spending relatively little compared to the sales spike.
MER sounds like an inexact way to attribute media, because it is such a sky-high perspective on what’s working.
For that reason, MER, like media mix modeling (MMM), is useful as a rolling benchmark, rather than a one-off way to measure a campaign.
The furniture brand James & James now uses MER as its internal North Star metric, CMO Tristan Cameron said during AdExchanger’s Programmatic IO Las Vegas show in May. It’s a broad measuring tool, but helps the brand shine a better light on platform ROAS metrics – as in, self-attributed ROAS reported by Google, Meta, Amazon, etc.
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Generally, she said, platform ROAS numbers look really good. But when the company switched to MER, it became clear “that just wasn’t the reality for our bottom line.”
Still some MER confusion
There is a disparity between how some advertisers use MER.
If anything, the differences between how certain brands use MER is indicative of the macro-perspective marketers are looking for when it comes to ad measurement. Some brands consider the entire paid media budget as part of the MER equation, this divided by the company or product’s total revenue. Other brands, said the same agency buyer as before, count all marketing costs, including fees paid to agencies, the salaries of the marketing team, the measurement data used after the campaign, the price of analytics vendors, etc.
I mean, if you’re going to zoom, zoom out.
Another dispute is less substantial, but probably more controversial.
Is it “MER,” like, “frankincense, gold and myrrh”?
Or “M-E-R,” as in, “Do you watch the NBA?”
These are the things that must be ironed out so that society doesn’t end up in another GIF-JIF situation.
