What the Tech is marketing efficiency ratio (MER)?

If there’s one thing the marketing industry doesn’t lack for, it’s ways to measure the effectiveness of marketing at each stage of the funnel.

Brand equity and brand awareness sit at the top, campaign exposure and viewability in the middle and then the actions consumers take — such as clicks, follows, email opens and shopping cart adds — that inch closer to a sale. Then, of course, brands measure sales themselves.

But the hardest and most important task isn’t measuring those pieces individually — it’s understanding whether the sum total of marketing activity is actually driving revenue. That’s where a marketing efficiency ratio (MER) comes in. MER offers a broad measure of how a brand’s holistic marketing efforts relate to the revenue they generate.

Below, we detail what MER is, how it stacks up to other measurement systems and why brands have embraced the metric.

What is MER?

The “ratio” in MER is a brand’s total revenue relative to its total marketing spend. In other terms, it’s a brand’s revenue divided by marketing.

Marketing efficiency ratio = (Total revenue) / (Total marketing spend)

The higher the MER, the more effective the brand’s marketing is. Easy enough.

Isn’t that return on ad spend (ROAS)?

Not quite, and this gets into the difference between marketing advertising.

Return on ad spend (ROAS) is calculated in the same way as MER, but the variables are different. To calculate ROAS, you take all the revenue generated by an ad campaign and you divide it by the cost of that campaign.

Return on ad spend = (Total revenue generated by an ad campaign) / (Campaign cost)

ROAS is used to measure the performance of a specific ad campaign, and the number indicates whether an ad campaign drove sales and was an effective use of the brand’s ad budget.

But marketing is more expansive than just advertising.

When it comes to calculating MER, how a brand defines “total marketing spend” can vary. Some brands consider total marketing spend as equal to the cost of paid media, or advertising spend. Other brands might consider everything spent on marketing — including the cost of the marketing team itself — as part of their total spend.

Of all the brand metrics available, why use MER?

MER gives brands a high-level accounting of a brand’s marketing strategies beyond any one campaign. If the goal is to understand, at a generalized level, whether marketing is helping the bottom line, MER is a good indicator. Because it’s tracked over time — weekly, monthly or quarterly — it also helps marketers spot trends, showing where efficiency is improving, declining or just being skewed by seasonality.

MER also captures sales effects that can’t be directly tied to campaigns. For example, if a popular influencer is spotted wearing a brand’s T-shirt, the resulting boost won’t show in campaign-level metrics. But it will show up in MER as part of its overall revenue. Likewise, a PR crisis might hurt sales despite no change in campaign performance. That hit to the brand’s image would also show up in MER. Some brands even layer MER with new-customer metrics to make sure they’re measuring growth rather than just repeat purchases.

So while MER doesn’t help identify how individual campaigns perform (that’s ROAS) or how campaigns interact with each other, it does give marketers the most holistic measure of how their marketing correlates to revenue. A high MER is better than a low one, but “good” is relative to a brand’s margins and goals — there’s no universal benchmark. And while MER doesn’t replace detailed attribution, pairing it with tools like incrementality testing or media mix modeling keeps the big picture in focus: Is our marketing working overall?