The Marketing Efficiency Ratio (MER) is a tool used by marketing managers as an index to measure the effectiveness of their marketing campaigns. The MER is calculated by dividing the total marketing revenue by the number of sales generated from that campaign. MER is also called Marketing Expense Ratio, Marketing Efficiency Rating, Marketing Effectiveness Ratio, Blended ROAS, Media Expense Ratio, or Media Efficiency Ratio.
A high MER indicates that a company’s marketing campaign is very effective and is generating a lot of sales for every dollar spent on marketing. A low MER indicates that a company’s marketing campaign is not very effective and is not generating many sales for every dollar spent on marketing.
The Marketing Efficiency Ratio can be useful for companies who are trying to improve their marketing campaigns. By looking at the MER, companies can see which areas of their campaign need to be improved in order to generate more sales. It is an index for measuring marketing spend efficiency. A low MER shows poor marketing spend efficiency.
MER Formula
The formula for marketing efficiency is defined as the ratio of total revenue made from advertising or marketing to the total spending on advertisement. If you are spending more and the revenue from sales is low, your MER will be low and that is not good.
To calculate your MER, you will need the following information:
- Your total marketing budget for the campaign
- The number of sales generated from that campaign
Once you have this information, you can plug it into the marketing efficiency formula: MER = (Total revenue)/(Total ad spend)
How to calculate marketing efficiency ratio (MER)
There are a few different ways to calculate the marketing efficiency ratio, MER. The most common method is to take the total number of sales generated from advertising or marketing and then divide it by the marketing budget. This will give you your MER for that particular campaign.
You can also compare multiple campaigns by taking the average MER for all of them. This will give you a general idea of how effective your marketing efforts have been. If you see a drastic drop in one campaign’s MER, then you’ll know that something needs to be fixed with that campaign specifically.
The marketing efficiency metric can be extremely useful for figuring out where improvements need to be made within your marketing strategy. By identifying areas where your MER is low, you can save yourself time and money in the long run by making changes to those specific campaigns.
Examples and Calculations
For example, let’s say you spend a total of $100,000 on marketing in one year and you generate $1 million in revenue. This would give you an MER of 10%, which is considered to be very good.
The MER is a valuable metric for businesses of all sizes, as it can help you quickly identify areas in need of improvement. It also unveils inefficiencies and will encourage you to address them. That way, your organization’s workflows will flow smoothly too!
For example, let’s say that you have a total marketing budget of $100,000 and your campaign generates $150,000 in sales. In this case, your MER would be 150,000/100,000 = 1.5. It means you get back 1.5 dollars on every 1 dollar spent on marketing.
What is a good marketing efficiency ratio?
A good general rule of thumb is that a MER of 1 or higher is considered to be good. This means that for every dollar you spend on marketing, you are generating at least one sale.
Of course, the ultimate goal is to have a MER that is as close to 1 as possible. This indicates that your marketing campaign is very effective and generates a lot of sales for every dollar spent.
Therefore, 1 can be said to be the general marketing efficiency ratio benchmark.
If your MER falls below 1, this means that you are not generating enough sales for each dollar you spend on marketing. This can be due to several factors, such as an ineffective campaign or targeting the wrong audience. In either case, it’s important to take a closer look at your campaigns and see where improvements need to be made in order to boost those sales numbers up.
How to measure your marketing success
The MER is a tool that can be used to measure your marketing success. In calculating your MER, you first need to total up all of your marketing expenses for a certain period of time. This should include everything from your advertising budget to the cost of your website and social media platforms. A high MER indicates that your marketing is effective and efficient, while a low MER suggests that your marketing efforts are not as effective as they could be.
The MER is an important metric to track, as it can help you determine whether or not your marketing efforts are paying off. If your MER is low, it may be time to reevaluate your marketing strategy and find ways to improve your return on investment. By tracking your MER, you can ensure that your marketing efforts are as effective as possible and that you are getting the most from your marketing spend.
The benefits of a good marketing efficiency ratio
The MER is a tool that helps businesses assess the effectiveness of their marketing spending. This ratio measures the return on investment (ROI) of marketing activities and can be used to compare the efficiency of different marketing strategies.
A high MER indicates that a company’s marketing activities are generating a good return on investment. This can help businesses make decisions about where to allocate their marketing budget and how to best use their resources.
While the MER is a valuable tool, it is important to remember that it is just one way to measure marketing effectiveness. Other factors, such as customer satisfaction and brand awareness, are also important indicators of success.
Why the marketing efficiency ratio is crucial for businesses
The marketing efficiency ratio (MER) is a metric that tells you how much of your marketing money is actually being used to generate new business.
While the MER is important for all businesses, it is especially crucial for small businesses. This is because small businesses often have limited marketing budgets and need to make sure that every marketing dollar is being used effectively; it can help the small business to improve its ROI.
There are a number of ways to improve your MER, but one of the most important is to track and measure your marketing efforts carefully. This will allow you to see which activities are generating the most leads and sales and adjust your budget accordingly.
If you’re not already tracking your MER, now is the time to start. It could be the difference between success and failure for your business.
Is a higher efficiency ratio better?
Yes, a higher efficiency ratio is generally better. This indicates that your marketing campaign is more effective and generating more sales for each dollar spent. However, it is important to keep in mind that there is no definitive answer to this question as it will vary from company to company and industry to industry.
ROAS vs MER
While both ROAS (return on ad spend) and MER (marketing efficiency ratio) are important marketing efficiency metrics to track, they measure different things. ROAS tells you how much revenue you’re generating for each dollar you spend on advertising, while MER tells you how many sales you’re generating for each dollar you spend on marketing.
ROAS is a more specific metric than MER, as it only measures the effectiveness of your advertising campaigns. This is important to track because it will give you an idea of which campaigns are performing well and which ones need improvement. However, keep in mind that ROAS doesn’t take into account other marketing expenses such as events or public relations.
MER is a broader metric that takes into account all marketing expenses (digital marketing, mobile marketing, content marketing, etc), not just advertising. This is important to track because it gives you an overall picture of the effectiveness of your marketing efforts. Keep in mind that a high MER doesn’t necessarily mean that your advertising campaigns are effective, as there could be other factors at play such as an ineffective campaign or targeting the wrong audience. In either case, it’s important to take a closer look at your campaigns and see where improvements need to be made in order to boost those sales numbers up.
Last Updated on November 5, 2023 by Nansel Nanzip Bongdap
Nansel is a serial entrepreneur and financial expert with 7+ years as a business analyst. He has a liking for marketing which he regards as an important part of business success.
He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael.
