In ecommerce, every dollar counts. The business owners who succeed know how to spend smartly on marketing for the highest return on investment (ROI). A marketing efficiency ratio (MER) helps you calculate how much revenue each marketing dollar makes so you can do just that. Companies that adopt MER achieved up to 15% to 20% higher marketing ROI than peers relying solely on channel-level metrics.
Learn how to compute your own marketing efficiency ratio, what this number means for your organization, and how to improve it.
What is a marketing efficiency ratio?
Businesses use a marketing efficiency ratio (MER), sometimes called a media efficiency ratio or marketing efficiency rating, to understand how much revenue they’re earning from their marketing spend. Instead of looking at individual campaign metrics, this calculation uses high-level performance data to evaluate marketing strategy and advertising efforts as a whole.
MER can determine if you’re allocating your advertising and marketing dollars effectively. A lower MER may indicate the need for additional conversion-focused messages. A higher marketing efficiency ratio indicates you’re generating an optimal return on your marketing efforts and ad spend. The goal is to spend the least money possible and yield the highest impact from marketing; bottom line, you want a high MER for your business.
MER vs. ROAS: What’s the difference?
Marketing efficiency ratio (MER) and return on ad spend (ROAS) both use ad spend as a basis for understanding value.
MER reflects the impact of branding efforts, organic traffic, influencer partnerships, and awareness campaigns. MER gives business owners a truer sense of overall marketing profitability and sustainability. ROAS may fail to represent the complete picture by only focusing on ad spend. MER provides a more holistic understanding of the costs associated with all marketing activities involved in attracting and converting customers.
ROAS is best for evaluating the short-term performance of specific campaigns or ads, as you can quickly see which initiatives directly drive revenue. MER, on the other hand, works better when you need a big-picture view—understanding whether all your marketing spend, from paid ads to influencer deals, is moving the needle on overall revenue growth.
In practice, you can track both ROAS for tactical adjustments at the campaign level and MER for strategic decisions about long-term marketing efficiency.
How to calculate marketing efficiency ratio
- Select a time period
- Calculate revenue
- Determine marketing and ad spend
- Apply the marketing efficiency ratio formula
You can calculate MER by using these steps and marketing efficiency ratio formula:
1. Select a time period
To calculate MER, start by defining a distinct time period, such as monthly, quarterly, or annually. For an accurate figure, keep this time period consistent throughout your calculation. If you decide to examine Q1 results, for example, gather revenue and marketing spend figures from this time frame.
2. Calculate revenue
Collect revenue data. MER is an all-inclusive metric—it reflects sales revenue from a specific time period tied to your marketing campaigns. Pull revenue data from an official tracking platform, such as your customer relationship management (CRM) or ecommerce platform, that reflects all sales.
3. Determine marketing and ad spend
You need two core numbers: total revenue and total marketing spend. Revenue should include sales driven by paid ads, influencer campaigns, email flows, or other marketing activities you can reasonably connect back to your strategy. Marketing spend, by contrast, should account for all costs tied to marketing and advertising—paid media campaigns, influencer partnerships, content creation, email marketing software, agency retainers, and even smaller recurring expenses like design tools.
Calculate how much money your team spent on all marketing and advertising initiatives during the specified time frame. This includes paid ad placements, influencer marketing campaign expenses, creative production costs, and any marketing-specific payments for tools or contractors. It typically does not include fixed costs like marketing team salaries and product warehousing or production expenses. For accurate comparison, keep track of the costs you include in this category and use the same list for future MER calculations.
4. Apply the marketing efficiency ratio formula
Gather revenue numbers and total ad spend details for your selected date range and apply the following formula:
Total Revenue / Total Marketing Spend = Marketing Efficiency Ratio
To express MER as a percentage, simply multiply your results by 100.
A sample calculation for an ecommerce business examining Q3 marketing results could look like this:
Q3 Revenue = $200,000
Total Q3 marketing and advertising spend = $50,000
200,000 (total sales revenue) /50,000 (total marketing spend) = 4 (marketing efficiency ratio).
Multiplying the results by 100 reveals a MER of 400%. In this example, the business earned $4 for every $1 spent on marketing efforts.
What is a good marketing efficiency ratio?
MER boils all of your marketing efforts over a period of time down to one number. It’s a useful metric for getting a broad overview, but it may not tell the whole story. MER results vary depending on your marketing goals, industry, and company maturity. New companies focusing on building consumer awareness or market penetration may naturally have a lower MER; spending more money at the outset, in this case, may be a valid way to invest in the future of your business.
Generally, MER is a more useful calculation for mature companies with many months of revenue to analyze. For established companies, a higher MER between 3 and 5 (or 300% and 500%) is a sign you’re spending sustainably and on the path to profitability. In the ecommerce industry, where businesses face high product production costs, marketing teams may aim for the higher end of this range as well.
How to improve your marketing efficiency ratio
- Refine targeting and segmentation strategies
- Optimize creative messaging
- Prioritize high-value channels
- Focus on AOV
- Improve pipeline efficiency
- Support CLTV
Improving your MER means generating more revenue for every marketing dollar spent. This can involve improving your ad messaging to attract more customers or finding ways to drive additional sales with your existing strategies. Try these tips to get more out of your advertising and marketing budget:
Refine targeting and segmentation strategies
Review your existing audience segments and targeting strategy. Consider using consumer data to adjust your segmentation strategy and group users based on conversion likelihood. If you focus on targeting consumers who are close to purchasing, you may be able to drive more sales without spending more money. This allows you to optimize ad spend.
Optimize creative messaging
Experiment with different creative advertising and marketing assets to increase your ad conversion rate. Consider using A/B testing tools to compare images, taglines, and CTAs in paid advertisements. These programs can monitor performance, identify messages that resonate with your audience, and automatically display the most effective advertisements.
Prioritize high-value channels
Review ROAS and MER for each of your active advertising channels to identify which channels consistently yield the best results. To increase efficiency, consider reallocating your budget to focus on high-performing channels.
Focus on AOV
A higher average order value (AOV) can improve MER—if each order generates more revenue, your efficiency ratio will improve, even if cost per acquisition remains the same. Upsells and cross-sells are common strategies for increasing AOV. Consider adding an upsell to your checkout experience to entice customers with related products or impulse purchases.
Improve pipeline efficiency
Tightening up a leaky sales pipeline can improve conversion rates, leading to more revenue without increasing your ad budget. To improve your sales pipeline, start by reviewing customer journey data. Track how many users make it through each stage of your sales funnel and identify large drop-offs. Look for ways to improve the customer experience in those stages. Common tricks for improving the sales flow include improving page load time, optimizing your website for mobile shopping, and reducing steps in the checkout experience.
Support CLTV
Increasing your customer lifetime value (CLTV) can also improve MER in the long run. If you can turn your existing customers into repeat customers, you’ll continue to benefit from money spent on acquisition long after the first purchase. Repeat purchase incentives, like loyalty programs, and high-quality customer support experiences can improve CLTV.
Marketing efficiency ratio FAQ
How do you measure marketing efficiency?
To measure marketing efficiency, divide total revenue generated by your total marketing and advertising spend over a predefined time period. This calculation, also known as your marketing efficiency ratio (MER), reveals how much revenue a business generates per ad dollar spent.
What’s a good marketing efficiency ratio?
Advertising professionals often suggest targeting a MER between 3 and 5 (or 300% and 500%). A lower MER doesn’t always suggest a problem. Company goals, maturity, and industry can all affect MER.
What is MER vs. ROAS?
Marketing efficiency ratio (MER) and return on ad spend (ROAS) are both focused on spending efficiency, but MER has a broader scope. ROAS focuses on revenue generated by paid advertising campaigns. A marketing efficiency ratio measures marketing and advertising dollars spent across all organic and paid channels. Compared to ROAS, MER provides a more holistic view of marketing inputs.
