A Comprehensive Guide to MER (Marketing Efficiency Ratio) and How It Differs from ROAS (Return on ad spend)

A Comprehensive Guide to the Marketing Efficiency Ratio (MER) and How It Differs from ROAS

In today’s fast-paced eCommerce environment, every dollar matters. As marketers and store owners strive to maximize returns on their advertising spend, having a clear sense of profitability is crucial. One metric that has gained traction for its simplicity and holistic view is the marketing efficiency ratio (MER). In this guide, we’ll define the marketing efficiency ratio, explain how to calculate it (including step-by-step instructions for Shopify), compare it to ROAS (Return on Ad Spend), and show you when and why to use each metric.

Table of Contents

1. What Is the Marketing Efficiency Ratio (MER)?
2. How to Calculate the Marketing Efficiency Ratio
3. How to Calculate the Marketing Efficiency Ratio in Shopify
4. Step-by-Step Example of Calculating the Marketing Efficiency Ratio
5. Difference Between the Marketing Efficiency Ratio and ROAS
6. Step-by-Step Example of Calculating ROAS in Shopify Using Google Ads and Facebook Ads
7. What Is the Marketing Efficiency Ratio Used For?

Marketing efficiency ratio (MER) is a high-level metric that measures the total revenue your business generates compared to the total marketing spend you invest across all marketing channels. Sometimes called “Blended ROAS,” the marketing efficiency ratio focuses on your entire marketing ecosystem rather than individual channels:

Example: If your store generates $100,000 in revenue over a certain period, and you spent $20,000 on marketing during that same period, then:

MER (Marketing Efficiency Ratio) = Total Revenue / Total Marketing Spend

MER (Marketing Efficiency Ratio) = $100,000 / $20,000 = 5.0 MER

Think of the marketing efficiency ratio as an overall picture of how effectively your business turns marketing dollars into sales—without diving into the finer details of each channel (Facebook Ads, Google Ads, email marketing, etc.). This holistic view can be particularly beneficial when you need to track how your collective efforts perform at a bird’s-eye level.

Why the Marketing Efficiency Ratio Matters

• Simplicity: The formula is very straightforward.
• Holistic Insight: Considers all marketing costs together, giving a top-level perspective.
• Budget Alignment: Helps confirm that you’re not overspending relative to overall returns.

Calculating the marketing efficiency ratio (MER) is simple:

• Step 1: Add up the total revenue generated within a chosen period (e.g., one month). This should include all eCommerce sales.
• Step 2: Calculate your total marketing spend for that same period (ad spend across Google, Facebook, influencer campaigns, etc.).
• Step 3: Divide the total revenue by the total marketing spend.

For instance, if your total revenue last month was $100,000 and your combined marketing spend was $20,000, your marketing efficiency ratio is:

MER = $100,000 / $20,000 = 5

In this example, a ratio of 5 means you earned $5 in revenue for every $1 spent on marketing efforts overall.

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While Shopify does not automatically compute the marketing efficiency ratio, you can still gather the necessary data within your account and combine it with your total ad costs from all channels. Here’s how:

1. Pull Your Shopify Revenue:
   • Log in to Shopify.
   • Go to Analytics > Dashboard or Reports.
   • Select your date range (e.g., last 30 days).
   • Note the total Sales figure for that time frame (only completed orders).
2. Sum Up Marketing Costs:
   • Collect spend data from each paid channel (Google Ads, Facebook Ads, influencer fees, etc.).
   • Aggregate this to get a grand total for your marketing spend over the same time frame.
3. Compute the Marketing Efficiency Ratio:

This figure gives you a blended, overarching view of how effectively your Shopify store’s marketing budget translates into overall revenue.

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Let’s walk through a realistic (but simplified) scenario:

1. Gather Revenue
   • Your Shopify sales report shows $80,000 in orders for the month of September.
2. Add Up Marketing Costs
   • Google Ads: $5,000
   • Facebook Ads: $4,000
   • Email Marketing Platform (monthly cost attributed to marketing): $200
   • Influencer Partnerships: $800
   • Total Marketing Spend = $5,000 + $4,000 + $200 + $800 = $10,000
3. Calculate Your Marketing Efficiency Ratio

MER = $80,000 / $10,000 = 8

In this example, the marketing efficiency ratio is 8, meaning you generated $8 in revenue for every $1 of marketing investment.

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While the marketing efficiency ratio (MER) gives you a high-level overview of the total returns from all marketing activities combined, ROAS (Return on Ad Spend) is typically channel-specific or campaign-specific:

ROAS = Revenue from a Specific Ad Channel / Cost of That Specific Ad Channel

By contrast, the marketing efficiency ratio incorporates all marketing spend and all revenue. This means:

1. Scope
   • Marketing Efficiency Ratio (MER): Total store revenue vs. total marketing spend.
   • ROAS: Channel-specific revenue vs. that channel’s spend.
2. Strategy
   • Marketing Efficiency Ratio: Ideal for getting a bird’s-eye view of whether your collective marketing approach is profitable.
   • ROAS: Great for determining which specific channels or campaigns are performing best.
3. Use Cases
   • Marketing Efficiency Ratio: Best for quick overall profitability checks, comparing total performance month over month, and ensuring company-wide budgets are in line.
   • ROAS: Useful for detailed optimization—like deciding if you should increase Facebook Ads budget or reduce spend on underperforming Google Ads campaigns.

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Now let’s apply ROAS to a real-world situation, focusing on data from Shopify, Google Ads, and Facebook Ads.

Step 1: Determine Channel-Specific Revenue

• Google Ads: Suppose you used UTM parameters or a reliable attribution system, and you see $30,000 in revenue attributed to Google Ads over the past 30 days.
• Facebook Ads: You find $40,000 in attributed sales from Facebook Ads within that same timeframe.

Step 2: Check Spend for Each Channel

• Google Ads: $5,000
• Facebook Ads: $4,000

Step 3: Calculate ROAS for Google Ads

ROAS (Google Ads) = $30,000 / $5,000 = 6

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Step 4: Calculate ROAS for Facebook Ads

ROAS (Facebook Ads) = $40,000 / $4,000 = 10

Step 5: Evaluate and Optimize

• Google Ads yields a ROAS of 6 (for every $1 spent, you get $6 in revenue).
• Facebook Ads yields a ROAS of 10 (for every $1 spent, you get $10 in revenue).

With these ROAS values, you might decide to allocate more budget to Facebook Ads and explore ways to improve the performance of your Google Ads campaigns.

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The marketing efficiency ratio provides valuable insights for businesses and is used in several key ways:

1. Budgeting at a High Level
   • The marketing efficiency ratio allows business owners and executives to see if the total marketing spend aligns with total revenue. This makes it easier to set realistic budgets and targets.
2. Tracking Performance Over Time
   • By monitoring the marketing efficiency ratio month over month or quarter over quarter, you can quickly spot trends—positive or negative—in your overall marketing health.
3. Preventing Overspecialization
   • While ROAS is incredibly useful for channel-specific insights, focusing too heavily on one channel can obscure how the business is performing collectively. The marketing efficiency ratio ensures you keep a top-level perspective.
4. Investor & Stakeholder Reporting
   • Many investors simply want to know, “How much money is coming in relative to how much is going out on marketing?” The marketing efficiency ratio is an easily understandable figure for stakeholders who don’t want to wade through channel-level data.
5. Issue Identification
   • If your marketing efficiency ratio suddenly declines, it may indicate rising costs, falling sales, or both. You can then dig deeper into your ROAS by channel to identify and address the root cause.

Final Thoughts

Both ROAS and the marketing efficiency ratio are essential tools in your eCommerce analytics toolbox, serving different but complementary purposes:

• Marketing Efficiency Ratio (MER): Tells you how well your marketing as a whole is performing. It’s the macro lens, ensuring you know whether all combined efforts are profitable.
• ROAS: Pinpoints how each channel (like Google Ads or Facebook Ads) contributes to your revenue, guiding you on where to scale or pivot campaigns.

By watching your marketing efficiency ratio, you ensure that your overall efforts are profitable, while channel-specific ROAS helps you refine and optimize each component of your marketing mix. Keeping an eye on both metrics—and combining them with other KPIs like customer acquisition cost (CAC) or lifetime value (LTV)—creates a well-rounded strategy for sustained growth in today’s competitive eCommerce landscape.

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