Formula: MER = Total Revenue ÷ Total Marketing Spend for a defined period.

What to include:

• Total revenue: all sales attributable to the business in the period (online + offline if relevant), net of cancellations/returns where possible.
• Total marketing spend: paid media, programmatic, search, social, affiliate, creator fees, agency fees tied to media, and brand spend. Keep inclusions consistent over time.

Interpretation:

• Higher MER means more revenue per $1 of total marketing investment and a stronger payback profile.
• Trend over level: track MER as a rolling time series. Rising MER at steady spend suggests improving efficiency or strong halo effects; falling MER suggests diminishing returns or data gaps.
• Sensitivity: MER will move with pricing changes, promotions, and product mix. Pair with contribution margin so MER gains do not mask margin compression.

Example:

If monthly revenue is $4.2M and total marketing spend is $900k, MER = 4.67. If next month spend rises to $1.1M and revenue rises to $4.5M, MER = 4.09. Efficiency fell even though revenue rose. Investigate incrementality and channel mix before scaling further.

Common pitfalls:

• Inconsistent inputs: changing which costs or revenue streams are counted breaks comparability.
• Short windows: measuring MER over too short a window ignores natural payback lags.
• Ignoring returns: gross revenue can overstate efficiency if return rates are high.

ROAS answers a tactical question: Did this campaign or channel generate enough revenue for the dollars spent in-platform?

MER answers a strategic question: Given everything we did in marketing, how efficiently did the business convert those dollars into revenue?

Use ROAS for:

• Daily and weekly optimization of bids, budgets, and creatives.
• Comparing channels or campaigns with similar objectives.
• Rapid testing and pruning of underperforming tactics.

Use MER for:

• Setting top-down spend guardrails and monthly investment plans.
• Reconciling platform-reported performance with finance actuals.
• Capturing halo effects, mixed-channel journeys, and offline impacts that ROAS misses.

Decision workflow:

1. Start with MER: Check if current MER meets your efficiency target at the present scale.
2. If MER is healthy: Use ROAS and incrementality tests to decide where to place the next dollars.
3. If MER is deteriorating: Freeze or reallocate budget, diagnose with channel-level ROAS and contribution margin, and validate incrementality.

Rule of thumb: ROAS can look weak on some upper-funnel or creator activity while MER improves because of halo. Keep investments that lift MER and pass contribution margin checks even if single-channel ROAS is modest.

Translate MER into targets:

• Baseline: Establish a 3–6 month average MER with consistent definitions.
• Guardrails: Set a floor MER that aligns with contribution margin and cash needs. Example: if contribution margin is 60% and you need breakeven within 60 days, a MER floor near 3.0 may be required. Calibrate to your unit economics.
• Scaling: Approve budget increases when projected MER stays at or above the floor after accounting for diminishing returns.

Key adjacent metrics:

• CAC: Validate that customer acquisition cost remains within LTV/CAC thresholds as you scale.
• LTV: Ensure MER-driven growth does not rely on low-quality cohorts. Monitor cohort LTV and payback windows.
• Contribution margin: Pair MER with variable costs to confirm revenue translates into cash contribution.

Operational cadence:

• Weekly: Review MER trend, spend pace, and contribution margin. Flag anomalies from promos or tracking changes.
• Monthly: Reconcile MER to finance actuals, update targets, and run incrementality tests.
• Quarterly: Refit guardrails and channel portfolios based on seasonality and marginal ROI curves.

Implementation tips:

• Standardize a source of truth for revenue and marketing costs and document inclusions.
• Use a rolling window to reduce noise and align with payback periods.
• Run holdouts or geo-tests periodically to validate that MER improvements reflect true incrementality.