Marketing Efficiency Ratio (MER) is the most honest measure of your marketing's overall effectiveness, especially now that channel-specific attribution is so fuzzy. It has become the primary way that sophisticated operators understand a business's health. While there's nuance in how to apply it, the core idea is simple: it’s your total revenue divided by your total marketing spend. Everyone seems to agree on that.
For years, we all obsessed over Return on Ad Spend (ROAS) for individual channels like Facebook or Google. But as Nigel Thomas points out on Honest Ecommerce, that approach is broken. Privacy changes from Apple and the broader move away from cookies mean the numbers you see inside your ad platforms are incomplete at best and misleading at worst. MER solves this by zooming out. Instead of asking what your Facebook ROAS is, it asks: for every dollar we put into marketing as a whole, how many dollars of total revenue came out? As Nick Shackleford clarifies, this calculation should only include advertising spend, not salaries, overhead, or shipping costs.
So what’s a good MER? Kunle Campbell, on the 2X eCommerce Podcast, suggests a baseline of 3, meaning you generate $3 in revenue for every $1 in marketing spend. However, Taylor Holiday from Ecommerce Playbook notes that more mature, scaled businesses often operate in an 8 to 10 MER range, which corresponds to a marketing spend that's about 10-15% of total revenue. The right MER for you depends entirely on your gross margins and profitability targets. A business with high margins can be very healthy with a lower MER, while a business with thin margins needs a much higher MER to be profitable.
This highlights the biggest weakness of MER: it measures revenue efficiency, not profitability. Kunle Campbell makes a crucial point that a great MER can hide a failing business. If your contribution margin, the revenue left after subtracting all variable costs like COGS and shipping, is too low, you could be losing money on every sale even with a 5:1 MER. You have to look at MER and your contribution margin together. High MER plus a healthy contribution margin equals a scalable, profitable business. High MER with a poor contribution margin is a trap.
To get a more sophisticated view, many operators split MER into two distinct metrics: overall MER and Acquisition MER (AMER). On an episode of The Unofficial Shopify Podcast, they describe AMER as focusing only on new customer acquisition. Taylor Holiday calls this ncMER (new customer MER) and defines it as new customer revenue divided by total ad spend. This is the number that truly tells you how effective your ads are at bringing new people in the door. It also helps you make smarter decisions about scaling your budget. If your overall MER target is 8:1, but your AMER is only 4:1, every dollar you add to your ad budget will pull your overall MER down. Understanding this relationship helps you find your