It’s Time to Make the Switch to MER
The MER era for modeling efficiency and evaluating the success of paid media has returned.
I remember years ago when we started working with one of our current clients that had their roots in pre-internet direct response, they were trying to figure out how to move from MER to ROAS because ROAS was so much easier for attribution.
At the time, MER felt like a relic from the direct response past, but in a post-iOS world and with the softening of Meta’s performance, MER is once again an incredibly valuable tool.
Many of you are probably asking, “What is MER?”
It stands for “Media Efficiency Ratio” and it is basically looking at all revenue and paid media spend to create a holistic return on investment number. It functions very similarly to ROAS, but it looks at all of your channels together instead of just one platform.
Here’s a formal MER definition and example:
This ratio is derived by dividing total sales by the media cost. For example, if an omnichannel media buy generates $3,000 in sales and its cost was $1,000, the MER is a 3.0.
If you apply MER to a single channel, it is in effect the same as ROAS.
One of the biggest questions we’re hearing from clients is:
“We need to invest more in our brand, but how do we know what is working?”
It’s so much easier to tell when UGC and last-click stages of the funnel are working than your true TOF prospecting because that is what the platforms are best at measuring.
This is where MER can be a powerful tool. It can help free you from an over reliance on ROAS and channels like Meta.
MER is focusing on holistic trends and it helps you to make sense of when TOF creative is working, even though most of the attribution goes to UGC and last-click funnel stage items.
One of the best examples of understanding MER comes from our work with Dr. Squatch. When we launched our original campaign for them, they were able to find a blended MER between YouTube, search and Meta that allowed them to keep spending even if the in-platform ROAS seemed low. YouTube is notorious for underreporting conversions.
They have gone on to 100x the business since Raindrop started working with them and this was in large part due to our creative, the product and their team’s understanding of MER.
As marketers, we’ve been spoiled by in-platform ROAS the last decade, but the good news is that there are other tools available and DtC has been around a long time! This is just the latest iteration of trying to understand what is working and how to scale efficiently. You’ve got this!
This article is a part of The Q1 2023 Founders’ Report. The Founders’ Report is a quarterly digest of the top conversations, insights and learnings that Jacques and Adam are having with our clients and top marketers. Sign up here.