We know that the one thing business owners want from their ad spend is results! Measurable, reliable, scalable results.

As marketers, we know platform attribution is far from perfect and our clients understand that platform sourced metrics are missing a part of the picture, so whilst they report a conservative view on conversion and ROAS (Return on Ad Spend) we recommend gaining a clearer picture of the overall Marketing Efficiency Rate (MER) to establish how hard the marketing budget is working for the business.

In this article we’ll explain what MER is, how to calculate it, and why it’s important for e-commerce businesses to do so.

What is MER?

MER, stands for Marketing Efficiency Ratio (sometimes Media Efficiency Ratio), and it evaluates the efficiency of your entire marketing spend, not just your ad campaigns.

While ROAS focuses solely on the return from your paid advertising, MER gives you a broader perspective, looking at how your total marketing efforts, including organic traffic, email campaigns, and social media, work together to generate revenue for your Shopify store.

We always refer it as something of a "North Star" metric: the higher it is, the more efficiently your marketing spend is driving sales. It’s also based on just 2 key numbers that every business owner will have access to, revenue and spend, meaning it never gets clouded by poor attribution.

Marketing Efficiency Ratio vs Media Efficiency Ratio

Both terms, Marketing Efficiency Ratio and Media Efficiency Ratio, are used when discussing MER, but there’s a slight difference in focus:

• Media Efficiency Ratio: This measures the efficiency of your total ad spend, often referred to as Blended ROAS.

• Marketing Efficiency Ratio: This takes into account all marketing related expenses, such as advertising costs, agency fees, and even staff salaries associated with marketing efforts.

How to Calculate MER for Your Shopify Store

The formula for calculating MER is straightforward:

• Media Efficiency Ratio:
  MER = Total Revenue / Total Ad Spend
  For example, if your Shopify store generated £100,000 in revenue and you spent £20,000 on ads through platforms like Google, Meta, and TikTok, your MER would be 5.0. In this case, 20% of your total revenue is going toward paid advertising.

• Marketing Efficiency Ratio:
  MER = Total Revenue / Total Marketing Expenses
  This version includes all marketing-related costs, not just ad spend. If your total revenue is £300,000 and your marketing expenses (ad spend, agency fees, and staff salaries) total £100,000, your MER would be 3.0.

Why E-comm Store Owners Should Use a Marketing Efficiency Ratio

A Marketing Efficiency Ratio gives e-comm business owners a holistic view of how well their entire marketing budget is performing without getting bogged down by complicated attribution models. This is especially important when considering top-of-funnel activities like social media ads or paid partnerships, which may not generate immediate sales but are helpful for building brand awareness and steering future revenue.

If you were to rely solely on ROAS, you might pause these brand-building activities because they don't immediately show a direct return. However, by measuring your overall marketing efficiency through MER, you can better understand how all your channels—paid, organic, social, email—are working together to drive sales.

What is a Good MER for Shopify Stores?

A "good" MER will depend on your business and industry, but generally, an MER of 3.0 or more is considered healthy. This means for every £1 spent on marketing, you’re generating £3 in revenue.

For Shopify e-commerce stores, it’s not uncommon to aim for an MER of 5.0 or higher, especially if you’re factoring in product margins. Since direct-to-consumer (D2C) sales involve product costs, this higher target accounts for maintaining profitability while scaling your store.

Factors That Can Impact your MER

Several factors can influence your MER, and it’s important to regularly monitor it to ensure your marketing remains efficient. Key factors include:

• Competition: Increased competition is likely to drive up your ad costs, pulling MER down.

• Seasonality: Seasonal demand fluctuations (Black Friday anyone?) will affect your revenue and MER.

• Product Demand: Trends and demand changes can either boost or reduce your sales.

• Economic Conditions: The overall economic environment can shift consumer spending habits, impacting your store’s revenue.

When Should Shopify Store Owners Measure MER?

While MER can be calculated on a daily, weekly, or monthly basis, it’s essential for Shopify store owners to also measure it over a longer time frame, particularly during periods with a longer sales cycle.

For example, in the lead up to Black Friday or a major sales event, you might increase your ad spend in September or October but only see the big lift in conversions in November and December. Measuring MER across this entire period gives you a better picture of how your marketing investment is driving long-term revenue.

Similarly, if you have a subscription model or high levels of repeat customers, your MER should take into account the life time value of each customer, as marketing efforts in month one may lead to repeat purchases down the line.

Where MER Falls Short

Although MER is a valuable top-level metric for Shopify store owners, it still has its limitations. MER won’t provide insights into specific campaigns that are working well or where you should allocate your budget next. For these more tactical decisions, we still turn to the the platform metrics like ROAS, Customer Acquisition Cost (CAC), and Cost per Conversion.

Also, MER doesn’t directly indicate profitability. For instance, a store with an MER of 3 might be more profitable than one with an MER of 5, depending on factors like profit margins and operational costs.

Using MER and ROAS Together 

MER provides a big-picture view of your overall marketing efficiency, while ROAS gives a more granular perspective on the performance of individual campaigns. We always strive to use both metrics together, to help make more informed decisions:

• MER for strategy: Business owners aware of their MER can assess the overall marketing strategy and how the wider set up is driving revenue.

• ROAS for optimisation: As an agency we’ll use ROAS, alongside other in platform metrics, to fine-tune individual ad campaigns or move spend between platforms.

For example, a business might have a strong MER but certain campaigns have a low ROAS, this may indicate that those campaigns need optimising to boost performance.

MER and Customer Acquisition

If your focus is on acquiring new customers, you may accept a lower MER in the short term. It’s almost always more expensive to acquire new customers than to keep existing ones, so a lower MER might be expected initially. However, over time, as these new customers make repeat purchases, your MER should improve.

If your MER remains consistently low, it could indicate you’re overinvesting in customer acquisition or using ineffective marketing channels, and it may be time to reassess where your marketing spend is going.

3 Key Takeaways for Shopify Store Owners

1. MER is a powerful metric for evaluating the overall efficiency of your marketing spend, providing a top-level view of how well your Shopify store’s marketing is performing.

2. It avoids the complexity of attribution, making it easier to assess the long-term impact of all your marketing investments.

3. Use MER alongside other metrics like ROAS and CAC for more comprehensive insights. While MER guides your broader strategy, ROAS can help you make more tactical decisions about individual campaigns and channels.

If you’re looking for help in using MER to optimise your business performance, or need support in evaluating your ads strategy, get in touch with us today.