Thinking Big Picture: Shifting from ROI to Marketing Efficiency Ratio (MER)

Introduction: Co-written by Josh, CEO of AmpliSell & Nicole, CEO of Marrow Marketing,

In the competitive landscape of digital marketing, every dollar counts. Business owners and marketers are constantly evaluating the return on investment (ROI) and return on ad spend (ROAS) to determine the effectiveness of their marketing efforts. 

As agency owners, we see our clients daily trying to navigate this world of data & analytics in order to make the wisest decisions about their marketing investments. 

While these metrics are undoubtedly important, they often fail to provide a comprehensive view of the true impact of your marketing spend. 

That's where MER, or Marketing Efficiency Ratio, comes into play. And that’s why we (Josh & Nicole) are excited to offer a combined and collaborative agency service that supports our clients who are advertising on both Meta & Amazon with an MER approach to collective reporting.

Let’s delve into why considering your marketing spend from an MER perspective is essential for long-term success and growth.

Understanding the Basics

Before we dive into the merits of MER, let's clarify its definition. MER is a metric that takes into account not just the direct financial returns generated by a marketing campaign but also factors in the indirect benefits, such as brand visibility, customer loyalty, and overall market positioning. Essentially, MER offers a more holistic view of how your marketing efforts contribute to your business goals. 

It zooms up into the bigger picture of analytics, above every marketing channel, to provide a birds eye, 30k ft view of what’s working, and what impact your investment into Facebook (for instance) had on your Amazon sales. 

The Limitations of ROI and ROAS

While ROI and ROAS are valuable metrics, they do have limitations. They tend to focus on short-term, direct financial outcomes, which can lead to a tunnel vision approach. Here's why:

• Channel Isolation: ROI and ROAS are channel-specific, leading to a fragmented view of your marketing efforts. When you evaluate each channel independently, you miss the synergies between them. MER provides a comprehensive perspective that factors in cross-channel effects.

• Overlooking Brand Building: ROI and ROAS calculations often disregard the value of brand building. Investments in brand awareness might not yield immediate returns, but they are crucial for long-term success. MER considers these intangible benefits.

• Short-Term Focus: ROI and ROAS are inherently short-term metrics. While they are essential for assessing the immediate impact of a campaign, they may not reflect the long-term value generated by customer relationships nurtured over time.

The Holistic Approach of MER

MER takes a more comprehensive view of your marketing efforts by considering both direct and indirect effects. Here's how it works:

• Cross-Channel Synergy: MER looks at the interconnectedness of your marketing channels. It recognizes that a customer's journey is often influenced by multiple touchpoints, both online and offline. By considering these synergies, you can optimize your marketing mix for better results.

• Brand Equity: Building a strong brand is a significant long-term asset. MER considers the value of brand equity, which may not be immediately quantifiable but plays a pivotal role in customer loyalty and market positioning.

• Customer Lifetime Value (CLV): MER factors in CLV, which accounts for the long-term revenue generated from a customer throughout their relationship with your brand. A high MER indicates that your marketing efforts are not only acquiring customers but also retaining and maximizing their value.

• Market Positioning: Beyond immediate sales, MER considers how your marketing efforts position your brand in the market. This can lead to increased market share, pricing power, and long-term sustainability.

Strategies to Enhance Your MER

Once you have understood the importance of MER, here are some strategies to help you improve it:

• Integrate Your Marketing Channels: Break down silos between your marketing channels and adopt a holistic approach. Build a reporting dashboard that collectively considers omni-channel investments and ROI. Understand how different channels work together to influence customer decisions and allocate resources accordingly. 

• Measure Beyond Immediate Results: Don't be solely fixated on short-term results. Track metrics like customer sentiment, brand mentions, and customer lifetime value to assess the broader impact of your marketing efforts.

• Invest in Branding: Allocate a portion of your marketing budget to build and reinforce your brand. While the immediate ROI may be lower, the long-term benefits in terms of customer loyalty and brand recognition are invaluable.

• Customer-Centric Approach: Focus on enhancing the customer experience to boost CLV. Tailor your marketing efforts to provide value at every touchpoint, from awareness to post-purchase interactions.

Final Thoughts

While ROI and ROAS remain vital metrics for assessing short-term performance, considering your marketing spend from an MER perspective allows you to make more informed decisions that prioritize long-term growth and sustainability. 

By understanding the holistic impact of your marketing efforts, you can build a brand that not only survives but thrives in the ever-changing market. 

So, don't just count the dollars; measure the true value of your marketing with MER. 

If you’re interested in developing an MER approach to your omni-channel brand, contact our teams to discuss a partnership.

Best!

Nicole & Josh