Understanding MER and why you should pivot
The marketing industry is forever evolving. The issues with user privacy, the secrecy of platforms, the questions around the real effectiveness of paid advertising - they're just a few of the more prominent things that are shaping the dynamics of the marketing world. Now more than ever, marketers are expected to be responsible for the methods they track and collect user information without compromising individual privacy.
When the industry leaders begin to shift to better practices, the KPIs we measure should reflect these changes.
What are the KPIs of the future?
We want to help you stay ahead of the curve and introduce MER, or Marketing Efficiency Ratio, as your shining light to hover towards. But to understand the why, it is important to lay down how this metric came into the limelight.
KPIs, or performance metrics, make or break a marketer. Every marketer has their favourite metrics that act as their North star - CPM, CPC or the common favourite, ROAS. Return on Ad Spend is simply the return gains on your marketing campaign within a platform. You can easily calculate it by dividing the total sales attributed to a specific campaign by the total cost of said campaign.
ROAS has always been a tricky metric to fully comprehend, but we did the best with what we had. It was tangible, easy to quantify and acted as a badge to a marketer's capability. But ROAS is even trickier to fully trust when a company runs a full-fledged marketing campaign across organic, direct and paid media channels. With such an omnichannel approach, how are you able to judge which platform convinced the user to buy your product?
Here's a quick breakdown of where ROAS fails.
Let's take the case of Ahrefs. Ahrefs is one of the leading tools for SEO marketers. But they're better known for their free online courses and YouTube channel that offers marketing sights for beginners. But until recently, even Ahrefs ran ads to gain users. Let's say the user regularly consumed their content, and when they saw the ad the 5th time, they decided to purchase a subscription.
In such a case, is it the offer in the ad that converts the user or the trust generated from the free content they consistently create? What if the buying intent was set before seeing the ad? Can you attribute the brand awareness only to the online content, or do the ads have a role to play here?
Here is one more example. Imagine that you run an eCommerce store. You find out that your CPC varies between $8-12 dollars. But your customers love your product, and they refer your brand to all their friends. What is the ROAS in this case? Can you really define the effectiveness of your marketing campaign across any one platform?
Are you starting to see the cracks in the conventional understanding of ROAS?
Enter MER, or Marketing Efficiency Ratio. Marketing Efficiency Ratio is a more encompassing metric that takes into account all your marketing efforts. Simply put, it is the total revenue generated by the complete marketing campaign divided by the total money invested for marketing across all channels.
MER is a holistic metric that looks at not just the immediate returns from a marketing campaign but rather measures the value generated across a longer time frame. As a marketer, aligning your marketing North Star to MER is a matter of serious importance.
But how do we justify the money spent on paid media?
It's important to realize that an ad is more than just the means to an end. It can also:
make your customer aware of your product and services.
build a brand that can be related to.
generate a need for your products over time.
A well-placed ad can act as the step to a strong digital brand, which is a business' true asset. When this sinks in, you begin to see why ROAS is just a piece of the puzzle.
How do we practically employ MER in our marketing strategies?
We've understood that it is foolish to attribute success to a single platform or campaign during an omnichannel marketing approach. MER allows you to take a step back and plot out how much value is created through the entire marketing effort. This is the change in mindset that allows you to make business strategies that focus on the big picture.
MER, when combined with the other KPIs, reveals how your omnichannel approach is connected across platforms. To take the example of Ahrefs, we can identify how valuable content scaled organically drove faster conversions when their users saw the ads. With the privacy-focused tracking restrictions in place, ROAS will become more unreliable, since the information collected by these platforms will be even less accurate. In such a scenario, the MER approach gives you a better map of your brand and the value it delivers.
Read this article again, and think it through for yourself. With incomplete data, can you really tie your worth as a marketer to ROAS on any one platform? We don't mean to quash the usefulness of ROAS but hope to stress into your mind the real value of this metric.
We don't want to leave you in the middle of nowhere with this article, which is why we will be writing more about how to incorporate MER into your overall marketing strategy. This series of blog posts should help measure more accurately the effectiveness of your marketing campaigns and design strategies for growth. But if you don't want to wait, we offer consultations on building data-driven brand tactics. If you want to reach us, we'll be happy to help!
