GuideThe numbers leadership asks about
MER (Marketing Efficiency Ratio)
Definition
Total company revenue divided by total marketing spend over the same period, with everything counted on both sides.
How it’s calculated
Take booked revenue from finance and everything marketing cost you in the period: media, agency fees, tools, and salaries if you want the full picture. Divide the first by the second.
It exists because the platforms mark their own homework. Meta and Google each claim the conversions they touched, so the sum of channel ROAS routinely adds up to more than the company sold. MER starts from finance’s revenue and cannot be inflated from inside a dashboard.
Your break-even MER is one divided by your gross margin. At a 50% margin the line sits at 2; at 30% it sits at 3.3. Below it, marketing has spent more than the gross profit it brought in. Work out your own line before comparing yourself with anyone, because the same ratio sits on opposite sides of it in two businesses with different margins. And when the sales cycle is long, read the ratio across several quarters: a single quarter divides revenue from deals created months earlier by spend whose deals have not landed yet.
The weakness: it is blunt. It cannot tell you which channel to cut; for that you need an experiment.
What to watch for
Add up the revenue each channel reports and set it against booked revenue: if the channels claim more than the company sold, the deck is double-counting. An MER read without gross margin next to it cannot be judged; the same 3.0 is comfortable at a 70% margin and underwater at 30%. An MER used to decide which channel to cut will not support the decision; that call needs an experiment. And on a long sales cycle, this quarter’s ratio describes deals created before this quarter’s spend.
The question you ask
“If we add up every channel’s claimed revenue, is it more than we sold?”