ROAS vs MER: What is the difference?

Ever wondered what the difference between ROAS vs MER is? And why should you track both metrics?

Many find these terms interchangeably used, but these terms are actually different.

Confused? you are not alone. Let's clear it up:

ROAS vs MER

📈MER- Marketing Efficiency Rate

Purpose: MER measures your overall marketing efforts, across all channels. It answers one question: are my overall marketing efforts successful?

Example: Let's take a look at your total gross sales for last week over spend. Let's say that your total marketing spend last week was $15,000 and your total gross sales last were $25,000. Your MER is: 1.66

• Last week’s total marketing spend = $15,000

• Last week’s total gross sales = $25,000

• MER = $25,000 ÷ $15,000 = 1.66

You can calculate the MER for any time period: Last week, month to date, this year, last year etc.

💰ROAS- Return on Ad Spend

Purpose: Perfect for measuring a specific channel or campaign. 

Example: Think in-platform meta (paid social) results for last week. Let's say you've spend $1,000 in Meta last week, and your in platform sales where $3,500. Your ROAS will be 3.5X.

• Last week’s Meta (paid social) spend = $1,000

• Last week’s Meta-attributed sales = $3,500

• ROAS = $3,500 ÷ $1,000 = 3.5X

Like MER, you can calculate ROAS for any time period: Last week, month to date, this year, last year etc.

It is a good practice to first understand your MER, i.e overall marketing efficiencies and then each channel's efficiency.

Why measuring both of these metrics?

First, it will give you a pulse check on your overall marketing efficiencies. You'd want your MER to always be above 1 because that means that your sales are higher then your marketing spend.

Second, by looking at both MER and ROAS you will be able to identify the better performing channels vs the ones who don't perform best.

If we go back to the MER and ROAS examples above: We know that our MER last week was 1.6 and Meta's ROAS was 3.5. This suggests that Meta or your paid social campaigns are working better then other channels. Hence, something else pulls the MER down.

What could it be? now we are investigating! Few options:

• Options A- if you have other paid channels, this is the time to look at your other paid channels' ROAS. are they above or below 1.6? those that are below 1.6, are driving your overall marketing efficiencies down. Consider optimizing these channels to get better results.

• Option B- If Meta (or paid social) is your only paid channel, then this might mean that your sales from organic channels are down. Consider deep diving onto your organic channels and figure out what you can do to increase gross sales from these channels.

With just these two metrics, we can get a good grasb on the business growth. The true effectiveness of your marketing efforts lies somewhere between these two metrics.

Tip #1: It's a good practice to track both metrics on a weekly, monthly, quarterly and yearly basis.

Tip #2: Remember that each platform will over-attribute sales, take this into consideration when calculating ROAS and when comparing channels. Understanding what happens in each of your channels usually require investigation and more context then just the numbers.

When tracking these metrics for TAG's clients, we're having a constant conversation around how efficient the business is and where and when we need pull up levers and turn on or off campaigns.

#marketingmeasurment #campaigns #ecommerce #tagmarketingservices #roas #mer #analytics

__________________________________________________________________________________

👋 I’m Anat Yaniv, founder of TAG Marketing Services.

👥 We are marketing experts, we are data masters

🎯 Services include: Fractional marketing support, thoughtful paid media, creative ops for paid media, marketing reports and audits and US market entry.