MER in Ecommerce: How It Guides Your Ideal Ad Spend

In business, every dollar works as hard as you do. But if you invest in all the wrong places, you might just be selling dollars for cents. Without a clear metric to guide you, scaling quickly turns into risky business.

Ad spend is often the trickiest piece of that puzzle. You spend without clarity and it feels like filling a leaky bucket; money keeps going in, revenue shows up, but profits leak out months later.

That’s why you need a metric that shows how efficiently your marketing performs across every channel and how far you can scale. It starts with finding your Marketing Efficiency Ratio or MER. MER gives the big-picture view of your marketing performance and sets the stage for smarter, next-dollar decisions.

In this blog, we’ll break down how MER works, the key metrics that support it, and how to use them strategically to maximize returns.

What is MER?

Marketing Efficiency Ratio (MER), also called Blended MER, shows the overall efficiency of your marketing across your entire business. While ROAS zooms in on individual campaigns, MER zooms out to capture how every channel, from paid ads and email to content marketing and SEO, collectively drives total revenue. 

The formula is straightforward:
MER = Total Revenue ÷ Total Ad Spend

MER shows whether your spend is generating profitable returns, helps spot overall performance trends and guides budgeting and scaling decisions to keep your growth sustainable. Think of it as a financial health check for your marketing. If it’s strong, you have room to grow profitably and if it declines, it’s a sign to pause and optimize. 

Why MER Can Trick You Into Overspending

MER alone doesn’t confirm profitability. Yes, it shows how effective your marketing spend is overall, but it reflects only the average efficiency of that spend. It doesn’t account for which campaigns, products, or new customers are actually profitable. The average can seem solid, but in reality, you might be stretching your marketing budget beyond what’s truly profitable for your business.

For example, 

You spend $10,000 on ads across Google, Facebook, TikTok. You make $50,000 in revenue.

MER= 50,000 ÷ 10,000 = 5

This means for every $1 spent, you got $5 back. Generally, anything around 5.0 or above is considered good. 

Now suppose you try to scale Facebook Ads further. You add $5,000 more to Facebook. But that extra spend only brings $10,000 more in sales (instead of $25,000 like before).

Now your totals look like this:

• Total ad spend = $15,000
  
  

• Total revenue = $60,000
  
  

• MER = 60,000 ÷ 15,000 = 4

Your MER dropped from 5 to 4.

At first glance, MER 4 still looks healthy. But those extra $5,000 gave only 2x returns, much weaker than your original 5x. The average MER hides the fact that your new ad dollars are much less efficient. This means MER can, at times, misguide you by showing healthy-looking returns while masking real inefficiencies.

So, how does scaling ads reduce efficiency? Hop on to the next section, where we break down what really drives MER and how to keep it profitable on the surface and at its core.

How To Make MER Work For You?

MER includes all revenue, both new and returning customers. That’s why it often looks stable because repeat purchases and non-paid revenue sources like organic traffic or email and SMS, can inflate total revenue, even if your new ad spend is underperforming. This can make your marketing performance appear more efficient than it actually is, especially when scaling acquisition efforts.

For example, look at this table below. At $50,000 in ad spend, MER shows 4.20, which looks healthy. But let’s say, out of the $210,000 revenue, $134,000 came from returning customers and only $76,000 from new. On the surface, MER looks efficient because much of your revenue comes from returning customers or other non-paid sources. But if you look at the new customer revenue, the picture isn’t nearly as strong.

Also, notice how MER keeps declining as spending increases (from 4.20 at $50k to 3.57 at $100k), which brings us to the key question…

Are your new dollars really pulling in enough revenue?

To make MER work for you, first segment revenue by new vs. returning customers. Then calculate aMER, the metric that tracks new customer acquisition efficiency. 

Let's see how.  

What is aMER and How to Calculate It? 

As we just saw, looking at new customer acquisition is one of the most important parts of making ads profitable. If you want to scale your brand quickly and sustainably, you need to ensure every dollar you spend on acquisition is paying off.

Here’s how to calculate it:
aMER = New Customer Revenue ÷ Total Ad Spend

Now, let’s apply this formula to our earlier example, 

76,000 ÷ 50,000 = 1.52

For every $1 you spend on acquiring new customers, you only earn $1.52 in revenue. The acquisition is still profitable, but each additional dollar brings in less than before (see table). Even if your overall marketing strategy appears effective, you may need to improve how you acquire new customers by focusing on better targeting, increasing average order value, or reallocating budgets to high-performing channels.

Like I warned before, a strong-looking MER can mask this decline, tricking you to spend more. To identify exactly when additional spend stops being profitable, you can turn to another metric,  Marginal aMER. We’ll save that for another day! For now, let’s keep it simple.

Conclusion

MER is a powerful top-line metric that shows how effectively your marketing investments generate revenue, but it’s only the starting point. Interpreting it accurately to guide spend decisions requires analyzing it alongside key metrics like aMER.

aMER ensures your strategies are attracting profitable new customers who are the source of incremental revenue and long-term business growth. A sudden drop in these numbers is your cue to optimize acquisition and prevent wasted ad spend.

Track MER and aMER over time to see how efficiently your marketing is scaling and whether higher spend is actually delivering proportional returns.

So now, there’s no need to stress over the question, “What ad spend should I run my store at?”, because now you can see exactly what works for you!