The Smart Way to Calculate Marketing Efficiency Ratio in eCommerce

In business, every dollar works as hard as you do. But without knowing how well those dollars are working, scaling quickly can turn into risky business. 

Marketing spend is often the trickiest piece of that puzzle. You keep investing, revenue shows up, but are the returns truly worth it? 

That’s why you need a metric that shows how efficiently your marketing performs across all channels combined and how far you can stretch your budget. 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 the Market Efficiency Ratio?

Marketing Efficiency Ratio (MER) is total revenue divided by total marketing spend. It’s a blended efficiency metric across all channels over a set period, best used for setting budget guardrails, but not for assessing acquisition performance.

Formula:
MER = Total Revenue ÷ Total Marketing Spend

For instance, if your total revenue is $210,000 and total marketing spend is $50,000

MER = $210000  ÷ 50000 = 4.25

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. 

How 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 the returns from your most recent spend on acquiring new customers. The average can seem solid, but in reality, you might be stretching your marketing budget beyond what’s truly profitable for your business.

To understand this better, let’s walk through an example.

Look at this table below:

You spend $50,000 on ads across Google, Facebook, TikTok. You make $210,000 in revenue.

MER= $210,000 ÷ 50,000 = 4.20 (section 1.1)

This means for every $1 spent, you got $4.20 back. Generally, an MER around 5.0 or above is considered good. 

Suppose you increase your spend by $10,000 each month. Notice how MER keeps declining as spending increases, from 4.20 at $50k to 3.57 at $100k. On the surface, 4.08 or even 3.57 may still look healthy, but they can be misleading, hiding the fact that new ad dollars are generating weaker returns. This brings us to the key question: 

Are your new dollars really pulling in enough revenue?

Let’s find out! 

In the next section, we’ll see how to keep MER profitable on the surface and at its core by looking at aMER, the metric that measures new customer efficiency.

What Is aMER (Acquisition MER) and How to Calculate It?

In marketing, Acquisition Marketing Efficiency Ratio (aMER) shows how much revenue you are earning specifically from new customers compared to your total marketing spend. A higher aMER indicates that your marketing is doing a great job bringing in new customers, while a lower aMER is a sign you might be spending more than you’re earning from new acquisitions.

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

Let’s calculate new customer efficiency for section 1.1 

76,000 ÷ 50,000 = 1.52

While the overall MER is 4.20, the aMER for the same $50,000 spend is only 1.52. This shows that revenue from newly acquired customers is much lower than what the blended MER reflects. This is why looking at MER alone can be misleading.

That brings us to the conclusion that your existing customers are contributing most of the revenue. Let’s confirm it by calculating your existing customer MER.

Existing customer MER = existing customer revenue  ÷ Total Marketing Spend

                                          = $134,000 ÷ 50,000

                                          = 2.68

Yes, we guessed it right! The past spend has built a loyal customer base that consistently generates revenue. New ad dollars, on the other side, are working to acquire fresh customers, which takes more effort and investment, and therefore generates lower returns initially.

How to Use MER and aMer Together

As discussed, MER includes all revenue, both new and returning customers. Repeat purchases and non-paid revenue sources like organic traffic, email, or SMS can inflate total revenue. Even if new ad spend is underperforming, MER may make your marketing appear more efficient than it actually is, especially when acquiring new customers. 

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. Even if your overall marketing strategy appears effective, you may need to improve new customer acquisition. Focus on better targeting, increasing average order value, or reallocating budgets to high-performing channels. 

For those looking to track exactly when incremental spending stops being profitable, you can turn to another metric,  Marginal aMER. That’s a story 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. To interpret it accurately and guide spend decisions, you should analyse it alongside key metrics like Acquisition MER (aMER).

Track aMER to ensure your ad spend is generating proportional returns from new customers, not just from existing ones. If you notice a sudden drop in these numbers, take it as a cue to optimize acquisition and prevent wasted spend. Doing so keeps your MER strong, inside out. After all, maximizing efficiency here allows you to save margin for other expenses while still securing a healthy net profit.

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

FAQ

What Is The Difference Between Marketing Efficiency Ratio and ROAS?

While ROAS zooms in on the efficiency of individual paid campaigns, MER zooms out to show how all channels, paid media, email, content, and SEO, collectively drive total revenue.

What is a Good MER for eCommerce?

For e-commerce brands, a good MER depends on industry, growth stage, revenue, and media spend. Generally, a MER of 3 is considered good, while 5 and above is excellent. 

How Do You Calculate Marketing Efficiency?

MER is calculated as:

MER = Total Revenue ÷ Total Marketing Spend

Where, total marketing spend combines costs from paid media, organic marketing and indirect expenses such as agency fees and influencer partnerships.