Why it’s time to break up with ROAS and say hello to the Marketing Efficiency Ratio
Dan Howe outlines a view on the Marketing Efficiency Ratio vs Return On Ad Spend and why MER is considered the best for measuring marketing performance and profitability.
The Marketing Efficiency Ratio (MER) is overtaking the once golden metric of ROAS as a source of truth for eCommerce brands. This overview will help businesses make sense of multi-channel eCommerce analytics.
For so long, eCommerce brands have rightly (or wrongly) relied on return-on-ad-spend (ROAS) to monitor performance and scale channel profitability. Marketing managers would see if a certain channel had a good ROAS and immediately give it more dollars, sit back, and reap the rewards.
However, in a world that has seen Apple crackdown on app tracking, which cost Facebook a rumoured $10m USD this year, ROAS has become less accurate. Not to mention, we are coming closer to the ‘death of the cookie’, meaning ROAS just can no longer be trusted.
Have you ever heard of something called Econometrics?
One would think that effectiveness should have primacy over efficiency.
The most efficient campaign would be to run a single ad just to those consumers who always buy the product. And the MOST efficient would be if there was just a single consumer – you’d be 100% efficient. But hardly effective. And in fact the brand would go broke along with the need for marketing.
Well written Dan.
I’ve seen so many brands just stuck in the mindset of growing ROAS = good, and decreasing ROAS = bad and we need to jump into alert mode, especially comparing to this time last year.
ROAS is really a measure of efficiency, but any brand should be happier making 2 million from 1 million than 100k from 10k.