Turbocharge your business with the Marketing Efficiency Ratio
13 October 2023
Welcome to the racetrack of digital marketing! It’s a thrilling course, full of twists and turns that can lead to podium finishes or pit lane woes. Just as a Formula 1 team monitors every performance metric down to the millisecond, we at Refuel Creative believe you should be monitoring your Marketing Efficiency Ratio (MER). So, buckle up, let's take a pit stop to understand this racing beast!
Starting the engine: what is the Marketing Efficiency Ratio (MER)?
At its core, MER is the turbocharger of your marketing vehicle, propelling it forward with precision and efficiency. It serves as a vital indicator, allowing you to gauge how effectively your marketing dollars are being spent and whether your strategies are delivering the desired outcomes.
Imagine yourself behind the wheel of a powerful sports car, navigating the twists and turns of the advertising autobahn. The speed at which you drive your marketing car is no longer the sole focus; it's all about how efficiently you navigate the digital landscape. Just as a skilled driver knows that speed alone won't guarantee victory on the racetrack, savvy marketers understand that generating high engagement and social media buzz is not enough to secure success. It's about achieving optimal results with the resources invested in order to cross the finish line.
Pit crew precision: how to calculate MER
Calculating your MER is like tuning a race car; it requires precision. The formula is straightforward: it's the Gross Profit generated from marketing efforts divided by the Marketing Investment. The result is a ratio that helps evaluate the performance of your marketing investments.
MER acts as a navigational tool, helping you stay on track and avoid veering off course. By calculating this ratio, you gain insights into the performance of your marketing campaigns, distinguishing between those that are accelerating towards success and those that are dragging behind like a slow puncture. Through careful analysis and comparison of different campaigns, you can identify trends, successful strategies, and areas in need of improvement. By focusing on this ratio, you can ensure that your resources are being utilised effectively and that you're getting the most out of your marketing budget.
Let's say you're behind the wheel of your latest campaign. If your gross profit from the campaign is $100,000 and you invested $20,000, your MER would be 5. This tells you that for every dollar spent, you generated five in return.
On the racing line: why MER is critical in modern digital marketing
Why should MER be your pole position KPI? Just like a racer needs to balance speed with tire wear and fuel usage, marketers must balance their resources with returns. In the high-octane world of digital marketing, it’s easy to get caught up in the chase for likes, shares, and retweets. But without correlating these to returns, you might as well be driving in circles.
MER brings you back on track. It helps you gauge the performance of your campaigns, showing which are delivering and which are more like a slow puncture. You need to compare different campaigns in order to can spot trends, identify successful strategies, and steer clear of tactics that aren't yielding sufficient returns. By focusing on MER, you can avoid the pitfall of chasing vanity metrics that don't translate into real business results. MER helps you stay focused on what truly matters - achieving optimal results with the resources you have.
With this information, you can allocate your resources effectively and make data-driven decisions to refine your marketing strategies. You need to ensure that every action you take is contributing to you crossing the finish line.
Riding the draft: why marketers should keep MER in their rear-view mirror
Just as a good racing driver keeps an eye on all the gauges, good marketers should always keep an eye on their MER. It helps you understand the impact of your marketing investments and ensure that you're not just burning rubber on your budget track.
A higher MER means you're getting more bang for your buck, like a well-tuned engine getting more performance from every drop of fuel. It allows you to make informed decisions, allocate resources effectively, and scale up the strategies that work best - like shifting gears when you hit the perfect RPM.
Without monitoring your MER, it's like driving blindfolded, hoping for the best outcome. But with MER as your pole position KPI, you have a clear view of the track ahead. You can see which campaigns are delivering impressive results and which are falling behind. You can also pinpoint areas that need improvement and make data-driven decisions to refine your marketing strategies.
In the competitive world of digital marketing, it's essential to stay on track and avoid wasting resources on tactics that aren't delivering sufficient returns. MER acts as your compass, guiding you towards success and helping you navigate the twists and turns of the digital landscapes.
Benchmarking your MER: what's a good score?
Getting a grasp on what constitutes a 'good' MER can be a bit like understanding how impressive a lap time is without knowing the track. For some context, in many industries, an MER of 5, like the example mentioned earlier, would be considered excellent - a podium finish, if you will.
However, just as a Formula 1 driver wouldn't compare their lap time with a NASCAR racer, MERs can vary significantly across different industries. For businesses with higher profit margins or longer customer lifetimes, such as luxury goods or subscription services, a lower MER of around 2 might still be considered a victory lap.
For a more competitive industry with lower margins, like fast-moving consumer goods (FMCG), marketers may need to push the performance envelope a bit more. An MER of 10 could be the checkered flag they're aiming for.
It's also essential to consider the stage of your business. For instance, start-ups might have lower MERs due to higher initial marketing investments. It's like they're still on their qualifying laps, not yet racing at full speed.
Example: shifting gears with MER
Let's dive into an example to better understand the importance of the Marketing Efficiency Ratio (MER). Imagine you're a marketing manager at a SaaS company, and you currently have two campaigns running simultaneously. Campaign A has an MER of 4, while Campaign B boasts a higher MER of 6.
At first glance, it may seem like Campaign B is the clear winner, positioned as the pole sitter in this race. However, let's consider the industry average MER, which is around 7. Suddenly, Campaign B doesn't appear to be performing as well as expected, and Campaign A is falling significantly behind.
By recognising this discrepancy, you can start to diagnose the issue just like a skilled pit crew would during a race. It's time to take a closer look at Campaign A and identify potential areas for improvement. Much like adjusting the tire pressure on a race car to gain a few valuable seconds, you might find that tweaking the target audience or adjusting the creative assets in Campaign A could significantly enhance its MER.
Over the finish line
We believe the race for marketing efficiency is won one ratio at a time. The MER isn't just a number—it's a powerful tuning tool that can turn your marketing vehicle into a championship winner.
Remember, in the race of marketing, it's not always the fastest car that wins, but the most efficient. This highlights the importance of closely monitoring your MER and using it as a guide to fine-tune your marketing strategies. By identifying campaigns that are underperforming and taking action to rectify the situation, you can maximize your marketing efficiency and drive towards success. So, monitor your MER, refine your strategies, and you'll find yourself lapping the competition in no time.
In the competitive world of digital marketing, every decision counts. By utilizing the power of MER and making data-driven adjustments, you can ensure that your marketing campaigns are not just revving the engine, but racing towards top of the podium. Remember, with the right data on your dashboard, every marketer has the potential to become a winner.
And now that you're equipped with the power of MER, it's time to put the pedal to the metal. Happy marketing, racers!
Staying in the fast lane
In summary, while we can't give a one-size-fits-all 'good' MER, you can use industry benchmarks, historical data, and strategic goals to understand where your MER should be. It's like understanding the optimal tire pressure or fuel load for a specific track.
Keep an eye on your MER and adjust your strategy as needed. This way, your marketing campaign won't just be revving the engine; it'll be racing to the podium. Remember, with the right data in your dashboard, every marketer can be a world champion in their field. Now, let's get back on track and race on to marketing success!