Measuring the success of your marketing efforts involves evaluating different metrics, such as return on advertising spend (ROAS) and marketing efficiency ratio (MER). These metrics allow you to understand how much revenue your marketing strategies are generating and how cost-effective your approach is.
ROAS is a performance measurement metric that tracks the amount of revenue generated as a result of the money spent on advertising. It is calculated by dividing the revenue derived from advertising by the advertising cost. The ROAS metric tells you if your advertising campaign is generating more money than it is costing you.
MER, on the other hand, is a financial ratio that measures the efficiency of your marketing investments. It is calculated by dividing the revenue generated by your marketing efforts by the cost of your sales and marketing expenses. The MER metric tells you if your marketing efforts are producing a high return on investment.
In a nutshell, then, ROAS measures how much revenue you generate for every dollar spent on advertising, whereas MER measures the efficiency of your overall marketing spend. Thus, while ROAS and MER are related to each other, they evaluate different aspects of your marketing performance.
One apparent advantage of ROAS is simplicity. You can quickly calculate your ROAS by dividing your revenue by your advertising costs. This means that you don’t need a complicated formula to measure your advertising effectiveness. However, ROAS has limited value when assessing your marketing performance holistically. It only measures the revenue generated by your advertising, which means it disregards other important marketing activities that also contribute to your brand’s success - such as PR, social media management, and email marketing; just to mention some.
Therefore, using the MER metric may prove more beneficial for marketers because it can measure the effectiveness of all your marketing efforts. For instance, you can use this measure to calculate the revenue of all your marketing activities and then compare them to the costs. This shows the overall effectiveness of your marketing investments in generating revenue.
Additionally, measuring your MER metric allows you to identify inefficiencies in your sales and marketing spend. This can help you make more informed decisions about your future investments in your marketing campaigns. You can analyze which campaigns are performing the best compared to others, determining what works and what doesn't.
In conclusion, when it comes to evaluating the success of your marketing campaigns, it’s essential to keep things simple while also not oversimplifying things. Evaluating your marketing campaigns using ROAS and MER should be considered complementary. ROAS shows how efficient your ad spent is, while MER measures your overall marketing efficiency. Therefore, we suggest using both metrics to gauge the effectiveness of your marketing strategies.
Remember, marketing campaigns are usually complex, so measuring your performance with one indicator only, won't capture the entire picture. But constantly monitoring and evaluating your marketing’s effectiveness can keep you on the path toward success.
Fortunately, you don’t have to think and worry about how to use both metrics for your marketing strategies, just contact our team at BSocial and we will handle the application of the most effective metrics befitting to uplift your presence to the next level.