What is marketing efficiency ratio and using it in eCommerce

Many agencies will have been anticipating changes to analytics once iOS 14.5 is rolled out, and as a result, we’re looking at new metrics like marketing efficiency ratio. As an advertising agency specialising in Facebook ads for eCommerce we have been waiting for the rollout for months. This update is an important one, as with the roll-out of the ATT (App Tracking Transparency) Framework every user on an iPhone using an app (Facebook included) is now automatically opted out from web tracking.

What this will mean and what the real effect is, is still difficult to say, but some effects will or could be

  • Lower ROAS and higher cost per purchase reported on Facebook because less people are tracked.
  • Audience sizes might become smaller as opted-out users will automatically be excluded from certain targetable audiences
  • Performance fluctuations for the next while, while Facebook is adapting to this new iOS14.5 rollout.

To be completely transparent, we don’t know exactly what the impact will be as this is a completely new rollout. Fact is though, that we can’t stop advertising for our eCommerce stores, so we have to find new ways to adapt to the changing environment.

So what do we do now if reporting is no longer accurate?

What is Marketing Efficiency Ratio (MER)?

Something we have done for a long time at Heavy Head Social, is use MER which stands for marketing efficiency ratio (MER).

The marketing efficiency ratio gives advertisers (and brands) a more holistic view of advertising, rather than on one channel.

What this means is that instead of looking at CPA on Google and ROAS on FB you look everything. What is my overall marketing spend and what are my overall sales. (store sales/all marketing spend)

The number you get is your MER and is going to be the most important number to look at in 2021 onwards.

The numbers that you see for your store are how much you’re spending on marketing, and how much you’re getting back in sales. By using the marketing efficiency ratio, you’ll be able to see how your overall marketing efforts are doing.

If you increase 1 platform in marketing spend, the marketing efficiency ratio should remain similar and sales increase.

When using multiple marketing platforms, this has always been the best measurement. However, with the new rollout of iOS14.5 this is going to be your best way of knowing how your overall marketing efforts are going.

MER and Attributed Sales

You can take the marketing efficiency ratio to a next level, which we are doing for our clients, and look at the attributed sales. As a result, you’ll see what  percentage of sales (that any platform is reporting) is attributing in the total sales.

So say Facebook ads is reporting 70% of total store sales and has reported this amount for the last 3 months, then you know that when reporting is changing to 40 or 50%, however, your MER is staying the same that this has nothing to do with your ad performance, but with reporting on the platform.

This way you know that your marketing spend is just as efficient, consequently the reporting on the platform is not. It also gives you enough data to know not to reduce your ad spend as this will impact your store sales.

We’ll be seeing a lot more about attribution and reporting in the next while with all the changes coming into place. Therefore, using the Marketing Efficiency Ratio is your best tool to stay sane moving forward into the future of marketing and eCommerce.

Find out how we can boost your sales by applying these brand new metrics by booking a call