{"componentChunkName":"component---src-templates-blog-post-tsx","path":"/mer-measurement","result":{"pageContext":{"blogPost":{"title":"MER Measurement - Is It Replacing ROAS as the Gold Standard within Paid Media?","slug":"mer-measurement","description":"Measurement has always been a vital aspect of digital marketing - it allows businesses to track the effectiveness of their marketing efforts. By measuring key metrics such as traffic, conversions, and customer lifetime value, brands can get a better understanding of how their marketing efforts are performing. This can help them identify which tactics are working well and which ones may need to be adjusted or abandoned.","content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"ROAS (return on ad spend) has historically been the gold standard in terms of ensuring spend into advertising is profitable, however is there a better metric we could be using?","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Is ROAS too granular?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Historically, ROAS was the go to metric to optimise for. This is great for measuring performance within each individual paid marketing channel, providing a barometer on how activity changes are impacting your performance. If a test of a DR focused campaign results in higher ROAS or a lower CPA (cost per acquisition), you can safely say that the change is an improvement. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"ROAS ultimately gives us a measure for single channel optimisations, yet when looking at our marketing efforts on a whole, we shouldn’t add up the metrics from all the platforms and call it a day. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Paid platforms tend to over-attribute sales to themselves, particularly when you change the conversion attribution model to take into account contributions to the user journey. When every channel gives themselves credit for a touchpoint, you can see how double counting would come into effect when trying to add these together.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The issue with a 'Last Click' model","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"GA (Google Analytics) can provide a consolidated overview of how each channel is contributing to your overall revenue, without double counting revenue. Yet here we face issues too - GA can misrepresent the real value attributed to each channel. Nowadays, the consumer journey involves more than 500+ touch points with a brand before conversion - and GA attributes on a Last Click model. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Last Click attribution assumes that the last channel interaction before purchase was the most crucial. However, this is not always the case:","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Perhaps a new user is a perfect fit for your brand, but hasn’t discovered it yet. Arguably the first touchpoint would be more important here given that the new user would not have ever converted without becoming aware of you. ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For a more sceptical prospective customer, the middle of the journey may be more important - wherein the brand is nurturing and convincing the consumer of the benefits and USP of the product. ","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Each user journey is different and complex in its own way, and Last Click models can be inaccurate in judging single channel performance contributions to the bottom line.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Furthermore - brand awareness style activity may contribute to a purchase without the user even clicking an ad. Facebook is a great example where you can see within the data that ~50% of purchases are tracked back to an ad impression and not a click. Therefore GA would essentially miss all of these users. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Cross Channel Attribution in GA","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In addition to the consumer journey becoming more complex, there are inherent difficulties when it comes to Last Click single channel attribution.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Google Analytics usually severely underreports Facebook channel sales compared to what is seen in the Facebook interface (Google Analytics tends to report between 2% - 10% of sales reported by Facebook) due to a number of factors: ","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Cross Device User Journey: ","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":"Users are required to log into Facebook, which makes it easy for the platform to attribute actions and track performance across different browsers and devices. Google Analytics, on the other hand, installs a single-location cookie to track a user’s activity on a single device. Therefore Google tends to lose visibility on sales made from a Facebook ad if they didn't convert right away, attributing it to a different channel.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Cookies:","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":" if a user doesn't accept cookies, GA can't track their touchpoints as it uses first party cookies to capture data about web visitors, whereas Facebook doesn't require cookies to track clicks on an ad (however, they do for sales and conversion reporting).","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Conversion Tracking: ","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":"If a user clicks your Facebook ad and views your site, leaves your site, then returns the next day and makes a purchase, Facebook attributes that conversion to Facebook. Google does not. Google Analytics tracks only direct Last Click conversions — when a user clicks your Facebook ad, views your site, and converts right then and there without leaving.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Brand Marketing:","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":" We also have to take into consideration that not all activity is short sighted revenue growth - you want to also be building the brand name to create a growth bed for future sales. This type of activity would show dividends down the line rather than immediately, and doesn’t necessarily mean the channel where the brand advertising is being hosted will see that revenue increase. ","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Therefore running social media ads tends to result in an overall uplift in sales seen in GA, but GA will tend to attribute sales that were driven by social to other channels.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Introducing MER","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Given that it’s harder to determine single channel contribution to overall revenue growth, we need to look at things from a more holistic perspective. This is where Marketing Efficiency Ratio (MER) comes into play. This is ","marks":[],"data":{}},{"nodeType":"text","value":"total sales revenue divided by total marketing spend. ","marks":[{"type":"bold"}],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Here we have a metric that encompasses the multi-touch point user journey and looks at how all marketing spend is influencing total site revenue. There are, however, some considerations for MER:","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Time period: ","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":"Make sure you’re calculating the revenue and spend across the same time period to ensure the integrity of the KPI.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"International: ","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":"Focus on calculating by region as you want to ensure you’re tracking the effect of marketing spend in areas.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Additional Costs: ","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":"This KPI can also help you track the profitability of running your ecommerce site if you include the cost of running the online store (along with other costs) alongside the paid spend.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In Action:","marks":[{"type":"bold"}],"data":{}},{"nodeType":"text","value":" We recommend graphing out this metric over time, with a second spend and revenue graph for context. ","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"MER in context of new customer acquisition","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"You want to ensure that you find the sweet spot between pushing customer acquisition and your MER ratio:","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A common MER ratio would be 5:1, or 20% CoS for brands looking to scale using performance marketing.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Typically a CoS below 5% will render an insignificant result to your bottom line and it will be difficult to fully measure the value of activity.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In contrast, we’ve seen that going up to 30-40% CoS can result in a 0.9 correlation between marketing spend and brand demand!","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Pushing new customer acquisition too hard can lead to a deterioration in MER. The main benefit behind MER is the ability to increase marketing investment and measure the overall impact to top-line revenue. If you have periods of consistent spend and revenue, it should be quite simple to measure the effectiveness of additional ad spend. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"You can then build out diminishing returns models and assess your incremental (or marginal) MER. So for every extra £1 spent, how much extra will the website make? You can also do this for new customers e.g. we know our customer acquisition cost is XX, to drive 20% more new customers, the cost for those new customers would be XX. You can do this analysis quite simply through regression.  ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"In summary","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When optimising and running tests within each channel, ROAS is a useful measurement tool. Nevertheless, it has shortcomings when assessing the overall impact of paid activity on your bottom line.","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Typically, Google Analytics is used to view the paid journey from a holistic viewpoint. It ensures we’re not double counting revenue across channels when consolidating data. Yet again, here we’re faced with a short-sighted analysis tool, as sales are attributed to channels on a Last Click basis - not taking into account the full customer journey. ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If this were the ultimate analysis tool, it would indicate, for example, that Facebook is not worth advertising on; Google Analytics typically reports 2% - 10% of platform sales.","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This is where we turn to MER as the preferred analysis metric: it provides a more holistic view of how marketing spend is impacting revenue. At a healthy MER ratio of 20% to 25%, you can safely push new customer acquisition and launch brand awareness campaigns, without becoming disheartened by the channel housing such activity’s ROAS dropping off. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you have any questions about marketing attribution and understanding the performance of your paid media campaigns, then ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://vervaunt.com/contact/"},"content":[{"nodeType":"text","value":"get in touch","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]}]},"postType":["Paid Media"],"publishedOn":"2023-04-11T09:24:17.075Z","mainImage":{"name":"blog post 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V 2020 Logo","file":{"url":"//images.ctfassets.net/rsv5jnhanwkh/6s4xFi28KVaEJy9klXGCLM/bb1f8bb11d05c80bc665cb04606be83c/icon_vervaunt_2020_white_green.svg","details":{"size":1899,"image":{"width":229,"height":311}},"fileName":"icon_vervaunt_2020_white_green.svg","contentType":"image/svg+xml"}}},"twitterLink":"https://twitter.com/vervaunt","instagramLink":"https://instagram.com/vervaunt","linkedinLink":"https://www.linkedin.com/company/crimson-fox","copyrightText":"© 2021 Vervaunt. 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