Why you need to pivot to MER (aka blended ROAS)
Recently, a respected (and hilarious) media buyer told me this in response to my question "how do you explain to a client why switching to MER (marketing efficiency ratio) /Blended ROAS is necessary? “
Hey client — look at how FB is reporting 1 conversion and Google Analytics is reporting 5. The data is a mess. You can't report on-platform 100%. It's a good guide for trends. But your guiding light should be MER/Blended. Or GTFO.
In a second example, another junior media buyer came to me last week and said “my client says we need a 4X ROAS on Facebook and we’re not getting it, what do I do?”
My response: explain blended ROAS (Total revenue / total money spent on advertising) and see what they say. If they still don’t get it do the following:
Explain it again.
If they still don’t get it, kindly fire them, because no one can succeed in that environment.
Quick recap:
For reference, a good MER is usually between 2-4X, depending on the AOV and a few other factors. While there are still metrics in Facebook that we can use as information, we know that it isn't 100% correct, which makes it unreliable to optimize and scale off of.
(The calculation for MER is: Revenue / marketing cost) x 100)
So what is all this discussion of MER and Blended? Why does it matter?
It matters because if you’re relying solely on Facebook’s reported data, some of which is real, some of which is modeled and some that’s delayed - you are massively hurting your chances of succeeding in today’s environment on paid social.
Essentially, you’re looking at the relationship between money spent on ads and the revenue you have.
As Alex Afterman of 11:11 digital says he tells clients that “MER is your bottom line metric.”
Tony Christiansen says it well too with “conversions often overlap too for client's on various advertising channels, so MER/blended ROAS can be better to look at overall profitability.”
And Carly Stringer says she tells clients “we need to use MER for overall guidance as to whether our efforts are working and the in platform data to try and help guide as as to what specific campaigns and creatives are working. Most of mine get it and they know as soon as spend is lowered they notice a big shift - bigger than what Facebook tells us.
Carly continues: “At the end of the day, it all boils down to the same thing - what's your revenue and what are your costs and what can you afford in marketing spend. I don't think it matters what calculation you use if you and your clients are on the same page in terms of how you do it and what your targets are.”
Eric Allred of El Dorado Digital says, “Personally, I think Blended ROAS isn’t as sufficient of a definition as MER. Because MER incorporates referral, organic, and other non-paid efforts it’s a better indicator of Average Cost of Sale versus ad spend. We typically use a Paid MER Total New Customer Sales / Ad Spend and then MER which might be a better signal for our email and other retention efforts are. As far as incorporating all marketing related expenses (incl. agency fees) that sounds like the true definition of Customer Acquisition Cost.”
While looking at platform metrics is important, it’s important to understand that only looking at in-platform advertising data pigeon-holes advertisers into understanding and seeing only a part of the full advertising story. At the end of the day, humans aren’t machines, and don’t always do exactly what we as data-hungry advertisers would like: they don’t purchase immediately from seeing an ad for the first time, they don’t always opt-in to iOS14 tracking, they don’t always purchase on the same device they saw the ad on, and they certainly don’t always convert after a single marketing touchpoint.
Why are we rambling about MER?
Jess Bachman of Fireteam started a Slack thread in our membership, which got us all thinking, responding, and realizing that MER isn’t as straightforward as it should be.
The bottom line? Reporting will never be an exact science, but MER/blended ROAS helps us get a little closer.
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