Online advertising can be a costly exercise for businesses of all sizes. One of the best ways to measure the success of your advertising efforts is by calculating your Marketing Efficiency Ratio (MER). This metric can help you determine the value of your marketing campaigns and make more informed business decisions. In this article, we will guide you through the process of calculating MER in Google Ads.
Understanding Marketing Efficiency Ratio (MER)
Marketing Efficiency Ratio is a metric that measures the cost-effectiveness of a marketing campaign. MER takes into account the revenue generated by a campaign and the cost incurred in running the campaign. The goal of any campaign is to generate maximum revenue while minimizing the cost incurred. MER helps businesses to determine their return on investment (ROI) and plan more effective campaigns.
What is Marketing Efficiency Ratio (MER)?
MER is a simple calculation that compares the amount spent on a marketing campaign to the revenue it generated. The higher the MER, the more profitable the campaign was. The formula for calculating MER is:
MER = Total Revenue / Total Cost
Why is MER important for your Google Ads campaigns?
Google Ads is a popular advertising platform used by businesses worldwide. It is a powerful tool for reaching a target audience and generating leads. However, advertising on Google can be expensive and determining the value of your campaigns can be challenging. This is where MER comes in. By calculating MER, you can measure the success of your Google Ads campaigns, optimize your campaigns to generate better ROI, and make more informed business decisions.
Setting up Google Ads for MER calculation
Before you start calculating MER in Google Ads, you need to set up your Google Analytics and Google Ads accounts. Here are the steps to follow:
Linking Google Analytics to Google Ads
The first step in setting up Google Ads for MER calculation is to link your Google Analytics account to your Google Ads account. This will allow you to track the performance of your campaigns and measure the success of your marketing efforts. To link the two accounts, follow these steps:
- Log in to your Google Ads account
- Click on the "Tools & Settings" icon and select "Linked accounts"
- Click on "Google Analytics" and then "Set up link"
- Select the Google Analytics property you want to link to your Google Ads account
- Click "Link accounts"
Setting up conversion tracking in Google Ads
Conversion tracking allows you to measure the success of your Google Ads campaigns by tracking the actions of your users. Conversion tracking is particularly useful for e-commerce businesses that want to track sales made on their website. Here are the steps to set up conversion tracking:
- Log in to your Google Ads account
- Click on the "Tools & Settings" icon and select "Conversions"
- Click on the plus button to create a new conversion action
- Define your conversion action by selecting a category and setting up the conversion parameters
- Add the conversion tag to your website to track conversions
Defining your marketing goals and KPIs
Before you can calculate your MER, you need to define your marketing goals and key performance indicators (KPIs). This will help you determine which metrics to track and measure the success of your campaigns effectively. Here are some common marketing goals and KPIs:
- Goal: Increase website traffic. KPI: Website visits, bounce rate, time on site.
- Goal: Generate leads. KPI: Lead form submissions, phone calls, email sign-ups.
- Goal: Increase sales. KPI: Revenue generated, conversion rate, average order value.
Calculating Marketing Efficiency Ratio (MER)
Now that you have set up your Google Ads account and defined your marketing goals and KPIs, it's time to calculate your MER. Here's how:
Identifying the key components of MER
The two main components of MER are the total revenue generated and the total cost incurred. To calculate your MER, you need to first identify these two components.
- Total Revenue Generated: This is the total revenue generated by your campaigns. You can find this information in your Google Ads account or your Google Analytics account.
- Total Cost Incurred: This includes all the costs associated with running your campaigns. This can include advertising costs, campaign management costs, and any other costs associated with your campaigns.
Step-by-step guide to calculating MER in Google Ads
Once you have identified the two components of MER, you can calculate your MER using the following steps:
- Log in to your Google Ads account
- Click on "Campaigns" and select the campaign you want to measure
- Click on the "Segments" dropdown and select "Time"
- Select the time period you want to analyze
- Calculate the total revenue generated during that period. You can use conversion tracking to track sales made on your website or use Google Analytics to track other types of conversions.
- Calculate the total cost incurred during that period. This includes your total advertising spend as well as any other costs associated with your campaigns.
- Plug in the numbers into the MER formula: Total Revenue / Total Cost
Interpreting your MER results
The value you get after calculating your MER will be a percentage. If your percentage is higher than 100%, it means your campaigns are profitable. If it's below 100%, it means you're spending more money on advertising than you're making in revenue. A MER of 200% means that for every dollar spent on advertising, you're generating two dollars in revenue.
Optimizing your Google Ads campaigns for better MER
Once you have calculated your MER, you can take steps to optimize your Google Ads campaigns for better ROI. Here are some tips:
Adjusting your bidding strategy
Your bidding strategy can have a significant impact on your MER. If you're using automatic bidding, consider switching to manual bidding and setting bids for individual keywords and ad groups. This will give you more control over your campaigns and help you optimize your bidding for better performance.
Refining your target audience and keywords
Refining your target audience and keywords can help you reach the right people with your ads. Use demographic targeting, location targeting, and keyword targeting to narrow down your audience and show your ads to people who are more likely to convert. This will help you generate more revenue per ad dollar spent, improving your MER.
Improving ad creatives and landing pages
Your ad creatives and landing pages can make or break your campaigns. Improving your ad copy, images, and calls-to-action can increase the click-through rate of your ads, generating more revenue per click. Additionally, optimizing your landing pages for conversions can help you improve your conversion rate, generating more revenue per sale.
Calculating your Marketing Efficiency Ratio (MER) is an essential step in measuring the success of your Google Ads campaigns. By following the steps outlined in this article, you can set up your Google Ads account for MER calculation, define your marketing goals and KPIs, and calculate your MER to make more informed business decisions. Remember to optimize your campaigns continuously for better ROI and keep calculating your MER to track your progress.