Knowing your acquisition marketing efficiency ratio (aMER) will allow you to find the exact point where you need to stop spending on advertising - or where you should be throttling.

Marketing efficiency ratio (MER) is used to measure all ad spend against all revenue in - fundamentally, how much did we make from how much we spent?

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Total Revenue ÷ Total Ad Spend = Marketing Efficiency Ratio

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If you spent £5k and made £15k you’d have a MER of 3. The bigger the MER the more you should throttle your ad spend.

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Whilst this is helpful to understand, revenue from retained customers shouldn’t impact your ad spend massively. So it’s important to separate new customers from retained ones.

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Ensuring every pound you spend on acquisition is profitable is essential if you’re looking to scale your brand quickly and confidently.

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Acquisition marketing efficiency is calculated by dividing new customer revenue by total ad spend.

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New Customer Revenue ÷ Total Ad Spend = aMER

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This gives us the blended aMER, which doesn’t answer the question - at what point does my next pound spent on ads become unprofitable.

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To go deeper it’s important to understand your Marginal aMER.

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Marginal acquired revenue ÷ Marginal ad spend = Marginal aMER

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After working this out, plug in your breakeven point at gross margins.

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At 70% gross margins, this would be a 1.5 aMER and a blended aMER of 2.0.

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Using this methodology will allow you to set ideal MER targets and work backwards.

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In 2024, it's so important that you remain profitable when acquiring new customers. You need to take into account all of your unit economics to find your true margins and then separate new customer revenue from retained customer revenue.

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Need help finding your aMER or your breakeven point? Get in touch today.

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