--- title: "Marketing efficiency ratio vs ROAS, POAS, ROI and nCAC | Product Metrics" description: "Marketing efficiency ratio (MER) is total revenue ÷ total marketing spend. See how it differs from ROAS, POAS, ROI and nCAC, and which to steer by." canonical: "https://www.productmetrics.io/blog/marketing-efficiency-ratio-vs-roas" pageType: article language: en publisher: "Product Metrics" author: "Berend Vrakking" datePublished: 2026-10-07 dateModified: 2026-10-08 image: "https://www.productmetrics.io/og/blog/marketing-efficiency-ratio-vs-roas.png" --- > Content index: https://www.productmetrics.io/llms.txt # Marketing efficiency ratio vs ROAS, POAS, ROI and nCAC ## Key takeaways - ROAS is revenue per euro of ads, MER revenue per euro of all marketing, POAS profit per euro of ads, ROI profit after ad cost, nCAC new-customer cost. - ROAS, POAS and nCAC can be read per product. MER cannot, because it divides all shop revenue by all marketing spend, including orders no product's ads caused. - With profit counted before ad spend, ROI = POAS − 1, so a POAS of 1.0 is an ROI of 0%. - A good MER depends on margin: break-even MER is 1 ÷ your average contribution margin, so a 25% margin breaks even at 4.0. Marketing efficiency ratio (MER), ROAS, POAS, ROI and nCAC all divide something by what you spent, so they get mixed up. They answer different questions, and using one for another's job is how a shop ends up pushing a number up while profit stays flat. The ROAS and POAS parts build on [break-even ROAS per product](https://www.productmetrics.io/blog/break-even-roas-per-product), and every example uses round numbers you can check by hand. ## Five metrics, five questions Each answers its question at one or more levels, and only MER cannot go below the account. | Metric | Formula | Question it answers | Level | |---|---|---|---| | ROAS | Revenue ÷ ad spend | How much revenue did each euro of ads bring in? | Product, campaign, account | | MER | Total revenue ÷ total marketing spend | How much revenue does all my marketing support? | Account only | | POAS | Profit before ad spend ÷ ad spend | Did the sale pay for the product, the order and the ad? | Product, campaign, account | | ROI | (Profit − ad spend) ÷ ad spend | What did the ads earn after cost, as a share of cost? | Product, campaign, account | | nCAC | Ad spend ÷ new customers | What did one new customer cost? | Product, campaign, account | MER can't be read per product because its top line is every order the shop took, including orders from email, organic search and returning customers that no product's ads caused. Dividing that by one product's spend would credit the product with revenue it didn't earn. The other four need only the spend and the orders linked to it, so they work at any level. ## What is MER? Short for marketing efficiency ratio, MER divides total revenue by total marketing spend. It answers "how much revenue does each euro of marketing support?" with one division: | | Spend | Revenue | Ratio | |---|---|---|---| | Shopping campaigns | €6,000 | €24,000 credited | ROAS 4 | | Social campaigns | €4,000 | €6,000 credited | ROAS 1.5 | | Whole shop | €10,000 marketing | €50,000 all orders | MER 5.0 | Illustrative data. The two channels are credited with €30,000 between them, a combined ROAS of 3 on the €10,000 of ad spend. The shop took €50,000 in total, because €20,000 of orders came from email, organic search, direct visits and returning customers that neither channel is credited with. Divide the full €50,000 by the €10,000 spent and you get a MER of 5.0. The [MER calculator](https://www.productmetrics.io/mer-calculator) does the same division with your own totals and adds nCAC and marketing ROI. **Figure: Two channels' ROAS against the whole shop's MER, from the same €10,000.** The first two bars are each channel's ROAS, credited revenue ÷ its spend; the third is the MER, all shop revenue ÷ all €10,000. Shopping reads 4 and Social 1.5, but the MER of 5 can't show that one channel earns far less than the other. | Channel or whole shop | Revenue per €1 spent (ROAS or MER) | | --- | --- | | Shopping campaigns (ROAS) | 4 | | Social campaigns (ROAS) | 1.5 | | Whole shop (MER) | 5 | _Source: Illustrative data. Calculated as revenue ÷ spend: €24,000 ÷ €6,000, €6,000 ÷ €4,000 and €50,000 ÷ €10,000_ MER is useful because it uses the shop's own revenue, so it doesn't change when two platforms argue over who deserves the credit for an order. It is also the number to watch when you change total spend. What it hides is the split: here one channel returns €4.00 per euro and the other €1.50, and a MER of 5.0 looks healthy either way. To decide which channel or product to fund, go down a level. > **Sidenote:** Definitions vary. In this post blended ROAS means total revenue ÷ total ad spend across all channels. MER divides by total marketing spend, which can include costs such as agency fees, so the two match when ad spend is all you count, as in the table above. Some tools add up each platform's reported revenue instead, so check the definition before you compare numbers. ## What is a good MER? Your margin sets the bar, and another shop's average says little about it. MER counts revenue before costs, so it hides margin in the same way ROAS does, and the line to beat is your break-even MER. Break-even MER is 1 ÷ your average contribution margin. At a 25% margin, every €1.00 of revenue leaves €0.25 after the product and the order, so €1.00 of marketing needs €4.00 of revenue just to break even. Below that MER the marketing costs more than the profit it supports. Fixed costs and the profit you want come on top. **Figure: Which MER does a shop need to break even, at each average margin?.** Each bar is the MER at which profit after variable costs just pays for the marketing: 1 ÷ average margin. A shop with a 25% average margin breaks even at a MER of 4, and at 50% it breaks even at 2. | Average contribution margin | MER needed to break even | | --- | --- | | 20% | 5 | | 25% | 4 | | 30% | 3.3 | | 50% | 2 | _Source: Calculated as 1 ÷ average contribution margin_ This uses a single average margin across all revenue, and that average moves when your product mix changes. A MER that holds steady while the mix drifts towards thin-margin products is getting worse, and the MER itself will not tell you. ## ROI is POAS minus 1 POAS is profit counted before ad spend, divided by ad spend, and ROI is what is left after the ad spend, divided by the same ad spend. So with profit counted before ad spend, **ROI = (profit − ad spend) ÷ ad spend = POAS − 1**. A POAS of 1.0 is therefore an ROI of 0%, and both mean break-even. Put €1,000 of ad spend against €4,000 of revenue, a ROAS of 4, at three margins: | Contribution margin | Profit before ad spend | POAS | ROI | |---|---|---|---| | 20% | €800 | 0.8 | −20% | | 30% | €1,200 | 1.2 | 20% | | 50% | €2,000 | 2.0 | 100% | Illustrative data. **Figure: Every margin gets a ROAS of 4: what POAS does each one earn?.** Each bar is the POAS a ROAS of 4 gives at that margin. The dashed line at 1 is break-even (ROI 0%). Green is profit beyond it, red the shortfall: a 20% margin gives a POAS of 0.8 (ROI −20%), a 50% margin gives 2 (ROI 100%). | Contribution margin | POAS: profit ÷ ad spend | | --- | --- | | 20% | 0.8 | | 30% | 1.2 | | 50% | 2.0 | Reference line: Break-even: POAS 1, ROI 0% (1.0). _Source: Calculated as ROAS × margin, at a ROAS of 4_ All three rows have the same ROAS. The margin turns it from a loss into a doubling of the ad spend, which is why [what is a good ROAS](https://www.productmetrics.io/blog/what-is-a-good-roas) says a good ROAS depends on margin, and why [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas) shows POAS as ROAS × contribution margin. Plotted across ROAS, each margin crosses zero at a different point (every point is ROAS × margin − 1): **Figure: At which ROAS does ROI turn positive? ROI in %, at three margins.** Each line is the ROI at one margin as ROAS rises. The dashed line is break-even, ROI 0% (POAS 1). A 20% margin reaches it at a ROAS of 5, a 30% margin at 3.33 and a 50% margin at 2. | ROAS (revenue ÷ ad spend) | ROI at a 20% margin | ROI at a 30% margin | ROI at a 50% margin | | --- | --- | --- | --- | | 2 | -60% | -40% | 0% | | 3 | -40% | -10% | 50% | | 4 | -20% | 20% | 100% | | 5 | 0% | 50% | 150% | | 6 | 20% | 80% | 200% | Reference line: Break-even: ROI 0%, POAS 1 (0%). _Source: Calculated as ROAS × margin − 1, which is POAS − 1_ If you need the break-even per product, the [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) gives it from a margin. The glossary has short definitions of [ROAS](https://www.productmetrics.io/glossary/roas) and [marketing ROI](https://www.productmetrics.io/glossary/marketing-roi), including the common mistake of calling revenue ÷ ad spend ROI. ## nCAC prices a new customer New customer acquisition cost (nCAC) is ad spend divided by the new customers it brought. It differs from ROAS because it counts people instead of revenue, and from cost per order because returning customers are left out. Google Ads Help defines customer acquisition cost the same way: the ad spend allocated to new customers divided by the unique new customers acquired through a campaign. **Figure: €10,000 of ads: what does each order and each new customer cost, in €?.** Each bar is the €10,000 of ad spend divided by orders or by new customers. Per order it is €50.00, per new customer €83.33, because 80 of the 200 orders came from returning customers. | What the ad spend is divided by | Ad spend per order or new customer | | --- | --- | | Cost per order | €50.00 | | Cost per new customer (nCAC) | €83.33 | _Source: Illustrative data. Calculated as €10,000 ÷ 200 orders and €10,000 ÷ 120 new customers_ In the example, €10,000 of spend with 200 orders looks like €50.00 an order, but 80 of those orders came from returning customers, so each of the 120 new customers cost €83.33. [Customer acquisition cost for ecommerce](https://www.productmetrics.io/blog/customer-acquisition-cost-formula) shows how to work out the most you can pay for that first order, and the glossary defines [CAC](https://www.productmetrics.io/glossary/cac). LTV:CAC compares what a customer has brought in over a chosen window with what the first order cost, and it needs the lifetime value counted in profit. [LTV:CAC ratio for ecommerce](https://www.productmetrics.io/blog/ltv-cac-ratio-ecommerce) explains how to calculate it from observed orders. nCAC is also one of the metrics you can read per product. Product Metrics shows nCAC per product and as an average. The average is ad spend divided by new customers, who have their own conversion action in Google Ads, and it hides which [products](https://www.productmetrics.io/product-segmentation) bring new customers cheaply and which don't. ## Match the metric to the decision Start from the decision and work down to the number: **Choose the metric for a decision in four steps** 1. **Start from the question.** Is the whole business funding its marketing (MER), is this campaign or product paying for its ads (ROAS or POAS), what did the ads earn after cost (ROI), or is a new customer worth the first order (nCAC)? 2. **Pick the level.** Decisions about a product or a campaign need ROAS, POAS or nCAC. MER can only judge the account, so use it for budget and total spend, not for choosing products. 3. **Check the data behind it.** POAS and ROI need a margin per product. nCAC needs every order marked new or returning. All of them need the orders to have been recorded. 4. **Compare with break-even, not an average.** Read ROAS against 1 ÷ margin, POAS against 1.0, ROI against 0% and MER against 1 ÷ your average margin. Another shop's number says little about yours. In practice, MER sets the total budget, ROAS or POAS decides how it is split between campaigns and products, and nCAC tells you whether first orders pay back. Product Metrics works at that product level: [Product Segmentation](https://www.productmetrics.io/product-segmentation) segments products by their ad clicks and their return, where return is ROAS or POAS, so the POAS-above-1.0 check runs for every product. It works on ROAS straight away until margins are connected. ## Every metric depends on recorded orders Each of them counts only the orders that the ad platform and the shop recorded. If an order never reaches the ad platform, ROAS, POAS, ROI and nCAC all look worse than the ads really did. Shop revenue still holds the order, so MER is less exposed, but the split between channels and products is not. nCAC has an extra requirement: every order must be marked new or returning. Google Ads can detect it automatically or take it from the conversion tag, according to Google Ads Help, and a missing flag pushes new customers into the returning count. To see how much your own setup loses, run the [ad blocker conversion tracking test](https://www.productmetrics.io/ad-blocker-conversion-tracking) in your browser. [Full Signal Tracking](https://www.productmetrics.io/server-side-tracking) runs on a unique endpoint on your own domain and gets through every adblocker, so more of your orders reach Google Ads. None of these metrics decides which click earned an order. Whether the ads caused the orders at all is a separate question, which an [incrementality test](https://www.productmetrics.io/blog/incrementality-testing) answers with a holdout or geo split. ## Two checks on your own numbers The [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) gives the starting number for each product, and [Product Segmentation](https://www.productmetrics.io/product-segmentation) runs the same check across every product. First, work out your break-even MER from your average margin and compare it with your current MER. Then, for the products that take most of your spend, multiply ROAS by margin and check that POAS is above 1.0. ## Frequently asked questions ### What is the difference between MER and ROAS? ROAS divides the revenue an ad platform credits to its ads by the spend on those ads, so it works per campaign or product. MER divides all shop revenue by all marketing spend, so it covers the whole business and shows nothing about which campaign or product earned it. ### What is a good MER? There is no universal number. A MER is good when it is above your break-even MER, which is 1 ÷ your average contribution margin. At a 25% margin that is 4.0, so a MER of 5.0 leaves €0.25 of profit before fixed costs for every €1.00 of marketing spend. Fixed costs and the profit you want decide how far above it you need to be. ### Is ROAS the same as ROI? No. ROAS is revenue divided by ad spend and ignores what the products cost. ROI is profit after ad spend divided by ad spend. With profit counted before ad spend, ROI equals POAS minus 1, so a 4 ROAS can be an ROI of −20% at a 20% margin and 100% at a 50% margin. ### What is blended ROAS? Blended ROAS is total revenue divided by total ad spend across all channels. It is close to MER, which divides by total marketing spend, including costs such as agency fees and software, and the two are equal when ad spend is all you count. Some tools instead add up the revenue each platform reports and divide by ad spend, so check which definition a report uses before comparing numbers. --- Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-08. HTML version: https://www.productmetrics.io/blog/marketing-efficiency-ratio-vs-roas