The Doom of Diminishing Returns

The basic instinct is to go into spend reduction to survive, but is it really the best strategy?

By Katia Barakat

About 3 min read . Sep 19, 2019Strategy & Consultancy

Have you been in the scenario where you’re working on a new marketing strategy, perspectives are original, ideas are fresh and lots of different and exciting things are on the horizon? And you can’t wait to launch your first campaign and deploy all the amazing content that has been created?

And then, it gets even better! You’re live and phone calls are pouring in, comments are flaring up online, people are sharing your content…Things are looking great!

Fast forward a few weeks or months…You’re feeling a little unimpressed. You’re not seeing the same results anymore and you’re feeling, it’s ok to say it... underwhelmed.

What happened?

The most probable answer: The law of diminishing returns happened.

Yes, we’re tying ROI with this economics concept.

The law of diminishing returns is an economic principle stating that as an investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant... This is the law of diminishing returns.

How does this apply to marketing?

Let's give some very simple examples that can help us relate.

If you show up at a party looking very glam, the first time people will ooh and aah and pay you lots of compliments. The second time you show to a party looking very glam, you’ll get some oohs and aahs, but slightly less than the first time. The third time even less…until people just expect you to show up looking very glam. Your effort to look glamorous has become a constant and other variables have become a constant too (the same people showing up to the same parties, etc.).

In marketing, if were doing more of the same, after time, returns will normalize (or even worse, diminish). Moreover, adding to your budget will not solve the problem if all else remains the same. To be able to continue getting an increase in returns, there has to be a shift: in widening the audience net, in choosing alternative channels, in producing new/fresh content, etc.

Which brings us back to something we preach a lot: in marketing, especially with today’s fast paced world, one cannot sit back and reap the benefits of their marketing efforts.

Being dynamic, responsive and innovative are the ways to keep your marketing efforts positive and yielding returns.

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