Are You Spending Too Much?

Are you spending too much on online advertising? Find out how to answer this here. In this post I wrote on the Cardinal Path blog, I explain how diminishing returns can be used to optimize your spending budget.

As you are probably aware, every dollar spent on advertising does not generate equal return. When looking at how media spend performs within a channel  (paid search for example), there is a point at which a campaign starts to bring in less revenue than what was spent. This is known as the point of diminishing returns.

In the beginning, the money you spend on advertising for a certain channel will yield a  high return, since without it, there would have been no revenue generated from the channel at all. You usually have to spend a sufficient amount in order to maximize your gains from entering a particular channel. However, as you start to spend more and more, you will see these high returns begin to taper off at a certain point. Eventually, you will be spending $1, while realizing less than $1 in revenue. It is at this point where  you have hit the point of diminishing returns. Now would be the time to consider scaling back your investment in this channel…

Learn more here.