The Law of Diminishing Marginal Returns applies to economics.

But it’s just as relevant in normal life.

Basically, you get the most value from anything at the beginning.

The more you add, the less value you get from each unit.

First you had nothing.

You add one unit: you get 100% increase.

You add another unit: you only get a 50% increase.

You add another unit: now you only get a 25% increase.

And so on.

Every additional unit adds less than the previous one.

That’s why it’s called the law of Diminishing Marginal Returns.

That’s what happens in most areas of life.

Take drinking: the first pint is always the best, the second pint is good but not quite so good, by the fifth pint you’re not really enjoying it.

Or money: the first million is fantastic, the tenth million: good but not quite so good, the fortieth million: no big deal.

So it is with most things: food, cars, houses, sex, etc.

The first is the big bang: the change from nothing to something.

After that, the more you have, the less difference each one makes.

Like everything else, that’s how it works with advertising.

First, manufacturers had no way to reach consumers.

Then they had advertising, which was fantastic because it was 100% improvement on nothing.

Then they had marketing, which was a 50% improvement on that.

Then they had research, which was a 25% improvement.

Then new media gurus: which was a 12% improvement.

Then ‘content curators’: a 6% improvement.

Then ‘innovation evangelists’: a 3% improvement.

Then ‘digital warriors’, a 1% improvement.  

And so on, and so on.

The problem is: The Law of Diminishing Marginal Returns.

For each new unit you add, the smaller the return you get.

But each new unit still costs as much as the original unit.

So the cost of all those tiny marginal increases far outweighs the cost of the people that did the job in the first place.

Like an upside-down pyramid.

The client is paying for an awful lot of people to sit on the original horse, and wondering why it’s hardly moving.

And there’s another problem.

All those extra people must justify their salary.

By ‘honing’ an idea, not by ‘having’ an idea.

And so the marginal cost is increasing as the marginal return diminishes.

So where can you save money?

You get rid of some of those diminishing marginal returns, right?

Well no, that’s not how it works in advertising.

Those new additions are fashionable and so can’t be touched.

Instead, you economise on the people who were actually doing the work in the first place.

Like a football team economising on players so they can spend more money on sports psychologists and liaison officers.

They won’t win as many games but they’ll have better PR.

With all the accountants we’ve got running agencies, you’d think they would have spotted it.

But what do I know, I’m only a creative?