![]() Two approaches stand out: the MCI (multiplicative competitive interaction) and the MNL (multinomial logit) models. This decline can be a function of many things: size, market saturation and penetration, the limits to marketing vehicle effectiveness, and so on.įinding the right mathematical expression for that is the challenge. To your point, in marketing it is quite reasonable to assume diminishing returns to scale as expenditures increase and, conversely, kind of unreasonable to assume that vehicle effectiveness can increase linearly without limit. Cooper's frame of reference are elasticities and cross-elasticities - very useful tools for marketing decision-making. One of the best discussions of these issues is in Lee Cooper's book Market Share Analysis, which is available for free download on his UCLA website (, see pages 34++). Positing this as an issue for finding the correct functional model form is a good start. You don't mention them, but chances are good that you have additional marketing factors that could be added to the model. The one possible exception being the personal relationship with another person in rare circumstances(my personal opinion).Your question is a marketing science concern. But even within these areas there will come a peak point in time that afterwards the enjoyment level will start to diminish. I’m sure there are exceptions to this rule…the enjoyment of a relationship can continue to improve over time…the enjoyment of a career or endeavor can continue to improve over time. You name it and think about it…your enjoyment over time diminishes relative to a peak point in whatever it was that you once loved doing. Other examples: Competing and winning in athletic pursuits. I could never get the same level of excitement that accompanied the early days of doing whatever it was. Almost everything I have ever done in my life that seemed incredible at first eventually diminished as I continued to do it. I attribute this to the newness factor and law of diminishing returns. I think that over time a person naturally receives less enjoyment in a given activity. Are you at the point of diminishing returns?Īsking this question can be one method of determining when you have “enough” of something. If you find yourself in a situation where you want more of something, stop and consider if it will actually benefit you. With larger mortgage debt and more to maintain, a bigger home is not always better. But like everything else, there is a point where adding more square feet stops benefiting you. ![]() House Size – A lot of people dream of having a larger home. ![]() But at a certain point, when everything you own is “smart”, it becomes a burden to manage. Technology – Adding some technology products in your life can help improve your productivity, and help simplify by doing more with less. But as you increase the amount of luxury you have, you begin to need luxury in your life (instead of enjoy it), and the cost of your lifestyle inflates. Luxury is great in small quantities in areas that matter to you most. Luxury Items – A little bit of luxury allows you to enjoy some of the finer things in life. Suddenly, the volume of clothing you own begins to become a burden. Examples of Diminishing Returns in Our LifeĬlothing – More clothing means more to choose from! We can be more fashionable! Except at a certain point, your closet becomes cluttered, and you can’t find the shirt you are looking for. Things that seem like adding more will always better, but are actually not. ![]() Then there are some less obvious examples of diminishing returns in our life. There are some obvious examples in everyday life too. In business, we consider the law of diminishing returns when we are doing things like determining how many people to assign to a task, or how much money to invest in a campaign. You’ll begin to receive less return from each incremental investment. When you start to add too much of something, you begin to cause more harm than good. In other words, more is not always better. It’s a simple concept – Adding more input will only provide a positive benefit to a certain point, then additional input will begin to have a negative effect. When studying economics or production theories in business, students will learn about the law of diminishing returns. If something is good, then more of it is even better – right? Wrong!
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