Diminishing Returns (ads)

Definition

Diminishing returns means each additional dollar of spend produces less incremental revenue than the previous dollar, often due to audience saturation and creative fatigue.

How to use it

• Expect marginal ROAS to decline as you scale spend.
• Segment curves by channel/audience; saturation happens at different levels.

Common mistakes

• Assuming performance scales linearly with spend.
• Treating short-term volatility as a structural saturation signal (insufficient data).

Why this matters

This term matters because it affects how you interpret performance and make budget decisions. If you use inconsistent definitions or windows, ROAS/CPA can look "better" while profit gets worse.

Practical checklist

• Write a 1-line definition for "Diminishing Returns (ads)" that your team will use consistently.
• Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
• Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
• Use a calculator that references this term (e.g., Marginal ROAS Calculator) to sanity-check assumptions.
• Read the related guide (e.g., Marginal ROAS: how to scale ads with diminishing returns) for context and common pitfalls.

Where to use this on MetricKit