Every marketing textbook teaches the same gospel: spend more, get diminishing returns. Double your budget, expect less than double the results. It’s marketing law, carved in stone since Economics 101.
Except it’s wrong. Dead wrong. And this myth is probably costing you millions in missed growth opportunities.
The economics class oversimplification
Marketing professors love clean theories. Supply and demand curves. Predictable diminishing returns. Tidy graphs where efficiency always decreases as spending increases.
But real marketing doesn’t follow textbook rules. Your campaigns don’t exist in isolation. Seasonality shifts demand. Creative refreshes reset performance. Audience saturation varies by platform. External events change market dynamics overnight.
The assumption that returns always diminish treats marketing like a vending machine—put in more money, get proportionally less candy. But marketing is more like compound interest, where the right investment at the right time can create exponential returns.
The seventh law of marketing
The efficiency of your marketing spend might saturate or increase depending on seasonality, holidays, creative, content, the amount spent, and other factors. The assumption that returns always diminish is false.
Sometimes spending more on a campaign makes each dollar work harder, not weaker. The key is knowing when you’re hitting diminishing returns versus when you’re approaching a performance breakthrough.
The saturation sweet spots everyone misses
Most marketers cut spend the moment they see any efficiency drop. ROAS goes from 5x to 4.5x, and they panic. But what they don’t realize is that many campaigns have multiple efficiency peaks.
We see this constantly with our clients. A Facebook campaign might saturate at $10K per month, showing diminishing returns as you approach that threshold. But push through to $15K, and suddenly you hit a new audience segment with different saturation curves. Your efficiency rebounds, sometimes stronger than before.
The brands missing out assume that first dip means the campaign is done. The brands winning push through temporary inefficiency to find the next performance tier.
The creative refresh reset
Here’s where diminishing returns theory completely breaks down: creative refreshes can reset your entire saturation curve. Your campaign might be saturated with Creative Set A, but introduce Creative Set B and suddenly you’re back to peak efficiency.
Traditional economics doesn’t account for this because products don’t fundamentally change their appeal every few weeks. But marketing creative does. New angles, fresh messaging, and updated visuals can make the same audience respond like they’ve never seen your brand before.
Savvy marketers don’t just track spend versus performance—they track creative fatigue, audience overlap, and message saturation. They know when diminishing returns are about audience limits versus creative staleness.
The seasonal efficiency multipliers
Remember Law #4? Seasonal efficiency changes everything about saturation curves. Your campaign might hit diminishing returns in July but have massive headroom in November. The same budget that saturates in March might be wildly under-optimized in December.
We’ve seen brands double their Q4 spend and achieve better efficiency than their baseline periods. The increased competition raises costs, but the heightened purchase intent more than compensates. Their “saturated” campaigns suddenly have room to scale.
The mistake is applying static saturation assumptions to dynamic seasonal markets.
The platform algorithm evolution
Facebook, Google, and TikTok algorithms get smarter as you feed them more data. Sometimes increasing spend provides better machine learning inputs, leading to improved targeting and higher efficiency. Your first $5K teaches the algorithm basics. Your next $10K might unlock optimization insights that reduce your cost per conversion.
This creates the opposite of diminishing returns—increasing spend can actually improve performance until you hit true audience limits. But most marketers never discover this because they stop scaling at the first sign of efficiency decline.
The competition reality check
While you’re carefully managing diminishing returns, your competition might be flooding the market during your pullback periods. They’re capturing market share, building audience pools, and establishing dominance in channels you’ve abandoned due to “saturation.”
Some of the best growth opportunities happen when competitors retreat from channels they assume are saturated. Your willingness to push through temporary inefficiency can create sustainable competitive advantages.
The strategic gap that’s costing you millions
While you’re spreading your budget evenly across the calendar like it’s a democracy, your competitors who understand seasonality are concentrating firepower when it matters most.
They’re reducing spend during low-efficiency periods and going all-in during high-conversion seasons. They’re adjusting their ROAS targets based on customer value, not arbitrary standards.
Some brands walk into Q4 with budget strategies that account for higher costs but target higher returns. They spend less when efficiency is low and more when efficiency is high. The result? They capture disproportionate market share during peak seasons while their competitors burn budget fighting seasonal headwinds.
The cruel irony? Most brands have this seasonal data sitting in their analytics right now. They just don’t know how to use it strategically.
The saturation intelligence advantage
This is why Prescient’s saturation curves don’t assume linear diminishing returns. We map the actual relationship between spend and performance for each campaign, identifying true saturation points versus temporary efficiency dips.
Because the reality is: some campaigns saturate quickly and should be capped. Others have multiple efficiency peaks that require strategic patience to discover. The brands that understand the difference scale confidently while their competitors leave money on the table.
Understanding Law #7—that outside factors affect your campaign saturation—prevents premature scaling decisions, but there’s another timing element that most marketers completely misunderstand. Because marketing effects don’t just vary in intensity—they decay at different rates that can make or break your long-term strategy.
Next week, we’ll explore Law #8 and why the half-life of your marketing dollars determines everything about sustainable growth.
Cody Greco is the co-founder and CTO of Prescient AI. He conducts the independent research that makes up the foundation of Prescient AI’s proprietary MMM, building our model from scratch based on marketing dynamics in the real world and reporting marketers need to know to optimize their paid media spend. He blogs about MMMs on his own website and guest lectures at universities when he isn’t coding a new feature. Before Prescient, he established and scaled Grubhub’s research science team and went on to lead their global machine learning organization. Cody holds a B.S. in Operations Research from UCSD and M.S. in Computer Science from Georgia Tech.
