LAW OF DIMINISHING RETURNS Sales and Promotion Budgets

Law Of Diminishing Returns  In economics, law stating that if one factor of production is increased while the others remain constant, the overall returns will relatively decrease after a certain point.  For example: if more and more laborers are added to harvest a wheat field at some point each additional laborer will add relatively less output than his predecessor did simply because he has less and less of the fixed amount of land to work with  The principle later accepted as an economic law underlying all productive enterprise. The Columbia Encyclopedia, Sixth Edition

Promotion Budgets  Increases in Promotion Budget have Diminishing Returns: The first $1,500,000 buys 36% awareness; Spending another $1,500,000 (for a total of $3,000,000) buys approximately 50%. The second $1,500,000 buys only 14% more awareness. 36% 14% Foundations Team Member Guide page 12

Promotion Budgets  First $500 yields 8%  Next $500 yields 13%  Next $500 yields 15%  Next $500 yields 9%  Next $500 yields 3%  Next $500 yields 2%

Promotion Budgets  Awareness  Each year 1/3 of those who knew about a product forget about it  When 100% Awareness is achieved, spending $1,400,000/year will maintain that level 33%

Sales Budgets  Accessibility  Companies must have at least 2 products in a segment to achieve 100% accessibility  The first $2,000,000 buys 22% accessibility. For companies with two or more products in a segment, spending $4,000,000 buys just under 35%. The second $2,000,000 buys less than 13% additional accessibility  Diminishing returns: Product at $3,000,000 Segment at $4,500,000  When 100% Accessibility is achieved, spending $3,500,000/year across the multiple products in the segment will maintain that level

Sales Budgets $2,000,000 buys 22% One Product $4,000,000 buys 35% Two or More Products