When I type define:diminishing returns into Google, this is what I get:
“In economics, diminishing returns (also called diminishing marginal returns) refers to how the marginal production of a factor of production starts to progressively decrease as the factor is increased, in contrast to the increase that would otherwise be normally expected”
What a mouthful. Long story short, there are certain areas of your business where adding more horsepower won’t necessarily give you the exact same result forever.
For example, if you build a customer service team comprised of only untrained, unmotivated, lazy customer service reps then eventually you’ll end up with frustrated customers who won’t be able to get their questions answered no matter how many people are on your customer service team.
In this video I discuss the economic principle of diminishing returns in the context of e-commerce and shares three examples that demonstrate how diminishing returns can impact your business productivity and bottom line.
The examples include:
- Spending more on Google AdWords to counter competitors bidding on popular keywords just to attract the same number of visitors
- Quality over quantity of autoresponders
- How to create a successful customer service department that when combined with automation will reduce your costs
This video is a bit heavy on theory, so if you don’t understand anything just leave me a question below or ask me on Twitter (@mitchellharper).
The BigCommerce blog is written by Mitchell Harper, co-founder of BigCommerce and e-commerce expert, having sold both physical and digital goods online to over 50,000 customers since 2001.