Forecasting
Diminishing Returns
The phenomenon where additional ad spend produces progressively less incremental revenue. Every channel has a saturation curve, and spending past the optimal point wastes budget. A channel producing $5 in revenue per $1 at $50K/month spend might only produce $2.50 per $1 at $150K/month. The optimal spend level sits at the inflection point of the S-curve where marginal returns start declining. Most brands overspend on their 'best' channel because they don't model diminishing returns.
Why it matters
It is the reason a channel with strong average ROAS can still be the wrong place for the next dollar. Averages hide where the curve flattens.
In practice
Look at ROAS in spend bands rather than as a single figure. The band where it starts falling is your practical ceiling, whatever the blended number says.
Related terms