I first came across the Law of Diminishing Returns in building materials in the 1970’s while working with one of my first clients. My assignment was to develop a strategy that would get more people to add insulation to their attics.
As I was doing my research, one of their engineers pulled out a legal pad and drew a graph that demonstrated the law of diminishing returns and insulation. At the optimum point of the graph, he placed R-13, or 3 ½” of insulation. As the graph continued to R-19 and R-38, it showed a declining rate of return.
At that time, there were still many houses with little or no insulation. So, adding even a small amount of insulation had a big payoff.
This graph helped me to develop a successful strategy to grow the sales of insulation.
3 Reasons Why This Grows Sales
1. It simplified any questions customers had that could get in the way of their decision to proceed. When you strip away all the other variables and boil it down to “Just Do This,” you make it much easier for the customer to buy.
People are very afraid of making the wrong decision. And the more options you give them, the more they second guess every decision. That indecision creates a barrier to your sale.
2. It created momentum that paid off for years to come. Once a homeowner added some insulation, they realized the following:
- It cost less than they thought
- It wasn’t that hard to do
- Their utility bills went down
- Their home felt more comfortable, less drafty
As energy costs and interest in energy savings continued to rise, these homeowners bought more insulation to make their home even more energy efficient. Once they saw how simple it was, they didn’t hesitate to do it again.
If we had given them even something as simple as a “Good – Better – Best” story, it would have taken much more time to grow these sales. Even an energy zone calculator would have been premature at that time.
3. It created a focus for the program. Everyone, at my client, took on the mission of getting homeowners up into their attics to install R-13 insulation. There were no rogue sales leaders trying to be heroes by pushing customers to buy higher levers of insulation.
The company’s advertising, PR and in-store communications were also squarely focused on R-13. Dealers had a clear idea of what they needed to do to grow their sales.
And it all started with a simple graph that communicated a very simple and easy to understand “Just Do This” message.
Most building materials companies try to help the customer make the right choice. But by providing too much information and laying out too many options, they are actually making it harder for the customer to say yes.
The more you can simplify and focus your sales message, the more success you will have.
Two Questions that Could Make a Big Difference for You
1. How could you simplify your sales message? Why are you sharing more than you need to? To show something about your company’s abilities or competence? Truth is, no one cares.
Approach your sales message like a good editor: what can you cut? The more you cut, the better.
And it’s not just the amount of information you give that should be cut:
Too many product options – If you have legacy products that are now a small part of your overall sales, cut them. Most of your sales in this category are to a small group of long-term customers. If you feel the need to keep these products, at least get them off your website. Let these older customers – and only these customers – know that they are still available.
If you feel that choosing your product has to be complicated or have many options that cannot be simplified, become a guide. Change your message to, “When you deal with us, we guide you to the best option.” Once again, make it easier for the architect, builder or contractor to choose you.
Online sales – I see a lot of companies selling direct from their website. This frequently generates only a very small part of their sales. Unless you’re ready to put in a serious effort to make online sales a significant portion of your business, take it off your website.
Leaving it on your website might seem harmless, but it will cause some problems. For one thing, you are unnecessarily making your other customers unhappy by competing with them.
You’re also creating some internal distractions for your team by making them spend time in an area that is way past the point of diminishing returns.
2. Focus – Is your sales team and your marketing all working towards the same clear, understandable and simple goal?
How You Can Use The Law of Diminishing Returns
Create two graphs that plot the areas of diminishing returns for your company.
Make the first one from the perspective of the customer: when do they hit the point of diminishing returns if they buy your product?
The second version of the graph is for your internal operations. Where are your sales, marketing and other efforts focused? Are they all focused at the same point on the graph or are some of them way past the point of optimized returns?
The first graph will help you simplify. The second graph will help you focus. And both together will help you see how to grow your sales more effectively.