- Returns flatten as spend grows.
- The optimum is where marginal return equals one.
- Refit the curve each quarter.
Why returns flatten
Early dollars reach the most responsive people. As spend rises, ads reach people who are harder to convert or who have already seen the ad many times. Each added dollar buys less.
The Hill curve in plain terms
The Hill curve has three inputs: a maximum response, the spend that delivers half of it, and a shape value. With a maximum of $100,000 and a half-point of $20,000, the extra dollar stops paying back near $24,700 of spend.
Try your own values in the saturation tool and watch the optimum move.
Collect the data
You need at least 12 weeks of spend and revenue for one channel, ideally with some variation in spend. Flat spend gives no information about the curve. Plan small increases and decreases to learn the slope.
Act on the result
If you spend below the optimum, raise budget in steps of 10 to 20 percent and watch the marginal return. If you spend above it, move the excess to another channel. Refit every quarter, since creative and competition shift the curve.
Where does the next dollar stop paying back?
Questions about Paid Media Math
Should I use revenue or profit?
Use gross profit for a budget that maximizes profit. Revenue finds the point where sales stop growing.
What if I have little data?
Start with rough values and improve them through small spend tests.
Can one curve cover all channels?
No. Each channel has its own curve and its own optimum.
Key terms
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