A university is just a group of buildings gathered around a library. ~Shelby Foote

Wednesday, August 03, 2005

The Law of Diminishing Returns

One of the few economic principles that has stuck with me throughout my life. It essentially comes down to the fact that each successive repetition of an action results in a decreasing result from that action. So, the first Mountain Dew you drink after working in the sun tastes great! The second is still good. By the third, you are no longer parched, and you wonder if maybe you've had enough. Number Four makes you feel bloated, and when you get to five you figure you must be out of your mind. You get less of a pleasurable return with each successive soda.

Same sort of deal with practice. When you suck at something, because you're just starting out, it is easy to make great strides forward with only moderate amounts of practice-- you've got nowhere to go but up. Your first round of golf might be a 136, but with only a little bit of practice, you can fairly easily knock that down to 120. A bit more practice gets you to 110, and still more to 100, but with each successive improvement, it takes more and more practice to reach a new level of ability. You get less return on your invested time and energy as you get better-- to the point where professional athletes have to practice year-round just to maintain themselves at their incredibly high levels of ability.

What's my point? Well, the same principle seems to work with businesses and diversification. Some diversification can increase sales significantly. A pizza chain adds bread sticks, sodas and desserts to their menu and sales bump up. Still more diversification can continue to increase sales, but at a diminishing rate-- people are only going to buy so much, and eventually all those menus items are essentially in competition with each other, with folks buying either breadsticks or cheesy bread, but not both.

Which is why I was stunned to learn that there are SEVEN different kinds of Diet Coke on the market right now. Well, technically six, plus Coke Zero, which is Coca Cola without any calories-- so you can see where they draw the distinction between Zero and Diet Coke. Right?

Anyway. We have Diet Coke, Caffeine Free Diet Coke, Diet Coke with Lemon, Diet Coke with Lime, Diet Cherry Coke, Diet Vanilla Coke, and Coca Cola Zero. I'm not a marketing guru, nor do I play one on TV, but isn't that kindof... what's the word... overkill? I mean, good grief-- seven different kinds of Diet Coke?

But perhaps I'm wrong. Perhaps Diet Coke with Lime opened up vast new markets of folks who thought, 'Lime! Hey, lime! I despise Diet Coke with Lemon, but if you're going to mix in a green citrus fruit, yo brother I am ALL over that!' I dunno, maybe. For a bit of hoot, check out all of Coke's worldwide brands. I think my personal favorite is Bimbo Break-- definitely gotta have me some of dat! Fruktime, Guarana Jesus, Tuborg Squash and Northern Neck really roll of the tongue as well. Tuborg Squash? Yeah, nothing says refreshing like a nice glass of squash juice.

"Whew! I am hot! Parched all the way down to my toes. Thank goodness I have some of that delicious Northern Neck in the fridge! And if that don't do it, I can always crack me open some Fruktime."

One thing I do know is that there is no lack of choices in our world today. Lots and lots of things to choose from, no doubt about it. Of course... are we sure that's such a good thing?
In mathematics, we call this an asymptote.

Actually, I like all the different flavors of Coke; it provides variety in my life.

But I do agree - I can't for the life of me figure out what is the difference between Coke Zero and Diet Coke. It's a mystery.

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