Advertising, what does the point of diminishing return mean?

The point of diminishing return simply means that no matter how much more money you spend on advertising, your gross sales will only increase in small increment, if any at all.

Below are some sample budgets for a single product showing how diminishing return can affect your profits and sales.

Example 1
Product: Widgets
Price: $100.00
Monthly Ad Budget: 2k
Monthly Widget Sales: 30
Gross Revenue: $3,000.00
Less Advertising: $2,000.00
Gross Profit: $1,000.00

Example 2
Product: Widgets
Price: $100.00
Monthly Ad Budget: 3k
Monthly Widget Sales: 35
Gross Revenue: $3,500.00
Less Advertising: $3,000.00
Gross Profit: $500.00

Example 3
Product: Widgets
Price: $100.00
Monthly Ad Budget: 4k
Monthly Widget Sales: 40
Gross Revenue: $4,000.00
Less Advertising: $4,000.00
Gross Profit: $0.00

The examples above clearly illustrate that sometime spending more money does not necessarily mean making more profit. It doesn