/
Optimization Mechanics: Response Curves & mROI

Optimization Mechanics: Response Curves & mROI

Open Article in Keen Knowledge Base

What Does Plan Optimization Actually Mean?

Below, we discuss Response Curves and their numerical counterpart, mROI (Marginal Return on Investment), to explain how investments are optimized for maximum impact.

Response Curves

A response curve shows how changes in Investment affects Contributed Net Profit (All Years). As investment increases, Contributed Net Profit rises—up to a point.

mROI measures the profitability of an incremental investment. It reflects how much additional return is generated by investing one more dollar.

image-20250320-200313.png

  • If the response curve slopes up steeply, above 1 is well above 1

  • If the response curve slopes down steeply, mROI is well below 1

  • If the response curve is relatively flat, the mROI is well below 1

  • If the response curve is relatively flat, the mROI is around 1

  • At the response curve’s inflection point, the mROI = 1.

Plans Optimize for the Highest mROI

Plans optimize by allocating each dollar to where it generates the highest mROI.

Every Combination of Tactic & Time Period Has Its Own Response Curve.

Marginal ROI varies by tactic based on its unique response curve. Concurrently, optimizations account for seasonality -- recognizing that the effectiveness of investments in any tactic fluctuate over time.

The result is a response curve for every tactic and time period combination, allowing for precise comparisons of when to invest, while respective any constraints applied in the plan build.

Here's how Keen optimizes a 1-Year Plan with a $10M marketing budget and 20 tactics

  1. First Dollar: Keen evaluates the mROI for 20 tactics * 52 weeks to identify the highest mROI opportunity.

  2. Next Dollar: Given the previous investment, Keen determines the next best placement.

  3. Repeat: This process continues until the entire $10M budget is allocated.

Reconciling mROI with ROI

While mROI evaluates the return on just the next dollar spent, ROI evaluates the return on all dollars spent. This makes ROI a retrospective measure, while mROI focuses on future potential.

In a fully optimized plan (Maximize Profit), the peak of the response curve marks the dollar at which the mROI hits $1 —meaning any additional spending would yield a marginal ROI of less than $1.

Conversely, hitting an mROI of $1 means that all previous dollars produced an mROI > $1.00. This is why an optimized, unconstrained plan will show an overall ROI well above 1. You’d have to continue spending well beyond this inflection point, amassing increasingly unprofitable marginal investments, to see the overall ROI decrease to 1.