How do you know that your marketing or sales promotion campaign has been effective? How many more clients can you get? One method that can help you evaluate the effectiveness of a campaign and measure success more objectively is incremental sales .
Keep reading and discover more about this sales indicator and how to monitor it.
What are incremental sales?
Incremental sales generally refer to additional sales caused by a promotional action, an advertising campaign or any other marketing action. Therefore, it is a basic indicator of marketing effectiveness.
Incremental sales are often difficult to identify because there are several factors that can influence sales volume simultaneously.
The increase in sales in a promotional operation is usually due to different factors:
- brand change
- increase in consumption
- packaging and cannibalization within the range
- attracting new consumers of the product
Formula to measure incremental sales
A simple formula to calculate incremental sales is:
Incremental sales = Total sales – Reference sales
In this case, two key terms are basic sales and total sales.
Baseline sales are the amount of revenue you would have generated without a promotion or marketing campaign.
Campaigns where measuring incremental sales is most important are seasonal offers, such as Black Friday sales, or when you are testing a new marketing channel and want to evaluate its effectiveness.
Total sales are, of course, the overall sales that occur during the specified period that the campaign was online.
Example of incremental sales
Suppose a retailer expects to sell 50,000 pesos worth of sporting goods in a month without advertising.
The retailer launches an influencer campaign that costs $20,000 and sells $80,000 worth of items.
In this case, the additional sales will be $30,000:
Additional sales = 80,000 – 50,000 = $30 00
Keep in mind that incremental sales are different from marketing ROI. In this case, the goal is to measure the incremental revenue generated by promotional campaigns.
How to measure incremental sales
To accurately measure incremental sales, you need to know baseline sales. Next, see how many new customers you acquire during a campaign. You can check it with your CRM.
Keep in mind that a customer may be new if they have never interacted with your brand before. Some brands consider them new if they haven’t made a purchase in the last six months or a year.
Some companies apply the single source rule. Let’s say you have an affiliate marketing program. When the customer purchases through the affiliate link, only that will be counted as an incremental sale.
The problem is that the customer may be influenced to purchase through the affiliate program but does not use the link to make the purchase. Therefore, even if the program led to the sale, the company will not consider it an incremental sale.
Importance of measuring incremental sales
It is obvious that the higher your incremental sales figures, the better your business will be. Demonstrate that your marketing campaigns are effective, that your sales team is also doing well, and that they are effectively converting leads into customers.
On the other hand, if you are not getting the desired ROI from your campaigns, you may want to review some of the KPIs.
Incremental sales KPIs will help you identify gaps and increase your profit margin by improving them. You may find that you are paying commissions for leads you would have gotten anyway. They are expenses that you can eventually ignore. In this way, you can increase your profits with the same number of sales.
When you accurately measure incremental sales, you’ll know how to best invest in your marketing. If you see that your marketing efforts are working, you can also increase your advertising budget. If your conversion rate doesn’t improve, you can reduce your advertising budget and focus more on sales efforts.