What Are Incremental Sales? Learn Its Meaning & Formula

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Incremental sales blog post by datapine

To ensure a sustainable level of commercial success in our cutthroat digital age, offering value, driving consumer loyalty, and consistently surpassing your targets are of the utmost importance.

A loyal, high-value repeat customer is worth more than a cheap sale, and by implementing the right strategy, setting the right goals, and working with the right KPIs, you will achieve the results you desire.

To win on today’s commercial battlefield, incremental sales are the name of the game. By taking a more strategic approach to your business’s profitability, you will stand a far greater chance of growing and evolving over time. 

Here we explore the meaning and value of incremental sales in the world of business, as well as the additional KPI examples and metrics you should track to ensure ongoing success.

Without further ado, let’s get started, first with the incremental sales definition.

What Are Incremental Sales?

Incremental sales is a KPI used by marketers to assess the financial value of various promotional activities. It calculates a business’s revenue from its marketing campaigns above what they normally sell and helps build successful strategies to ensure continuous growth.

Incremental sales by campaign is a sales chart template that illustrates the number of sales generated by marketing activities over a set time frame.

The three biggest sales priorities confirmed by business leaders are closing more deals (28%), improving sales funnel efficiency (18%), and enhancing sales technology (11%).

Incremental sales, at its core, relate to each of these three areas and more.

In other words, incremental sales are a KPI or method used to interpret the financial outcomes of your marketing efforts to make informed resource allocation decisions and drive growth. It can be anything from analyzing the performance of a specific marketing campaign to special discounts or deals or upselling and cross-selling actions made by your sales team. 

Your marketing activities attract qualified leads, and sales convert those leads into paying customers which can, in turn, potentially become repeat purchasing brand advocates – the most valuable kind of customers a company can attract.

But how do you calculate the impact of your promotional strategies? Keep reading to find out! 

Incremental Sales Calculation 

As mentioned, incremental sales are used by businesses as a key performance indicator to measure the financial success of their promotional efforts. This is done through the use of multiple metrics but most importantly the incremental sales formula which we breakdown below: 

Incremental Sales: Total Sales – Baseline Sales

Your total sales are the total revenue generated by your business during a specific time period with active marketing campaigns and promotions, while your baseline sales are the projected revenue without active marketing activities. Through this, you can understand the effectiveness of your promotional activities as well as measure the return on investment of each activity to keep the ones that bring more value.  

To put our definition into a real-world perspective, here’s a hypothetical incremental sales example we’ve created for reference:

A  green clothing retailer typically sells $14,000 worth of ethical sweaters per month without investing in advertising. In November, while running an advertising campaign that cost $1,500, the retailer sells $20,000 worth of ethical sweaters online. The owners calculate their incremental sales in this way:

Incremental Sales ($): $20,000 – $14,000 = $6,000.

If your incremental sales growth exceeds your initial marketing investment or results in an indirect increase in sales that you can attribute to a specific marketing activity or campaign, you will be able to track the success of your efforts on an ongoing basis. On the other hand, if you realize that the sales of a specific campaign (minus costs) are lower than the expected baseline sales, then it means that the campaign was not successful in bringing incremental sales and the strategy needs to be looked into. 

Now that you know how to calculate incremental sales, let’s look into their importance for your organization.

Why Do You Need Incremental Sales

With customers becoming more active and demanding than ever, the need to generate successful marketing campaigns to not only bring new customers but retain existing ones becomes fundamental for organizational success. In that sense, incremental sales analysis can present a huge competitive advantage for businesses as it provides the necessary knowledge to analyze the effectiveness and performance of different activities such as affiliate marketing, paid ads, influencer marketing, and many others. 

When it comes to decision-making in business, knowledge is power. Incremental sales enable the marketing and sales department to join forces and identify the specific campaigns and strategies that are bringing the biggest financial return to the company and boost them to reap the biggest returns. 

As a result, the organization will not only benefit from efficient marketing activities and an increasing number of qualified leads but will also save costs by generating informed data-driven marketing budgets with smart resource allocation.

In the end, your marketing efforts are only as valuable as their profitability. The only way to prove to managers, decision-makers, and investors that your strategies are worth the investment is through financial returns, therefore, monitoring incremental sales is a fundamental practice.  

As you’ve learned by now, when done correctly, incremental sales analysis can bring multiple benefits to your company. To ensure you remain successful in this process, there are best practices that you should follow.

Incremental Sales: Best Practices & Tips

To make sure your incremental sales are on the positive side, there are many processes and best practices to follow. These relate to direct actions you should take such as knowing your customer preferences and being aware of any major market changes, but also to the analytics process such as tracking the right metrics and defining clear goals beforehand. 

To help steer your success, and to additionally put light on the definition of incremental sales, here are the best practices you should adhere to:

  1. Build consumer relationships

Forging solid customer relationships is essential to the long-term success of your incremental sales strategy. To do so, it’s important to showcase your value by creating and delivering, content that is not only tailored to the needs of your target audience but will provide answers to your customers (potential and existing) most burning consumer questions. In addition, you’ll want to spark meaningful dialogues with your audience via your most engaged social media channels. At the same time, take the time to offer personalized thank yous to your customers for their engagement, interest, or purchases. Customer loyalty is driven by likeability (86%) and trust (83%) – a clear indication of the value of taking the time to foster meaningful customer relationships. By taking care of the overall customer data management practice, you can gain additional insights and hence tailor your strategy to deliver the best possible customer experience.

  1. Establish your business goals and KPIs 

To squeeze optimum value outlining your ultimate business goals is essential. That said, experimenting with various types of media, channels, touchpoints, and platforms should form an integral part of your budgeting strategy. To ensure you yield the results you desire, first establish your goals, then decide on the metrics that you will need to track to measure your performance. Moreover, you should execute a controlled promotional experiment to gauge which channels best appeal to your target audience and to understand the reasons why these work the best. By amplifying business dashboards, your whole strategy can be integrated into one, interactive and neat place, therefore, tracking and measuring your performance can be easily done with few clicks.

  1. Ask focused questions

When refining your sales goals, it pays to ask yourself focused questions that will help give your marketing strategies direction. For instance, you might ask yourself the question, “How can I boost my email marketing sales?” As a result of asking this focused question, you’ll be able to monitor conversions as a direct result of your consumer emails while identifying where you need to make improvements to increase sales.

  1. Adapt to market changes 

Our world is constantly evolving and adapting to unexpected situations, with the pandemic being the most recent example. That said, businesses that want to succeed at retaining their loyal customer base and growing it as well need to be capable of adapting to these changes and using them to their advantage.  Adapting your marketing strategies and overall promotional approach to these changes can make a significant difference in the outcome of your incremental sales. A professional market research dashboard can provide you with the necessary means to gather the information you need about the current state of your industry.

  1. Remain consistent

To benefit from the power of incremental sales, it’s important to remain consistent in all areas of your business. This means tracking the right KPIs on a regular basis to extract valuable insights and make constant improvements, making your branding cohesive across touchpoints, maintaining an active presence through your social media channels, and delivering content that is engaging and useful in equal measures.

KPIs To Help Boost Incremental Sales

Without a doubt, working with KPIs that align with your core commercial goals leads to a greater business intelligence strategy as well as continued growth and progress.

To help you in your quest to define incremental sales success, here is a rundown of the essential KPIs that you should track on regular basis.

Improve Your Marketing KPI Performance

First, we’re going to focus on 5 KPIs and metrics that will help you refine your marketing strategies to boost incremental sales.

1. Goal conversion rates

Website metric: Goal conversion rate comparison to measure the success of various campaigns

A conversion is a desired action taken by a customer or site visitor, and as this is a particularly goal-based metric, conversions can differ greatly from one business to the other.

In many cases, your conversion goal will be the closing of a sale, but this particular type of metric can extend to email subscriptions from a specific piece of blog content, free trial sign-ups, or eBook downloads. Tracking your conversion rates is critical, as you’ll quickly be able to identify your strengths and weaknesses and discover high-converting channels to expand upon as well as actions you can take to boost conversion rates in specific areas of the business.

2. Landing page conversion rates

Landing page conversion rate is one of the incremental sales KPI a business can track

It becomes obvious when we drill down further into conversion rates that the landing page conversion rate KPI is one of the most invaluable website metrics a company should follow. It gives you a panoramic snapshot of the performance of particular pages of your website and offers you insights into how to optimize your content for increased sales success.

By conducting A/B testing and comparing the performance of different pages of your website, you’ll be able to take actions that enhance the usability and appeal of your various landing pages, which will ultimately result in more engagement and a rise in consistent sales.

3. Click-through rates (CTR)

CTR or click-through-rate, a marketing KPI represented here by channel, keywords, industry average and weekly trendline

When it comes to measuring the value and success of your various marketing activities over time, analyzing your click-through rate (CTR) is essential.

CTR refers to the ratio of clicks compared to the overall number of impressions and as such, offers an insight into how effective your content and communications are in the eyes of your audience. To extract the most value possible from your CTR in terms of measurement, discover the average CTR for your industry and use it as a  performance benchmark.

4. Cost per lead 

The cost per lead is a valuable marketing KPI to boost incremental sales

Another important incremental sales marketing metric to assess the effectiveness of your campaigns is the cost per lead. A lead is a potential customer that has interacted with your company through any of your marketing touchpoints. This metric is calculated by dividing the total costs of a campaign by the number of leads and it can be tracked across all marketing channels to assess performance. Naturally, you want to convert as many leads as possible for the least amount of money which makes it a great indicator of success. 

5. ROI

Marketing ROI as a critical indicator for positive incremental sales

Measuring your marketing ROI is arguably the most important action you can take to assess and boost the profitability of your campaigns. In this case, it is being tracked by the marketing channel and observed for a 30-day period. With this information in hand, marketers can dive into specific campaigns, spotting the most successful ones and optimizing or eliminating the unsuccessful ones to ensure resources are being spent strategically. 

To explore these metrics in greater detail, visit our marketing KPIs and template examples page.

Build Your Sales With These KPI Examples

Here, we’re going to explore 4 performance metrics examples that will help you enhance your sales efforts to improve your incremental sales.

1. Incremental sales by campaign 

Incremental sales by campaign is a sales chart template that illustrates the number of sales generated by marketing activities over a set time frame.

As mentioned a couple of times already, the incremental sales metric helps businesses and marketers to assess the financial success of their marketing activities. In this case, the image above, generated with professional sales analytics software, is tracking incremental growth for each campaign on different with each channel being later compared using a line chart. Through this, marketers can easily identify which type of campaign and channel performs best and act accordingly.  

2. Sales growth

This sales graph shows you the evolution of your revenue and compares it to previous periods, which helps to improve the incremental sales

By measuring the growth of your sales, you essentially measure the growth of your business.

By tracking your sales growth over a predetermined period, you’ll be able to monitor the performance of your sales representatives while gauging if you’re on course to meet your targets – a pivotal metric in the ongoing growth and profitability of your empire.

3. Sales targets 

Sales target: setting goals in advance and implementing a strategy to reach and exceed them.

Drilling down specific sales goals and targets will help you consistently meet your business’s general objectives. Based on tracking actual revenue versus forecasted revenue, the sales target KPI offers a wealth of insight into your ability to meet your forecasted revenue based on a set of predetermined figures and goals.

An assessment of your actual versus forecasted revenue will, hopefully, show that you have outperformed your predicted amount. But if not, you’ll be able to develop initiatives to tackle the problem before it proves detrimental to your business.

4. Customer acquisition costs

The Customer Acquisition Costs are all the costs involved in the process of turning a prospect into a client. Keeping them as low as possible is a best practice to increase the incremental sales

The acquisition of a customer does come with its costs – which is the very reason that encouraging loyalty offers so much value.

Customer Acquisition Cost (CAC) refers to all costs incurred while signing up a customer. Different investments in this area will often depend on your industry or line of business. For instance, if you’re an online marketer, your CAC will include the various investments you’ve made to deliver a particular campaign.

With this KPI, the ultimate goal is to boost your customer lifetime value in addition to the average revenue per unit or user/account, while reducing your overall CAC to remain profitable.

To explore these metrics in greater detail, visit our sales KPIs and template examples page.

Incremental Sales Challenges & Considerations

Just like any other business process, incremental sales analysis has its challenges. To help you make the most of it, below we will describe some common challenges and considerations to have before diving into the process. 

  • Conversion tracking: Tracking conversions is not always a straightforward process and, in some cases, marketers might find themselves struggling with it. This is the case when a campaign generates leads in an indirect way. For example, a target customer sees your ad but accesses your website and completes a targeted action in a different tab without clicking on the ad. This makes it harder to credit the ad with the conversion, hence, making it a challenge to accurately calculate the incremental growth later. This is an important point to consider during your process to avoid any misunderstandings.      
  • Competitor’s activities:  Another important consideration is to keep an eye on competitors. While you can’t control what they are doing or have access to their performance stats, you can carefully analyze their marketing activity and consider it as a factor in the success of your own. For example, if you are launching a new campaign at the same time your main competitor is offering top discounts, it will clearly impact the performance of your strategies. In those cases, it is better to either tweak yours to make it more interesting for potential customers or schedule its release for a later time. 
  • Internal communication: A common challenge that can make your incremental sales fail is internal communication. In order to be successful with the process it is necessary for the sales and marketing teams to be connected and aware of any latest developments. In that sense, using a modern online dashboard is a great way to boost communication and keep every relevant employee, manager, and stakeholder involved and informed. 
  • Calculating baseline sales: As mentioned previously, baseline sales are the number of sales the company is expected to make during an observed period without any promotional investment. Getting your baseline value right is fundamental to analyzing the success of your marketing efforts and, consequently, calculating your incremental growth value. That said, this calculation is not easy and it presents a challenge for organizations. To calculate the baseline value in the right way, you need to make sure you are calculating it based on other periods in which you also didn’t have any active promotions. A good practice is to calculate it to the previous year to consider seasonality effects. 

Incremental Sales: Summary & Key Takeaways 

It’s clear that by focusing to define incremental sales efforts, you’ll help to ensure you not only maintain your profitability but by tracking the right metrics consistently, improve your business over time. This can only result in increased brand awareness and customer loyalty – two of the most valuable elements of any successful commercial empire.

For more business-based insights to help you in building your incremental sales, you can try our software for a 14-day trial – completely free!

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What Are Incremental Sales? Learn Its Meaning & Formula
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