Incremental sales

Incremental sales
Primary topic
Related topics
Methods and techniques

Incremental sales are additional sales activities resulting from an effectively conducted marketing campaign. The incremental character of these activities is closely related to promotional campaign. Advertisers identify sales as incremental when a marketing action is assigned to increasing sales in a given period of time[1].

Incremental sales KPI[edit]

One of the key performance indicators (KPI) is incremental sales measuring the share of marketing activities in the increase in sales revenue. The incremental sales ratio shows the influence between marketing and sales, as well as the benefits of this relationship for the company[2]. The main task of marketing is raising the interest of potential customers with a product or a service. Then, sales activation helps transform clients into actual buyers. This key indicator allows link revenue to a specific promotional campaign, which gives the opportunity to measure the return on investment (ROI) incurred for marketing activities[3].

Incremental sales measurement[edit]

Determining the value of incremental sales is crucial for designating the financial return. Two variables are useful for estimating this sum: actual sales and basic sales. The second one refers to sales without marketing activities. The following ways to calculate incremental sales are three of the most popular methods:

  • Econometric modeling

Using this mathematical technique, it is possible to define sales determinants.

  • Test and control

A control group, consisting of products or persons, is not subject to marketing activities. The revenues from the sale of advertised and non-advertised products are compared.

  • Extrapolating from a trend

This method uses one of the techniques called extrapolation from the trend. Estimating incremental sales in this way can be helpful in a situation when sales are maintained in a trend or at a constant level[4].

Footnotes[edit]

  1. Gonsalvez D.J.A., Inman R.R. (2016), Supply chain shared risk self-financing for incremental sales, "The Engineering Economist", Vol. 61
  2. Leach J.Ch., Melicher R.W. (2016), Entrepreneurial Finance, Cengage Learning, p. 329-332
  3. Lautman M.R., Pauwels K. (2009), What is important? Identyfing Metrics that Matter
  4. Binet L., Puri G., Deboo M. (2008), Measuring Marketing Payback. A best practice guide

References[edit]

Author: Patryk Schmidt