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Incremental sales

What is incremental sales? Definition and formula 

Key Takeaways
  • Incremental sales is a metric that helps determine the difference between actual sales you generate during a specific timeframe and the estimated sales you would have generated.
  • Incremental sales is an extremely important metric or KPI for sales managers, sales teams, and the business itself.
  • Incremental sales formula: Incremental sales = Total Sales – Baseline Sales

Marketing is all about being memorable to potential customers.

By consistently engaging with them and making a good impression, you increase the chances that they will immediately think of your brand when they need a product or service you offer. 

And the primary objective of putting in marketing efforts is to increase demand and boost revenue.

But the only way you can ensure that your efforts are paying off is by measuring the right metric of the campaign. 

Which is that metric? – Incremental Sales! 

Indeed many other factors are essential, such as conversion rate, cost per lead, engagement, and more.

But incremental sales is a metric that will help evaluate whether your marketing effort is showing results or not.

But before we see how you can measure incremental sales, let’s take a quick look at what exactly is incremental sales.

What is incremental sales? 

Incremental sales is a metric that helps determine the difference between actual sales you generate during a specific timeframe and the estimated sales you would have generated.

And, because the growth in sales is usually a result of promotional campaigns, it’s also referred to as a sales metric or a KPI (key performance indicator) that helps evaluate marketing effectiveness and performance of campaigns.

The two most important things here are baseline sales, which refers to the revenue you generate without marketing efforts. And the second thing is campaigns, which in this context, are the marketing channels you choose to reach your potential customers. 

So, this includes campaigns such as PPC advertisements, influencer marketing, social media advertisement, influencer marketing, and other such campaigns. 

Why do you need to measure incremental sales? 

Measuring incremental sales truly has its perks.

It is a KPI that can shape the way your sales numbers grow. And, if the revenue you’ve evaluated after measuring incremental sales is high, the campaign’s performance is good.

Whereas, if the numbers are negative, there are areas where improvement could be made.

Incremental sales can help identify loopholes in the sales process, enables better allocation of marketing funds, and helps identify shortcomings. As a result, increased profit is achieved.

Moreover, keeping track of incremental sales can help better strategize your upcoming promotional campaigns.  

How to calculate incremental sales?  

The incremental sales formula highlights the growth in sales due to promotional activities during a set timeframe.

Let’s learn how to calculate incremental sales to evaluate the success of marketing campaigns.

Incremental sales formula: 

Incremental Sales = Total Sales – Baseline Sales 

Now, let’s clear out the concepts mentioned in the formula.  

Total sales: It is the revenue your business generated during a set timeframe when the marketing campaigns were active.  

Baseline sales: Itis the revenue you had projected your business would have generated during a set timeframe without marketing campaigns. 

Calculating baseline sales can be a little tricky! However, educated guesswork can help make this easier.

A common approach is calculating the company’s average annual sales growth (without the marketing promotion).  

Now, let’s plug in some real numbers in the formula and take a look at an incremental sales example for a better understanding: 

Let’s assume total sales for,

2021: $170,000 

2022: $200,000 

As mentioned earlier, let’s roughly take an average of the last three years of average annual sales growth (promotion-free) for baseline sales.

2018-2019 = $20,000 

2019-2020 = $25,000 

2020-2021 = $30,000 

Average annual sales growth = $20000 + $25000 + $30000 = $75,000 

Average annual sales growth = $75000 ÷ 3 = $25,000 

Now as we know the average annual sales growth, can plug that into  

Baseline sales for 2022 = $170000 (2021) + $25000 (average annual sales growth) = $145,000 

So, the final figure would be: 

Incremental Sales = $200000 – $145000 = $55,000 

Now that we’ve seen how to calculate incremental sales let’s look at the best practices.

Best practices for improving incremental sales 

Here are a few important things you should keep in mind to improve incremental sales: 

Best practices to improve incremental sales

1. Utilize an efficient CRM for analytics

You’re well aware that keeping track of incremental sales and other important metrics of marketing campaigns isn’t a piece of cake. Instead, it requires a precise evaluation of the metrics.

Also, if you don’t already use software to manage sales revenue and other crucial indicators, you might want to start by thinking about a potent CRM like Salesmate.  

With interactive sales dashboards and simple analytics, Salesmate makes it extremely easy for businesses to make informed decisions from insightful sales reports. 

Drive incremental sales growth with ease 🚀

Drive incremental sales growth with ease 🚀

Discover how Salesmate reports and analytics can help you maximize your marketing efforts.

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2. Upselling and Cross-selling

Offering additional products or services to customers who are already purchasing can significantly improve sales figures.

For instance, if someone is purchasing a laptop, there is a high chance that they might need a laptop bag or sleeve as well. So, finding products or services that complement each other can be a great way to ensure that your sales figures keep growing. 

3. Choosing relevant KPIs 

Choosing the relevant KPIs is the second-best practice to improve your incremental sales.

Key Performance Indicators (KPIs) are various metrics that help you measure the efficiency of your marketing effort. Hence, adopting the correct ones along with incremental sales KPI is essential. 

Some common KPIs include: 

  • New sales leads 
  • Conversion rate 
  • Click-through rate 
  • Lead-to-customer ratio, and more.

4. Improve customer engagement

You should focus on improving customer engagement by personalizing your outreach, conveying informative and interactive content, reaching your target audience on their preferred channels, etc. 

The success of your marketing campaign depends on what scale your customer engagement is at. When you have good customer engagement, you will likely execute successful marketing campaigns.

Also, targeting loyal customers would more likely be a success as they will quickly take action on the same. 

5. Picking the right marketing channel 

Another practice to improve incremental sales is to use the right marketing channel.

Since various target customers are available on various social media platforms, you must pick the right one to get good results.

You can use various marketing channels like: 

  • Social media marketing 
  • Email marketing 
  • Search Engine Optimization (SEO) marketing 

Marketing trends are dynamic, and so should your efforts. When hopping on a new marketing trend, you should be aware of these trends and then have flexible efforts to adopt one.

Also, never resist trying new marketing strategies. Have a trial and error method to identify the best marketing campaign.

Once you create, test, and analyze a successful marketing strategy, you can also witness substantial growth in your sales. Eventually leading to improved incremental sales.

Conclusion 

Overall, incremental sales is a crucial metric for any business’s growth.

Keeping track of the metric will help your business increase revenue as you can constantly optimize your marketing efforts and gain a competitive edge in the market. 

And strategies like upselling, cross-selling, product bundling, and many more, help ensure that the incremental sales figures keep growing.

By implementing the best practices and measuring their effectiveness, businesses can stay ahead of the competition and continue to grow and thrive.

Dhanashree Pal

Dhanashree has been into writing since her teens. She believes writing is the best way to express and explain everything happening in this world. Reading and imagining are something she can do for hours. Enthusiastic about exploring new places and food. Young and hopeful of becoming better with every passing day.

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