Marketing campaigns are crucial to support sales and marketing efforts. As a result, many businesses invest a substantial amount of their budget in various marketing campaigns, such as social media marketing, email marketing, inbound marketing, influencer marketing strategies, content marketing, and digital marketing strategies to gain new customers, promote their products and increase sales and revenue growth.
But with creating and running these compelling marketing campaigns comes the need to measure their effectiveness. As a result, most marketers and salespeople are puzzled by the following questions: Did our social media ads generate the expected revenue? Did our special discounts and offers result in new customers? And Did our target audience interact well with our marketing campaign? And, importantly, how can we improve our marketing strategies to boost sales?
This is where incremental sales come in. Incremental sales refer to the additional revenue acquired from existing customers who had lost touch with your business (were not previously purchasing your product). Simply put, it is the revenue generated from upselling or cross-selling to your existing customers, making it possible to boost your business revenue without gaining new customers or expanding the customer base.
By leveraging these new streams of income from existing customers, incremental sales can be a next-leveler for your business by helping you increase profits and save on customer acquisition costs. In this blog, you learn about incremental sales, its benefits, formulas, examples, strategies, and best practices. Let’s get started!
Incremental sales refer to the additional revenue generated by selling additional products or services to existing customers or by attracting new customers through marketing efforts. In other words, the increase in revenue can be directly attributed to a specific marketing campaign, sales promotion, or other business initiatives.
Incremental sales can be achieved through various methods, such as introducing new products or services, running marketing campaigns, cross-selling, or up-selling. These methods help a business increase revenue by tapping into the existing customer base and attracting new customers. For example, if a company offers a discount on a specific product, the additional sales generated due to the promotion would be considered incremental sales.
Measuring incremental sales is an essential business metric that helps companies determine the effectiveness of their marketing strategies and business initiatives. It also enables businesses to identify new revenue opportunities, optimize their marketing efforts, and grow their customer base. Incremental sales are an important indicator of a company’s growth and success. Hence, it is important for businesses to focus on generating incremental sales to maintain a competitive edge in the market.
Below are two examples of incremental sales with calculations on the scenarios.
In this first scenario, a business runs promos and discounts to boost incremental sales. For example, suppose a business is running a promotional discount of 20% on a product that usually sells for $100. During the promotional period, the business sells 500 units of the product, whereas, in a typical month, it sells 300 units.
To calculate incremental sales, we can use the following Formula:
Incremental Sales = (Promotional Sales – Typical Sales) x Selling Price
Here, Promotional Sales =
500 units x $80 (after the 20% discount) = $40,000
Typical Sales =
300 units x $100 = $30,000
Therefore, we subtract the promotional sales from typical sales to get Incremental Sales:
= ($40,000 – $30,000) = $10,000
So, the promotional discount generated incremental sales of $10,000 for the business.
In this second scenario, the business cross-sells to its existing customers instead of running a promotional campaign. For example, say a company sells smartphones and accessories. During a particular period, it sells 1000 smartphones, with 40% of customers also purchasing a screen protector for $20 and 30% of customers purchasing a phone case for $30.
To calculate incremental sales from cross-selling, we can use the following Formula:
Incremental Sales = (Percentage of Customers who Cross-Sell x Average Value of Cross-Sold Item x Total Sales)
Here, the Percentage of Customers who Cross-Sell =
40% + 30% = 70%
Average Value of Cross-Sold Item =
($20 + $30)/2 = $25
Total Sales =
1000 smartphones x $500 (selling price per smartphone) = $500,000
Therefore, Incremental Sales =
(70% x $25 x $500,000) = $8,7500
So, the cross-selling of screen protectors and phone cases generated incremental sales of $8,7500 for the business.
Incremental sales are crucial for businesses to grow revenue, measure performance, and stay competitive in the market. More specifically, they are essential for the following reasons
1. Revenue growth
Incremental sales help businesses grow revenue by identifying new revenue opportunities and increasing sales to their existing customer base.
2. Performance measurement
Measuring incremental sales is a valuable metric for evaluating the effectiveness of marketing campaigns, sales promotions, or other business initiatives. It helps businesses determine which strategies are most effective in generating revenue and which need improvement.
Incremental sales help businesses optimize their marketing efforts and focus on the most cost-effective strategies that generate the highest returns on investment.
4. Customer retention
Cross-selling and up-selling generate incremental sales and can help improve customer retention and increase customer loyalty.
5. Competitive advantage
Incremental sales help businesses gain a competitive advantage by identifying new revenue opportunities and expanding their customer base.
Measuring incremental sales involves comparing the revenue generated by a specific marketing campaign, sales promotion, or other business initiatives to the revenue generated under normal circumstances. The Formula for measuring incremental sales is as follows:
Incremental Sales Formula =
Total Revenue Generated by the Marketing Campaign – Total Revenue Generated under Normal Circumstances
“Total Revenue Generated by the Marketing Campaign” refers to the revenue generated during the specific period when the marketing campaign or sales promotion was active. “Total Revenue Generated under Normal Circumstances” refers to the revenue generated during a similar period when the marketing campaign or sales promotion was inactive.
For example, if a business runs a promotional discount of 20% on a product and generates $10,000 in sales during the promotion period, whereas it generates $7,000 in sales during a typical period, the incremental sales would be calculated as follows:
Incremental Sales = $10,000 – $7,000 = $3,000
So, the promotional discount generated incremental sales of $3,000 for the business.
To measure incremental sales accurately, businesses must track and record sales data regularly during the marketing campaign or sales promotion and under normal circumstances. This data can then be used to calculate incremental sales using the Formula above. By measuring incremental sales, businesses can evaluate the effectiveness of their marketing strategies and make data-driven decisions to optimize their sales and marketing efforts.
Incremental sales is a crucial marketing approach that helps businesses boost sales and revenue growth without necessarily incurring the customer acquisition cost of getting new customers. They are the extra sales generated from marketing campaigns, promotions, or other business initiatives. Several factors can affect incremental sales, including:
Customer behavior is a key factor that can influence incremental sales. For example, customer preferences and purchase patterns can affect customer choice and needs, thereby affecting the success of marketing campaigns and promotions.
The general state of the market, including the level of competition, economic conditions, and consumer preferences, can impact incremental sales.
The quality of products offered can affect incremental sales. High-quality products that meet customer needs and expectations can generate positive word-of-mouth and repeat purchases, leading to higher incremental sales volume. However, low-quality products are less likely to generate revenue.
Pricing strategies can significantly impact incremental sales volume. Discounts, promotions, and competitive pricing can drive incremental sales, while higher prices may reduce incremental sales.
The choice of sales channels, such as brick-and-mortar stores, online marketplaces, or direct-to-consumer sales, can impact incremental sales volume.
Effective marketing and advertising can create brand awareness, increase customer interest and desire, and drive incremental sales volume. However, if the marketing and advertising strategies are not up to par, the frequency and message passed to the target audience can significantly impact the frequency and message.
A positive customer experience can lead to customer loyalty, repeat business, and increased incremental sales volume, whereas a poor customer experience can be detrimental to not just incremental sales but the entire business’s success.
Introducing new products or variants that meet customer needs and preferences can drive incremental sales volume.
Boosting incremental sales is crucial for the growth and profitability of any business. However, in order to increase incremental sales, companies must develop and implement effective strategies. Beyond just creating effective incremental sales strategies, It is equally important to regularly evaluate the effectiveness of these strategies and adjust them as needed to ensure continued success. Here are some strategies that businesses can use to boost incremental sales:
Offering discounts, coupons, or other promotions can incentivize customers to make additional purchases, boosting incremental sales. For example, a store can offer a “buy one, get one free” promotion or a percentage discount on a specific product or category.
Encouraging customers to purchase related or complementary products can increase the value of each sale and drive incremental sales. For example, a clothing store can suggest matching accessories or shoes to customers purchasing a dress.
Offering loyalty programs, such as rewards points or exclusive discounts, can encourage repeat purchases and drive incremental sales. For example, a coffee shop can offer a free drink after a certain number of purchases.
Utilizing customer data to provide personalized recommendations and offers can increase customer satisfaction and drive incremental sales. For example, an e-commerce website can suggest products based on the customer’s past purchase history.
Offering products as a bundle or package deal can increase the value of each sale and encourage customers to make additional purchases, driving incremental sales. For example, a fast-food chain can offer a meal deal with a burger, fries, and a drink.
Offering incentives for customers to refer friends and family can increase brand awareness and drive incremental sales from new customers. For example, an online retailer can offer a discount to both the referring customer and new customers.
Providing excellent customer service, a user-friendly website, and easy checkout processes can increase customer satisfaction and encourage repeat purchases, driving incremental sales.
Regularly introducing new products or product variants that meet customer needs and preferences can drive incremental sales volume. For example, a smartphone manufacturer can release a new model with updated features.
Improving incremental sales success requires a combination of effective strategies and best practices. Here are some best practices that businesses can follow to improve their incremental sales success:
Setting goals for incremental sales and regularly tracking progress can help businesses stay on track and make informed decisions about their strategies. Businesses should define specific and measurable goals, set key performance indicators (KPIs) and metrics, such as a percentage increase in sales, baseline sales figures, customer acquisition cost, customer lifetime value, conversion rates, and average order value, and use analytics tools to track their progress.
Analyzing customer behavior and preferences can help businesses identify opportunities for incremental sales. Businesses should collect and analyze customer data, such as purchase history and website behavior, to identify trends and patterns that inform their strategies.
A good practice to help you increase your incremental sales is developing a strong sales process that works for your brand, products, and customers and enables you to drive more sales. Importantly, a well-defined sales process can help your entire sales team build a consistent, effective playbook that guides all their steps. It can also help your sales reps provide a consistent experience to every prospect and customer, regardless of their sales stage.
Providing personalized experiences, such as personalized product recommendations or targeted marketing messages, can increase customer satisfaction and drive incremental sales. Businesses should use customer data to personalize their interactions and make their paying customers feel valued.
Pricing is a critical factor in driving incremental sales. Businesses should analyze their pricing strategies and adjust them to remain competitive and drive sales. For example, businesses can offer volume discounts or adjust their pricing based on customer behavior.
Retaining existing customers is often more cost-effective than acquiring new ones. Businesses should prioritize customer retention by providing excellent customer service, offering loyalty programs, and providing personalized experiences.
Social media can be a powerful tool for driving incremental sales. Businesses should use social media to engage with customers, promote their products, and offer exclusive deals and promotions.
Testing and refining strategies are crucial for improving incremental sales success. Businesses should test different strategies and analyze the results to identify what works best for their business.
Incremental sales are an essential component of any business’s growth and profitability. It provides valuable insights into customer behavior and preferences, which can inform businesses’ future strategies and product development. Incremental sales can be achieved through effective cross-selling, upselling, personalized marketing, loyalty programs, and social media engagement. By understanding the factors that affect incremental sales volume, businesses can identify areas for improvement and adjust their strategies accordingly.
As identified above, success-driven businesses must set clear goals, analyze customer behavior, offer personalized experiences, optimize pricing strategies, focus on customer retention, and test and refine strategies to improve their incremental sales success and drive revenue.
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