How to measure incremental sales
To calculate incremental sales, you'll use this formula:
Incremental sales = sales with initiative - baseline sales without initiative
This figure tells you exactly how many incremental sales you generated thanks to various marketing efforts versus the baseline sales you would expect without any additional marketing efforts.
Let's take a look at an incremental sales example to help you understand how it works:
Suppose a local coffee shop has seen steady sales of 100 cups of coffee a day at $5 each. The management wants to boost sales and introduce a promotion where every coffee purchase comes with a half-priced pastry.
For a month, every time a customer buys a coffee, they're offered a pastry for just $2 instead of the regular $4. Because of the promotion, the local coffee job saw the average daily coffee sales increase from 100 to 110 cups, and 60% of those who bought coffee also took advantage of the half-priced pastry offer.
Coffee sales were $550 (110 cups x $5). Pastry sales were $132 (110 x 60% x $2). These sales total with the marketing campaign are $682 ($550 + $132). We already know that baseline sales were $500 (100 cups x $5). Now, let's measure incremental sales by plugging these sales figures into our formula:
Incremental sales = $682 - $500 = $182
Therefore, this particular marketing campaign led to an incremental sale of $182 per day, which can be used to calculate average annual sales growth if the promotion continues. The coffee shop can then weigh this against its costs to determine the net profitability of its marketing efforts.
How to identify opportunities
Spotting opportunities for incremental sales can be challenging. These opportunities are often subtle but can lead to significant sales revenue boosts when tapped into effectively.
Analyzing customer data
The first step in identifying these opportunities is to analyze customer data. By analyzing customer data, including purchase histories and browsing patterns, brands can identify trends, preferences, and behaviors.
If a segment of customers consistently buys a particular product but not its complementary accessory, there's potential for a targeted cross-sell campaign. Similarly, if customers often upgrade to a premium service after a certain period, it highlights an opportunity for timely up-selling.
Recognizing cross-selling opportunities
Cross-selling capitalizes on the principle that customers who buy a particular product or service might be interested in related offerings. To identify these opportunities, businesses should map out product relationships. A customer buying a laptop might be interested in software or extended warranties.
Customer surveys can also provide insights into products or services customers feel would complement their purchases. By understanding these relationships and customer perceptions, brands can strategically position complementary products or services, enhancing the customer's overall experience and boosting sales.
Leveraging up-selling techniques
Up-selling encourages customers to purchase higher-end products or upgraded versions of their chosen items. Identifying these opportunities often involves understanding the value ladder of your offerings.
For instance, a SaaS company might notice that businesses with more than ten employees often benefit from their premium package features.
With this information, the company can target businesses on the brink of expansion with tailored up-sell marketing campaigns. Another technique involves showcasing the added benefits, features, or long-term value of the premium offering, making the customer see the enhanced value they'd receive for a slight increase in cost.