Every marketer knows it's easy to waste money on ineffective campaigns that have little to no impact. Plus, there are a variety of different metrics you can use to assess a marketing campaign. But if you want to cut to the chase, there's one metric that really counts. Incremental sales measure the direct impact of your marketing efforts, so if you want to know which campaigns are doing their job, your incremental sales hold the answer.
Your sales team, marketing managers, and company benefit from knowing your average rate of incremental sales for campaigns. It gives you a benchmark for sales rates that will make meaningful progress going forward.
The formula for incremental sales
Calculating incremental sales is simple with the right tools. First, you'll need to define your parameters. Choose the timeframe in which you'd like to measure sales and marketing activity.
Next, decide exactly what you want to measure. A direct mail campaign launched at the beginning of the month or a social media campaign last holiday season are just two examples.
The formula: Total Sales for a Given Campaign - Typical Sales for that Period
Depending on the situation, identifying a number for typical sales in a given period may be challenging. You'll need to look at a promo-free timeframe and compare it to the promotional timeframe. The difference between the two is your incremental sales metric.
The higher the number, the better your campaigns are performing. Be sure not to conflate the number of increased sales with the amount of increased profit. You'll need to consider the cost of each marketing activity to find your bottom-line profits.
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Obstacles to measuring incremental sales
In some cases, calculating this metric is a breeze, but in other cases, the simplicity of the formula is deceptive. For instance, a company may have a variation in sales for other reasons. High turnover, silos between marketing and sales, changes to products and services, and the inability to measure accurately may skew the results one way or another.
If a store runs an in-person event, many factors that can't be measured can influence buyers. Similarly, if a company runs a direct mail campaign at the wrong time of year, it may not be the campaign itself that was the problem — it was the timing.
In the digital realm, incremental sales can be difficult to measure when working with partners. If the customer doesn't use the specific affiliate link to purchase, for example, there's no way to know the partner influenced the sale.
These nuances must be considered through the lens of your unique business, and there are different ways to set up an incrementality test. Many other metrics can also come into play, including first-touch percentage, new customer percentage, and quick conversions. These measures give additional insight into your campaigns, your customer base, and their specific preferences.
Calculating any metric for your digital advertising efforts is fairly simple. However, getting them from a direct mail campaign and integrating your digital and direct mail campaigns gets complicated. This is why Lob offers a direct mail automation platform that streamlines the process for you. You can get insights from direct mail metrics without having to do the legwork.
Related: The Best Metrics to Measure Direct Mail Effectiveness
The value of incremental sales
The average small business spends an estimated 7-8% of its revenue on advertising, while B2B enterprises tend to spend 2-5%. While it's a small percentage overall, it's typically between $19,000 and $100,000 per year — an amount you want to use as optimally as possible. Unfortunately, wasting ad spend is a common mistake even among veteran companies. Incremental sales help you see clearly and act before waste happens.
Test special offers
Let's say you want to find out the quantitative value of a special offer, upselling practice, or a short-term ad campaign. These are just a few situations where you'll want to calculate incremental sales. Doing so helps you create an iterative process in which your marketing ROI just keeps getting better.
Avoid budgetary waste
The value of measuring incremental sales is that it answers pivotal questions. Knowing this metric helps you maintain margins and know how much to pay affiliates. If you find you're not getting any more sales than you typically would during a campaign, you can cut your ad budget to avoid waste. Once you tweak your advertisements or launch a different campaign, you can again test its effectiveness right away.
Never worry about marketing ROI again
If you're facing direct mail marketing challenges, finding ways to measure results and raise ROI are likely at the top of the list. At Lob, we help marketers harness the power of both digital and direct mail marketing into one seamless omnichannel experience for their customers. With features like address verification and data protection controls, our direct mail automation system allows you to capitalize on direct mail at scale.
Learn how to increase conversions to support your bottom line by watching our webinar recording, Real-Life Direct Mail Strategies to Crush ROI and Budget Goals.