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Marketing program performance appraisal: from baseline to incremental sales

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Marketing Performance Measurement When assessing the outcomes of various marketing promotional initiatives, careful attention should be paid to the very “law” of sales, that is: total sales equals baseline sales plus incremental sales from marketing.

Baseline sales define the expected level of sales that would be achieved without the marketing program, whereas incremental sales refer to sales that, on the contrary, are attributed totally to the marketing program.

Below are some cautions regarding these two concepts:
  • Estimating baseline sales is hard to perform, marketers usually resorting to historical data on sales, integrating possible influence of various factors (other than marketing programs) that might influence future sales.
  • Incremental sales from marketing can arise from advertising programs, promotions or other marketing activities. Calculating incremental sales from marketing involves adding up sales generated by all of these directions.
  • It is argued that the desire to generate incremental sales is in strong correlation to targeting consumers that are only likely to buy if they are included in the campaign, and not consumers that would buy either way, this impacting on the efficiency of the marketing program resources allocation. Thus, measuring incremental sales is not enough; focus should be given to means of maximizing incremental sales.
In addition to tracking baseline and incremental sales, marketers pay attention to other related metrics, as it follows:

% Lift of sales = ($ Incremental sales / $ Baseline sales)*100

$ Cost of incremental sales = $ Marketing spending / $ Incremental sales

$ Profitability of marketing program = $ Profits achieved with marketing program / $ Estimated profits without marketing program

Further reading: Image source: OFFICIALNXP
The 2010 Magic Quadrant for Business Intelligence Platforms
The case for using a Performance Management Glossary
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