What is an Incremental Sale?

What is an Incremental Sale?

JebCommerce is a Corporate Member of the Performance Marketing Association.

I have the distinct honor of serving on the Measurements and Insights Council of the PMA with some of the industry’s best and brightest.

Our conversations and activities many times center on how can the PMA, it’s members and this particular committee provide better data and insight on our industry to allow advertisers, publishers, agencies and networks do their job better, but also represent the channel more effectively and defend the sales attributed to it. It’s conversations like these that I love.

The conversation to defend this channel happens more and more. Take for instance an infographic that Shawn Collins shared that organized all the marketing technology of ecommerce – affiliate marketing and all the companies in this channel weren’t even included. A seat at the table still proves to be allusive.

There are many reasons why stretching from a deep history of fraud issues, channel cannibalization and more. One other reason is “incrementality” or “incremental sales”.

What are incremental sales?

Dictionary.com has the definition as “increasing or adding on”. Let me elaborate and focus it on our industry:

Incremental Sales – “a sale or action that resulted from a particular marketing activity, campaign, link or channel, that the advertisers/merchant would not have realized without the particular partner, channel, campaign or activity taking place”

Basically, to determine if a sale, lead or other action is incremental, you are saying that you only received that customer or lead because of the partner, action or campaign that ultimately took credit for driving that action.

Well, what is non-incremental then? That is just as important, especially for those in our space to understand.

Non-Incremental Sales – “a sale that was credited to a channel/partner/campaign that I would have received anyway, even if I didn’t engage with that channel/partner/campaign and I simply added costs to that acquisition by having this additional channel take credit for it.

Now, don’t shoot the messenger. I’ve edited that copy from what I have heard time and time again. It can be much harsher. Not saying it’s right, but we have to understand this sentiment, concept and the ways we can defend the channel accurately against them. I’ll try to address some of that here.

How Are Incremental Sales Measured?

There are a myriad different ways to measure incremental sales. Within our stable of clients, each and every client determines incremental a different way. Here are some examples:

It’s Raining New Customers – Many advertisers are able to see which customers come through a given channel that are new. Now, the definition of “new” is different among our clients and advertisers I’ve worked with. Some assume a time since last purchase as new, or new all time, or even new to this channel.

For instance, if a customer hasn’t purchased through any channel, offline or on, in two years, if they come through the affiliate channel now, they are considered new. This seems to be preferred because although it requires more data capture capability than many have, it is more simple than more complex attribution models.

Single Source Rule – Other advertisers only consider a sale, lead or action as “incremental” if it only came through the source (channel, partner etc) that is taking credit for it. All too often if a customer is acquired through the affiliate as last click attribution, but they were touched by just about any other channel, the advertiser will consider it non-incremental.

The Wonderful Oz Says So – I see this more and more often and it may be the most detrimental to our industry and your defense of the channel. A vast majority of advertisers have some sort of analytics package they use as their database of record. They may use Coremetrics, SiteCatalyst or even Google Analytics.

If the sale shows up in your network AND in their analytics package (the great and wonderful OZ behind the curtain) then congratulations, you have been deemed incremental. If for some reason it doesn’t, “Survey Says – X!”.

The problem with this has many different wrinkles, but mostly it is simple. The team/person who set up the attribution assumptions in the analytics system knows nothing about affiliate marketing, doesn’t understand the difference between last and first click attribution or simply does not set up this channel correctly in the system. And unfortunately, if SEM is reporting right, then those low numbers in the affiliate channel are correct “and I’m paying too much for sales I’m already getting”.

Those are neither the only ways to measure incremental sales nor complete in their definition or description, but it should get you thinking.

Why is Measuring Incremental Sales Important?

Simply put, the executives who sign off on the checks sent to the affiliates, agencies and networks are worried about driving only incremental sales and increasing margins and the health of their channels, divisions and company as a whole.

I have more and more conversations about how the affiliate channel can drive up liftetime value, new customer acquisitions, margin and profitability – all ways to measure incrementaility. These execs don’t want to pay more for a sale they were getting already, but that’s pretty easy to understand right? I don’t want them to do that either.

We need that seat at the table. Look at that chart that Shawn Collins shared again. The affiliate channel isn’t listed, it was overlooked. Because we sometimes don’t speak the same language as those other channels, performance marketing isn’t in the conversation.

So it comes down to how do you show the sales your network, your partnership, your marketing campaigns are driving are incremental?

I’ve got some ideas, yours?