In marketing, what matters is not how much your target audience bought, but how much more they bought because of your marketing. That’s incremental sales, and it drives your true ROI. This white paper will show you how to calculate it

1. © 2013 Catalyst
The Case for Incrementality
How to Measure the Real ROI of Your
Marketing Programs
By Marc Solomon, Director of Analytics, Catalyst
6/3/2013

2. Executive Summary
2
In marketing, what matters is not how much your target
audience bought, but how much more they bought
because of your marketing
That’s incremental sales, and it drives your true ROI
This white paper will show you how to calculate it

3. Incremental Sales
3
Revenue gained from a marketing activity
that would not have been generated without
that marketing activity

4. Example: Assessing Two Campaigns
Let’s compare the results of two hypothetical
campaigns:
Each required $100,000 of marketing investment
Sales from targeted customers:
Campaign A: $500,000
Campaign B: $250,000
Campaign A looks like the clear winner:
It generated double the sales, didn’t it?

5. Quick Analyses Can Mislead
5
But what if Campaign A targeted customers
who would have spent $500K anyway?
The $100,000 marketing spend did nothing for you – no
incremental sales
And, what if Campaign B targeted prospects who would
not have purchased anything if you hadn’t invested your
$100K to reach them?
Campaign B now looks like a better investment

6. Focus on Incremental, Not Total Sales
6
B is the clear winner!

7. How to Measure Incremental Sales
7
Create a baseline to represent the “business-
as-usual” results:
Ideally, a controlled experiment to isolate the factor you’re
trying to measure (e.g., impact of a marketing campaign):
Pick a control group: A random portion of your target audience who
will not be marketed to
Must look just like customer group who will receive marketing to ensure
apples-to-apples comparison

8. How to Measure Incremental Sales
8
Incremental Sales Calculation:
Sales from Targeted Audience – Sales from Control Group
You can definitively attribute the difference to your
marketing campaign

9. Alternative Baseline Approach
9
Sometimes it’s not feasible to create a control
group without exposure to the marketing:
Historical trends can be used to estimate the baseline sales
you’re expecting without the new marketing
However, this isn’t highly reliable and can potentially lead to
incorrect conclusions

10. Incremental Channel Impacts
10
A parallel approach can assess the impact of
specific marketing channels on sales:
The key is comparing results between groups of customers
who are generally similar except for marketing exposure

11. Practical Considerations
11
Measuring incremental sales works well in direct marketing
… but is difficult to do with mass marketing/advertising
where it is hard to create an identical random control group
It is typically worthwhile when there are large target
audiences and there is minimal opportunity cost to holding
out a statistically significant control group
If you can’t measure incrementality directly, use historical
trends and forecasts … you’ll still get a more accurate read
of your real ROI

12. Final Words
12
Incremental, not total, sales should always be
used to determine your marketing ROI.

13. About the Author
13
Marc Solomon, director of
analytics at Catalyst, holds an
MBA from the Stanford
Graduate School of Business.
He has leveraged analytics to
drive results for Fortune 500
companies for nearly 20 years.

14. 14
Catalyst is a direct and digital marketing
agency that knocks big data down to size. We
pair insight with analytics to take the
guesswork out of marketing decisions. Think of
it as Science + Soul.
About Catalyst
/scienceplussoul
www.catalystinc.com info@catalystinc.com