Incremental revenue

Incremental revenue is the sales associated with an additional quantity sold. The concept is used in the following situations:

  • Incremental pricing. When evaluating whether to accept an offer from a customer to sell more goods or services, usually at a reduced price. 
  • Marketing campaign. When evaluating the effectiveness of a marketing campaign; an effective campaign should generate a discernible amount of incremental revenue that would not have occurred if the marketing expenditure had not been made.
  • New product. When determining the sales associated with an extension of a product line.

The calculation of incremental revenue involves establishing a baseline revenue level and then measuring changes from that point.

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Financial Analysis