Incremental revenue definition
/What is Incremental Revenue?
Incremental revenue is the sales associated with an additional quantity sold. The calculation of incremental revenue involves establishing a baseline revenue level and then measuring changes from that point. The concept is used in the following situations.
Incremental Pricing
Incremental revenue calculations are derived when evaluating whether to accept an offer from a customer to sell more goods or services, usually at a reduced price. The incremental price must be high enough to still generate a profit for the seller.
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Marketing Campaigns
Incremental revenue should be considered 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 Products
Incremental revenue should be estimated when determining the sales associated with an extension of a product line. Any incremental revenue generated should exceed the incremental cost associated with adding one or more new products.