One of the best ways to build sales as a CPG company is to run promotions. As a smaller brand, you need promotions to help entice new customers to try your products and see what sets you apart. While these campaigns can be pricey, it’s imperative to find cost-effective solutions.
So, are your marketing tactics working as well as they should? Or are they just cutting into your bottom line? It’s far too easy for small brands to “spend themselves off the shelf.” You can find out by looking at your incremental volume. Don’t worry if you don’t know what that is – we’re about to break it down.
Incremental Volume Definition
Your sales volume is the total amount of products you’re selling in a given week. When you run a promotion, you will likely get a boost in your overall sales. That boost is tracked as incremental volume.
What’s crucial to point out is that this volume is only the difference between your regular sales (aka non-incremental volume) and your sales during the promotion.
So, let’s say that you usually sell 100 packages of product X in a given week. During your promotion, you sold 110. In this case, your incremental volume is 10.
What is Non-Incremental Volume?
Non-incremental volume is the number of sales you would have sold in a given week with or without a promotion. Using our above example, if you run a promotion and your sales volume doesn’t increase at all, you can tell that your marketing push isn’t getting any traction.
Knowing the difference between these numbers helps you pinpoint and track your promotional success. Without having a baseline, it’s impossible to tell if a promotion is actually helping or hurting your brand.
What Does Incremental Volume Mean in Business?
While the value of this metric is pretty apparent, there’s a lot of data that goes into your incremental volume value. Here are three points to consider when looking at this information.
Incremental Volume Doesn’t Account for Everything
Unless your company only sells one product in one store, many different factors can affect your sales volume. When it comes to incremental volume, NielsenIQ only looks at three components:
- Shelf Price Reductions – NielsenIQ only counts reductions of five percent or more when compared to the base price.
- Retailer Feature – The store you sell in has promoted your products via ads and/or coupons, meaning that customers should know about your promotion.
- Secondary Display – These displays must be temporary and have products available for purchase. A promo display that just has coupons or marketing materials won’t count.
Incremental Volume Can Be Small
Ideally, every promotion would deliver a substantial sales bump. However, if you run promotions regularly or your deals are not enticing enough to make consumers change their habits, the boost may be pretty small.
Also, remember that NielsenIQ only pays attention to specific attributes, which are not necessarily under your control. For example, one retailer may put up secondary displays and run ads while another doesn’t.
How Do You Calculate Incremental Sales Volume?
As we mentioned, incremental sales volume only measures the increase in sales during a promotion. Again, if you sell 100 packages of a product in a week and 110 during a promotion, your incremental sales volume is 10.
Another element to pay attention to is the difference between incremental to brand and incremental to category. Here’s a quick overview:
- Incremental to Brand – If you start adding new product offerings (i.e., larger sizes or different flavors), you can increase your sales incrementally because you have a broader product catalog.
- Incremental to Category – Oat milk wasn’t really a thing until about 10 years ago. Before then, CPG data wouldn’t have listed oat milk in a product category. Once Oatly started selling their milk, they added to the entire category since oat milk couldn’t be lumped in with regular cow’s milk.
Byzzer is a self-serve business intelligence platform that gives small CPG manufacturers the power of NielsenIQ data.