Incremental Revenue: Definition, How to Find

The additional income created by a firm as a consequence of a specific activity, such as a marketing campaign, a new product introduction, or a pricing strategy, is referred to as incremental revenue. It is the difference in total income earned before and after the activity. Incremental revenue can assist a company in determining the impact of its operations and the return on investment (ROI) of a certain program. It is a key indicator to monitor for firms wanting to develop and expand.


To calculate IR, subtract the baseline revenue from the total income collected once the action is completed.

Incremental Revenue = Total Revenue after Action – Baseline Revenue

How to Find Incremental Revenue

Determine the Baseline Revenue

It’s important to remember that baseline income can fluctuate over time due to a variety of reasons such as market changes, consumer behavior, as well as other internal or external variables. As a result, it’s critical to examine and change your baseline revenue on a frequent basis to ensure correct estimations of incremental revenue.

Calculate the Total Income Earned Following the Action

Implementing the given activity or program results in the production of overall money. For example, if you released a new product, track the income produced following the launch.

Subtraction of Baseline Revenue from Total Revenue

The difference between the total revenue earned after the activity and the baseline revenue determines the IR. Additionally, a project or action can create this extra money.

Incremental Revenue Example 1:

Consider the following example. A corporation generated $90,000 in sales to introduce a new product and $110,000 in revenue once the new product was introduced. You estimate that if not for the new product, your revenue would have been $100,000.

Incremental Revenue = Total Revenue after Action – Baseline Revenue

IR = $110,000 – $100,000

IR = $10,000

As a result, the new product launch earns an additional $10,000 in revenue.

Incremental Revenue Example 2:

Assume a coffee shop introduces a new line of specialty beverages and wishes to quantify the incremental income generated by this new product line.

Before the introduction of the new product line, the coffee shop’s monthly revenues were $10,000. The coffee shop’s monthly sales jumped to $20,000 with the introduction of the new product range.

Now we will account for the additional revenue. To do this, we must first identify the baseline revenue. revenue that might have been collected in the absence of the new product line is the baseline revenue. Also, if the coffee business thinks that without the additional product line, it would have produced $11,000 in revenue.

Incremental Revenue = Total Revenue after Action – Baseline Revenue

IR = $12,000 – $11,000

IR = $1,000

The new product line generates $1,000 in additional income every month. The coffee shop may use this data to assess the performance of its latest product launch and make educated decisions regarding future development and advertising strategies.

The Benefits of Incremental Revenue

Measuring the Performance of Certain Actions

Incremental revenue gives a clear indicator of a business’s success with a given activity or choice. This can also assist firms in determining the efficacy of their marketing efforts, product introductions, or pricing strategies.

Identifying Areas of Growth

Incremental revenue can assist firms in identifying areas of growth and revenue prospects. Businesses can identify where to spend their resources for the greatest growth by examining the incremental revenue earned by different products, markets, or marketing initiatives.

Making Educated Judgments

Businesses can make informed decisions regarding future investments and efforts by assessing incremental revenue. For example, a company opts to increase its investment in a certain marketing campaign or product line depending on the incremental revenue earned by that project.

Improving ROI

Incremental revenue helps firms enhance their return on investment (ROI) by understanding which activities or investments generate the greatest revenue. Businesses can leverage this data to enhance future investments and increase profitability.

Incremental Revenue Allows for Data-driven Decision-making

Incremental revenue delivers objective, data-driven insights into a company’s performance. This can help companies make more informed decisions while also lowering the risk of making decisions based on personal views or perceptions.


Incremental revenue is an important indicator that may help firms assess the effectiveness of their operations, find possibilities for growth, and make informed decisions that boost profitability and ROI. Businesses can measure the incremental income created by a certain activity or project to evaluate the impact of their advertising campaigns, product launches, or pricing tactics.

Incremental revenue provides objective, data-driven information into a company’s performance, allowing for data-driven decision-making while reducing the risk of making choices based on subjective judgments or presumptions Businesses can produce additional income to accomplish their targets and expand their operations by optimizing future investments and increasing profitability.