Incremental Revenue: Definition and How to Measure It

By Alva Chew · Updated 2026-11-07

Definition Incremental revenue is the sales you earned only because of an action, such as a loyalty program, and would not have earned otherwise. To measure it, compare members with a similar group of customers who did not join, and count only the difference. A points program makes this easier, because every sale and every reward is recorded against one balance.

What is incremental revenue?

Incremental revenue is the part of your sales that exists because of a specific action. If you launch a loyalty program and a member spends US$40 a month, but would have spent US$30 anyway, the incremental revenue is US$10 for that member.

The idea is a comparison. You need a baseline, which is what customers would have spent without the action. Everything above that baseline is incremental. Everything at or below it is revenue you would have kept regardless.

Why does it matter for a loyalty program?

Most members of a new program were already your regulars. Counting all of their spend as a result of the program makes it look far better than it is.

Academic work on real programs shows why. In a study of one convenience store franchise, light and moderate buyers bought more and grew more loyal after joining, while heavy buyers claimed most of the rewards but did not change their behaviour.

Finding	Setting	Source
Light and moderate buyers increased purchases after joining. Heavy buyers did not change behaviour	One convenience store franchise	Liu, Journal of Marketing, 2007
3% of purchases had a redemption and 60% of customers never redeemed over 43 months	One Latin American home and hardware retailer, 1% of spend earned	Stourm, Bradlow and Fader, Journal of Marketing Research, 2015

Sources: Liu, author summary, Stourm, Bradlow and Fader (PDF).

Both are single-retailer studies, so treat them as warnings about what to check, not as a rate you should expect.

How do you calculate incremental revenue?

Use a comparison group. Pick a period, such as three months, and compare two sets of similar customers.

Incremental revenue = (average spend per member − average spend per comparable non-member) × number of members

The numbers below are illustrative assumptions, not benchmarks.

Line	Value
Members	300
Average spend per member, 3 months	US$96
Average spend per comparable non-member, 3 months	US$90
Difference per customer	US$6
Incremental revenue	US$6 × 300 = US$1,800

Total member revenue in this example is US$28,800. Only US$1,800 of it, about 6%, is incremental. Multiply the US$1,800 by your gross margin, then subtract rewards and software, to reach loyalty program ROI.

What is a fair comparison group?

The comparison group must look like your members before the program. Good options are:

The same customers’ spend in the months before they joined.
Customers of a similar visit pattern who have not joined yet.
One outlet that launches later than another, if you have more than one.

A group of casual customers against a group of regulars gives a false result. A cohort analysis by month of joining helps you spot that, and average order value shows whether the lift came from bigger baskets or more visits.

What are common mistakes?

Counting all member sales. This includes spend that would have happened anyway.
Ignoring who joins. Regulars sign up first, so early numbers flatter the program.
Skipping the margin. Revenue is not profit. Reward cost comes out of margin.
Measuring too short a period. A week after launch tells you little. Our guide to measuring loyalty program success suggests what to track monthly.

If the lift is near zero after a fair comparison, read is a loyalty program worth it before changing the reward rate.

How Gimify fits

Gimify is points only, and points are earned in proportion to the purchase amount, so each member’s spend and rewards sit in one balance you can compare. The free plan covers one outlet with unlimited members.

Questions owners ask

What is incremental revenue in simple terms?

It is the extra money you took in because of something you did, such as launching a loyalty program. Sales that would have happened anyway do not count.

How is incremental revenue different from total member revenue?

Total member revenue includes purchases members would have made without the program. Incremental revenue is only the increase over a baseline, such as their own spend before joining or a comparison group.

How do I calculate incremental revenue for a loyalty program?

Take the average spend per customer in the member group, subtract the average in a comparable non-member group, then multiply by the number of members. Run it over the same period for both groups.

Is incremental revenue the same as profit?

No. It is sales, before costs. Multiply it by your gross margin and subtract reward and software costs to see whether the program paid for itself.

Why can my best customers make incremental revenue look bigger than it is?

Frequent customers join first and redeem most. Their spend is high with or without the program, so comparing them to non-members overstates the lift.