Incremental Revenues - Fact or Fiction

Last week, I got a chance to look at a tool that was developed by a company called Advanced Predictive Technologies. This tool cultivates the culture of Test and Learn. Say, you are planning to put together a marketing campaign initiative, this tools gives you the flexibility to test the effectiveness of the campaign on a small sample before you roll it out to the whole population. The idea behind this is great but the users of this tool need to be extremely cautious in interpreting the results of their promotion. The reason why these kinds of tools are profligating the industry landscape is to provide some sort of a platform and a strutured framework that can systematize the process of isolating the benefits for the thousands of initiatives being rolled across a corporation.

Each of the initiative claims to add an incremental x% to the top-line revenues over and above all the initiatives that are already in effect. At times, you get a feeling the amount of incremental revenue that each of the initiatives bring to the table, if you add them up is greater than the base business itself. An interesting analogy would be the value of derivatives from a financial product is greater than the underlying financial product itself.

At some point, I would like to design a tool (if somebody has something like that already in place - please let me know) that clearly identifies what the base business value is and layer in - each of the incremental benefits from different initiatives. Eventually this representation of the base business and incremental uplifts along with the costs of implementing each of the initiatives should become part of annual reports that can allow some sophisticated investors to make appropriate investing decisions.