Incremental Volume Tiger Trap litt2021

Marketing Essentials
2021
Professor Steven Litt
@StrategySteven
Ready to be a Marketing professional?
The ‘Incremental Volume’ Tiger Trap
©2021 Steven Litt . All rights reserved. May not be scanned, copied, duplicated or posted publicly to a website in a whole or in part.

‘Incremental’: the % of a Product’s Volume that is ‘additional’
for an organization. Usually used in conjunction with a New
Entry (product or service) to evaluate its worthiness for launch
errr.. that’s it????
Sounds pretty simple, doesn’t it?
so……….
• What is this topic so touchy?
• What could possibly make it controversial, sensitive?
Marketing Tools & Skills
Incremental Volume

Practical Tips for the Marketer
Wait! I was simply asked how much of this proposed New Entry’s
sales volume will be incremental?
Now I’ve been demoted/fired/let go.
What the heck went so wrong?
Where it does go wrong is when managing bias & assumptions
associated with this contentious query:
“How much incremental volume do we get
with our New Entry plan?”
Tiger Traps: Incremental Volume

”How much incremental volume do we get
with our New Entry plan?”

Market Size studies are often follow by this query:
“How much incremental volume do we get with our New Entry plan?”
Proceed with Caution because each of these risky
scenarios is far too common:
(i) CEO suffers from ‘locked-in volume’ syndrome; or
(ii) Myopia or pressure to say the New Entry is 100%
Incremental (no cannibalization)

Proceed with Caution! Scenario #1
(i) CEO suffers from ‘locked-in volume’ syndrome
When presented with a New Entry to launch (new product/service), a CEO may
resist, saying the New Entry fails to generate much ‘growth’ (incremental
volume).
Many CEO’s focus ONLY on ‘added growth’ to the organization’s revenue line.
These CEO’s may assume a flat volume or market share
They see the Status Quo as a given’ ie they assume that the current amount of
sales ‘is a lock’.

Proceed with Caution! (i) CEO ‘lock-in’ assumptions
If a New Entry Project Champion is honest, their launch rationale will
acknowledge that just PART of the New Entry’s sales is ‘growth’; the rest of its
sales revenue just helps offsets future declines on current product lines

This could be a flashpoint with a boss who feels you are being ‘defeatist’ by
suggesting the Status Quo plan will yield declining sales volume. C’mon! How
common is it to hold volume by coasting? Sadly, this is a popular CEO view.
Unrealistic view of
‘Incremental volume’

This is probably a more likely or realistic scenario. But tread carefully! Many
CEO’s will find it ‘unacceptable’ to acknowledge this
More realistic view of
‘Incremental volume’

Typically, only PART of the New Entry’s sales is ‘growth’; the rest of its sales
just helps offset declines on current product lines.
It is usually unrealistic to assume Status Quo = Flat sales
If you let a CEO win this “Status Quo = Flat Sales” argument uncontested; then
in my experience, 1 of 2 paths is likely to follow:
1. They approve investment spending in the New Entry ONLY early on (eg in
Year 1 & 2), then they expect to “coast” (not reinvest).
2. CEO refuses to invest in ANY New Entry, failing to see a ‘Holy Grail’ ie a
‘pure growth path’ they think exists a.k.a. Blockbuster Video syndrome; ie
‘Let’s not go online; I don’t see how doing so generates incremental sales’.
“Pure Incremental Growth’ is NOT realistic.
In most markets, coasting won’t allow you to ‘hold volume’.

How to combat the ‘Status Quo = Flat sales’ syndrome.
IF YOU’RE VERY COURAGEOUS, politely ask Exec to please
suggest some of the organization’s past cases, product lines or
scenarios where a ‘Do Nothing’ strategy let the company hold
volume/share, so you might ‘extract the lessons learned & find
specific Best Practices'
→ you may given examples. They’ll turn out, on closer inspection,
to NOT involve investing less, or NOT holding market share.
NB: This isn’t b/c bosses are being deliberately deceptive, but b/c
companies thrive on Mythical success stories eg “…that last New
Entry generated 100% Incremental sales”…not!

Proceed with Caution
Scenario (ii): The ‘No Cannibalization’ Mindset
Managers who champion a project often underestimate cannibalization.
They’re ignorant (or in denial) about which Current Item(s) a New Entry will
cannibalize eg Which current items (or resources) a New Entry will ‘eat into’.
‘100% Incremental’ is NOT realistic!
In most launches, New Entries are rarely 100% Incremental.

Sales or Marketing Managers who champion a project
often underestimate cannibalization. There are 2 types of ways that a
mesmerizing New Entry may harm the rest of the product line.
These happen b/c an org & its suppliers/partners (upstream or down)
have finite resources!
A New Entry puts pressure on the entire system; something will ‘give’.
The project champion may be ignorant (or in denial) about:
• direct impacts (ie which current items the New Entry ‘eats into’); and
• indirect impacts (the B2B sales time it cuts into, the ‘scarce
resources’ redeployed from current entries, to assist the New Entry).

To find ‘Direct Impacts’, find data at tie of past launches ie
trended sales data for the item launched and all company items.
You will typically learn some other product lines suffered. This is
‘direct’ cannibalization; the swap of 1 sale/usage for another.
Eg A cola firm launches their 1st lemonade; the ‘company line’
might optimistically be: “Lemonade is a different taste, so sales
will be incremental” however, this item will extract SOME usage
occasions or ‘share of stomach’ from current cola beverages!

“To find ‘Indirect impacts’. Again- data is your ally! Find the Track Record
in & after past launches; trade support, sales call reports, order fulfilment,
customer service, stockouts, order deferments. You may find some other
organizational entries suffered. Examples:
Coop ads/display space booked for current item ‘redeployed’ to the launch entry item.
At-shelf facings reallocated away from organization’s current items.
Sales Account managers spend less time on other products (you may find using eg
saleforce.com)
Manufacturing line time reallocated to New Entry (due to inaccurate launch forecasts,
other organization entries are ‘shorted’ during or shortly after the launch)
Purchasing orders reprioritized (eg for packaging, etc) to shift Launch Entry materials
ahead of those for current items (look for ‘Expedited’ delivery status)
→ you will find MANY company-wide sacrifices were made to
deliver that (mythical) ‘100% Incremental’ New Entry of the past.

If company lore says a past New Entry “was 100% Incremental”
and the facts you find indicate this is a myth….
TIP:
Tread warily!
This is Sensitive stuff esp in larger organizations!
The Project Champion of that launch was probably promoted &
their reputation rides on the project’s mythical status.
Pulling apart their Myth is risky!

Imo it’s safer to use this knowledge in an entrepreneurial
firm or one being restructured/ redesigned
eg a courageous New Product Development Director, tasked with
fixing a broken R&D process, may resort to such bold fact finding.
Be warned! Few topics are as sensitive as the facts
behind Company Myths.
The ‘launch success/impact’ facts that
you find may prove lethal for your career,
especially in Big Organizations.

This topic is a TRUE TIGER TRAP; be warned!
Many Execs have built lofty careers on ‘Spin’ not on true business
growth. Spin & Myths can get you far in Management.
So, to awkwardly paraphrase Blade Runner:
“Shame that story is a lie, but then again, what is truth?”
Or, before proceeding, ponder this quote from A Few Good Men:
“You want the truth? You can’t handle the truth!”

SOURCES
• Cover photo courtesy of Mandy S Photography
• The noun project accessed May 7, 2021 author cited in
text https://thenounproject.com/
• Thanks to Allyson Kinsley, Mike Puican, Mike Stangel, George
Cugini, Roger Gawne, Craig Bundrant, Pat Stewart, Darcia
Joseph, Grant Crosby, Lou Buccino, et al for helping me over
many years, and thanks to Queen’s University’s Ken Wong &
Dan Monieson for sending me down this road with confidence.

Incremental Volume Tiger Trap litt2021

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