New channel: computing the increment after transfer and dependency.
Key distinctions
Three conditions before calculating.
Net demand
Compare the buyers, areas or occasions genuinely out of reach with what would have been sold elsewhere. Internal transfer must be estimated with a comparator, not inferred from customer overlap alone.
Full cost to serve
Commission, logistics, returns, content, support, data, mandated promotion and stock requirement must be attached to the channel. Shared costs are free only if they genuinely remain unchanged.
Exit option
Data ownership, contract duration, dedicated stock and revenue concentration determine reversibility. A positive contribution can still be insufficient if the dependency becomes critical.
Method
Building a generalisable test
- 01Define the out-of-reach population
Write down which areas, queries, segments or occasions the channel is supposed to add; that population is the promise to be verified.
- 02Compute the differential account
Value the new sales, subtract the margin lost on transfers and add every variable or fixed cost triggered by the channel.
- 03Sample representative units
Include ordinary products, areas and periods; a pilot limited to the best references overstates generalisation.
- 04Define the steps
Make each extension conditional on a threshold of contribution, new demand, service quality and concentration.
The incremental economic account of the channel
The revenue announced is reconciled with displaced sales, product margin, commissions, returns, service and fixed costs.
Contribution too low given the transfer uncertainty.
€1.4M of sales for only €57,000 of contribution
A marketplace forecasts €1.4M of sales. 30% would be transferred from the direct site. Product margin on the genuinely additional revenue is 45%, the commission of 18% applies to all sales, returns and service cost €72,000, and the amortised integration €60,000.
Additional revenue: €1.4M × 70% = €980,000. Product margin: €441,000. Commission: €252,000. After €72,000 of service and €60,000 of fixed costs, net contribution = €57,000.
The channel does not yet justify a national rollout. A pilot must confirm the transfer, reduce returns and check that new demand exceeds 70% of sales.
Acceptance conditions
What must be true to act.
- 01
Transfer from each existing channel is valued as lost contribution.
- 02
Commission, returns, service, stock and exit costs are included.
- 03
The pilot covers representative units and a full return horizon.
- 04
A concentration limit and a right of access to the data are put into the contract.
Limits
What this analysis does not prove.
- Customers may use one channel to discover and another to buy, which complicates estimating the transfer.
- Coverage and awareness effects can appear after the pilot's horizon.
- Commercial terms can change with volume and make a small test unrepresentative.
References
Works cited.
- Neslin, S. A. et al. (2006), “Challenges and Opportunities in Multichannel Customer Management”, Journal of Service Research.
- Brynjolfsson, E., Hu, Y. J. & Rahman, M. S. (2013), MIT Sloan Management Review.
- Ansari, A., Mela, C. F. & Neslin, S. A. (2008), Journal of Marketing Research.