Incremental Recovery Rate (IRR)

1) Meaning

Incremental Recovery Rate (IRR) is a causal effect metric that measures how much more recovery (or repayment, or conversion back to “good status”) happens in a treatment group compared to a control group.

In other words:
“What fraction of people recovered because of the intervention, compared to if we had done nothing?”

This metric is widely used in collections/recovery, healthcare, and customer churn management.

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2) Formula

$\text{Incremental Recovery Rate} = P(\text{Recovery} \mid \text{Treatment}) – P(\text{Recovery} \mid \text{Control})$

Where:

• $P(\text{Recovery} \mid \text{Treatment})$ = recovery proportion in treatment group
• $P(\text{Recovery} \mid \text{Control})$ = recovery proportion in control group

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3) Example

Suppose a bank tests a new collections strategy:

• Treatment group (contacted with new script): 35% repayment
• Control group (no new script): 28% repayment

$\text{Incremental Recovery Rate} = 35\% – 28\% = 7\%$

The new strategy increased recovery by 7 percentage points compared to the old process.

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4) Relation to Other Metrics

• Incremental Sales: Same idea, but applied to sales instead of recoveries.
• Uplift / Incremental Effect: Incremental recovery rate is essentially an uplift metric for recovery outcomes.
• Total Incremental Recoveries: If population = 10,000 delinquent accounts, 7% extra recovery = 700 accounts recovered.

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5) Why It Matters

• True effectiveness measure: Shows the net effect of an intervention, not just the overall recovery rate.
• ROI focus: Distinguishes between organic recoveries (would have happened anyway) vs. those driven by the strategy.
• Targeting optimization: With uplift models, you can find which customers are most likely to show incremental recovery.
• Policy evaluation: Used in healthcare (patients recovering due to treatment vs. placebo).

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Bottom line:
Incremental Recovery Rate = the additional recovery percentage directly caused by an intervention (treatment vs. control). It’s the “uplift” metric applied in collections, healthcare, or retention contexts.