Price index refers to the metric that illustrates how a product, a group of products, categories, or a brand are positioned in the market.
A Retailer use Price Index mainly to compare itself with its competitors and adjust its pricing to support its Category Role and Strategies.
🧪 Example of Price Index Calculation
Price Index Formula= (Product Selling Price/Average Product Selling Price Surveyed ) x 100
If the Price Index is 100, then the Selling Price is exactly as the average competitor Selling Price in the Category. Anything higher than 100 means the Selling Price set is more expensive than the competition. It works the same the other way, anything lower than 100 means that the product is competitively priced. A price index of 97 would mean that the product(s) is/are 3% cheaper compare to the average.
❓What is used for
- To help Retailer to understand its price positioning and compare it to its key competitors.
- To help Retailer to keep track of price trends within its category(ies). Sudden movements in pricing strategies within the category will have a clear impact on Price Index.
- To create different price segments (HWB, High Sensitive, Low Sensitive, Non Sensitive) within a Category. This works best in highly competitive categories to define opportunities to improve profitability. It also helps understand how current price levels in the category are perceived.
- Price Index allows also to measure the Price fluctuation over different time periods, especially in category where Purchase Price are dependant from seasonality, availability, quality such as Fresh Products.
🎁 Take Aways
Price Index is strongly related to Price Image, it is a metric to drive and support support Retailer's Price Image. Not to forget it is one of the key elements to drive customer's perception if Retailer offers them "value for money"
🧰 Related Working Processes
● Price Image survey
● Customer Panels
● Price Survey (including web scrapping)
🖥️ Make it happen in Ariane CRM
How to access Price Index in Ariane4S: 2 Simple Steps
Step 1: Select Price Index from the Price Menu Bar.
Step 2: Select Option in the Filter Menu and choose the period and hierarchy level to display.
Here you are.