Which index uses information about the product category in the numerator to understand the development potential of the total product category?

A brand development index (BDI) is a ratio that shows the level of a brand's performance in a defined segment of customers. It indicates the relation between the total sales of a company and the population of a particular market, helping brands improve their marketing and advertising techniques.

Why is a brand development index important?

Companies use various marketing approaches to come up with the most appropriate budget allocation. By doing this, they try to achieve the main marketing aim — to reach the largest possible number of people with the help of advertising without making any unnecessary spendings. Brand development index is one of such approaches. It helps identify the relation between the total sales of a specific company and the population of a certain market.

Depending on the company's strategy, BDI influences the number of funds allocated to a particular region. This data enables businesses to tailor their marketing, advertising, and sales efforts because it gives them insights into where most consumers live. The index is usually associated with aggressive and defensive marketing approaches.

For instance, a brand with a defensive marketing strategy will invest more in the regions where the company is more popular (the brand development index is higher) to strengthen its hold in those areas. If the company uses an aggressive strategy, it'll allocate more money for advertising in the regions where the brand's products aren't trendy, and the BDI is low.

When a brand development index in a specific region is low, a company needs to improve it, for example, by allocating more funds for advertising to that region.

One thing is clear: BDI is essential for a brand's marketing initiatives. Let's make sure that you know how to calculate this index.

How to Calculate a Brand Development Index

BDI can be vital in developing audience segmentation, targeting strategy, and a company's positioning. It gives the measure of the brand with respect to its market and number of consumers. Below you can see a formula to calculate BDI for your business.

Note that the result obtained after using this formula should be a whole number.

Now that you know the formula to calculate BDI for your firm, let's explore the distinctive features of the brand development index and category development index.

Companies calculate brand development index to qualify the relative performance of their business in a particular group of customers. You need to own such information as demographics or psychographics. As a result, you'll obtain data on strong and weak segments for specific companies. Besides, you can use this index to evaluate the presence of a company within a particular target audience.

Category development index defines the sales of goods' category within a market related to the average performance among customers. It helps companies receive information on the performance of a particular product category among certain customers and determine strong and weak groups for product categories.

When used with BDI, CDI is beneficial in any marketing strategy. It enables companies to access data necessary to allocate advertising budget to specific areas properly to maximize product category awareness and revenue.

Example of a Brand Development Index

Imagine that you need to obtain the BDI of Samsung laptops in one of the country's cities (further called city A). First, to get this indicator, you need to calculate their sales in city A as a percentage of their total sales in the country. Next, you compare it with the population of city A as a percentage of the country's total population. Then, use the obtained percentages to calculate the BDI for city A.

Let's say if the country's population is 50000, the population of city A is 10000, sales of the Samsung laptops in the country is 1000 units, sales of these laptops in city A is 100 units.

Let's proceed to the calculations to obtain the BDI of Samsung laptops.

BDI in city A = (100/1000) x 100 / (10000/50000) = 50.

Therefore, the brand development index of Samsung laptops in city A is 50.

Brand development index is an essential measure that can demonstrate your company's performance in different segments of customers. You can easily calculate BDI for your company by using the formula above. Understanding the index allows you to efficiently segment your audience, allocate resources to suitable regions, and so much more.

Last Updated: 11.10.2021