When trying to determine the state of your brand’s performance, sales numbers are one of the primary components to look at. Your raw numbers, however, can only tell you a fraction of the story. You can certainly compare them to previous years’ performance to determine how much growth has occurred. In fact, I encourage you to do so. But it is also crucial to determine how specific markets are performing compared to your entire brand’s performance, how well a region’s specific category of offerings is doing compared to the entire market, and how these two measures interact.
The Common Language Marketing Dictionary defines Brand Development Index as “an index of how well a brand performs within a given market group, relative to its performance in the market as a whole.” It is important to remember that, to account for population counts, the sales numbers you should use in calculating BDI should be in a per-capita format. In other words, you need your sales numbers formatted to tell you how many sales you have made per person living in the designated region. To illustrate, let’s use Charmin toilet paper as an example, with some made-up numbers to help along.
First, let’s assume that we are working out what Charmin’s BDI is in Miami. Given a population of 500,000 and assuming that Charmin sold 8 million rolls of toilet paper in Miami last year, the Charmin roll sales per capita would be 16 (8 million / 500,000). Let’s also assume that, if we calculate the sales per capita across the entire US market, we get a higher number such as 18. The BDI for Charmin would be .89, or 89% (16 / 18). This may be interpreted to mean that, compared to the entire market, sales in Miami are underperforming at only 89% of the national average. We can still get an even bigger picture, however.
Category Development Index is defined as “an index of how well a category performs within a given market segment, relative to its performance in the market as a whole.” This is very similar to BDI, but it looks at the entire category as a whole rather than the brand. In our example, CDI would refer to the entire toilet paper market. We would look at all brands’ toilet paper sales per capita in Miami and compare it to the national average. If 25 million toilet paper rolls were sold in Miami last year, the per-capita sales would be 50. If the national per-capita average for the whole category was 65, Miami’s toiler paper roll CDI would be .77, or 77%. This may tell us that Miami as a whole buys less toilet paper per-capita than the entire national average, perhaps because of a more waste-conscious mindset.
The Combination of Factors
Why would it be important for Charmin to know the entire toilet paper category’s CDI in Miami rather than focusing entirely on their own brand’s BDI? The comparison of the two percentages is crucial. If we focus solely on BDI, Charmin may conclude that there is a problem in their product marketing within Miami because it has a lower BDI than other parts of the country. However, by looking at the whole category’s CDI, they can see that any alleged underperformance may be attributed to the fact that Miami simply goes through less toilet paper per capita each year.
For a more concrete comparison and conclusion, Charmin should divide their BDI by the CDI. .89/.77 = 1.16 or 116%. What this tells us is that, compared to the entire scope of toilet paper sales in Miami, Charmin is doing better than average by 16% and not underperforming after all.
This example indicates how important it is to look at sales numbers with sufficient context, rather than in isolation. For marketers, this serves to provide deeper insights into regional performance, a crucial part of assessing the success of marketing activities.