Price Index in a few words
There is a Price Index tab located in the Analytics section of the dashboard. In this section, you will see a chart and a table of price deviation, as well as filters that allow you to filter the data you are interested in.
Price Index - is the % of a competitor’s product price deviation in relation to your price. Thus, your price is taken as 100%, and the competitor's index is the average % deviation for all products in the filter.
If the Price Index for the competitor’s filtered products is higher than 100, it means that, on average, for the filtered products the prices for the competitor's products are higher than for your products. If the Price Index is below 100, the products are cheaper.
What is the Price Index stands for
Price Index is a tool that shows how your “price position” relates to the price of the market in general, in relation to specific competitors or specific categories.
The Price Index is the metric that allows you to see how your products (or brands on sale) are positioned by the price relative to all competitors’ similar products or the market (if the market is formed by several competitors).
Thus, by using this metric, you will be able to fully understand your store’s price positioning and sensitivity in relation to the market and individual players.
Price Index calculation
To calculate the Price Index, you need to take all price pairs. A pair is a case when you have a product in stock, one of your competitors has a product in stock, and there is a price for these products.
Once such information is received, you need to calculate the Price Index for each product for each competitor. To do so, you need to divide the cost of a competitor's product by the cost of a similar item from your assortment.
The average Price Index of a product can be calculated using another formula: the sum of the gotten Price Indexes is divided by the number of competitors.
To see the impact of competitor prices on your sales, you need to determine the average price index for each competitor. It is calculated using the formula:
The last step is to visualize the received data on a chart to see all the deviations of the competitors' price indices. The picture below shows the price position of products, categories, and brands from the retailer’s assortment with a dotted line, and deviations of competitors’ similar positions are shown with colored lines.
Now that all price deviations are visible, you can enrich the graph with sales data (gray bars in the graph below) to see the influence of competitors on sales dynamics. The below chart shows how the change in the 2nd Competitor’s price affected sales.
Products that are included in the Price Index calculation
All products that are monitored are included in the Price Index calculation. Accordingly, the more products are monitored, the more complete picture of the price positioning of your store you see.
Using filters for particular groups of products
Competera can calculate the Price Index for any of the monitored product segments. To do this, you just need to use a filter, so you can get a Price Index calculation for any brand, in any price and date range, for any competitor, in any category.
For example, having applied particular filters on the dashboard, you can check your store’s position in household appliances by KVI-positions, relative to the market in the requested period of time.
Price Index usage
Price Index can be used in different ways:
- to build retrospective reports, so that you always have an answer to the question: “What is the reason for the drop in sales on a specific day?”
- to build correlations between datasets and identify patterns that affect sales and profit;
- to prepare reports of the store’s price positioning, categories, brands, and products on sale in relation to the market and particular competitors.
You can save the data in the following formats: CSV, Excel, JSON, JPG.