Brand vs Category Development Index: Formula & Template
By busayo.longe
| Last updated:
Jul 27
|
11 min read
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Have you ever wanted to find out how your brand is performing in the market? Well, if your marketing team has presented data metrics to you on your brand performance, then you have experienced a brand development index.
Top brands marketers allocate marketing budgets and come up with many techniques that have the most efficient marketing expenditures because generally, marketers need to maximize their ad spend by reaching a very significant number of people.
In this article, we are going to break down the concept of brand and category development index along with how it applies to all brands in the market.
The brand development index evaluates how well your brand is performing in the market when its value is placed side by side with the average value in all markets. This technique calculates a brand’s sales power in a particular market.
For example, consider the Pepsi brand that has been among the top brands ranging from 10 to 50 years of existence. This shows how effectively the marketing team has used brand development index technique to stay relevant by creating advertisements that reach a large population with minimal cost.
Let us also consider this example to better understand the brand development index.
Assuming Coca-cola company wants to evaluate the brand development index for a specific state in the U.S. like New York. Coca-Cola can determine the brand development index by calculating the sales of Coke in New York and comparing its percentage with the entire population in the state.
After this, the result of the calculation will be compared as a percentage of the total sales of Coke in the United States. These two percentages (The state of New York percentage and the United States percentage) will provide Coca-Cola with its brand development index for New York.
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There are some other metrics that are used to understand the market and gain data that can help businesses thrive. Some of these metrics are competitive trends, and per capita.
This allows you to measure where you stand in the market and also analyze the place of your competitors in your target market.
This helps you gain insight into new data and understand the current state of the market.
These two metrics are also part of the sales analytics techniques with brand development index and category development index.
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Brand development index and Category development index are both indices that compare how relatively strong a market is with its overall sales. While the brand development index is compared to the general brand sales, the category development index (Category development index) is compared to the general category sales. And, the average index score for both indices is 100.
The difference between brand development index and category development index is that in a market, the percentage of the brand’s sales is associated with the percentage of that same market population.
So while brand development index analyzes the performance of a brand in a particular market, category development index measures the performance of a product in a particular market. In summary, one focuses on the brand, while the other focuses on the product.
The brand development index and the Category development index are used to better understand a specific target group as it relates to the entire market.
Different marketing scenarios will determine the application of both brand development index and category development index in market research.
When a brand is pursuing expansion of its market the most appropriate index is the Category development index. This means that the organization is going through a positive marketing moment.
If the brand is going through a defensive marketing moment, the best option is to stick to the current market. In this case, it is best to use a brand development index which means that the brand is choosing to stick with its dominant market.
Knowing when to apply the brand development index and the category development index will allow you to have inside insight into your market potential.
To calculate the brand development index of Pepsi, for instance, you will divide the percentage of Pepsi total sales in the X market by the percentage of the total population in X market. Then you will multiply the result by 100 (which is the index score) to get the brand development index number.
brand development index =[Brand sales to region ÷ population in region] / [Total brand sales ÷ Total population]
Note that the brand development index can also be used in target segments. For example, Pepsi may decide to check its brand development index among 20 to 40-year-olds adults in India to reflect the adoption rate for the brand among different age brackets in India.
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It is highly important for brands to estimate the number of people who use their products to understand how efficient their marketing strategy has been in promoting the products or services of the brand. So if you as a brand want to estimate the number of people who use your products consider the following steps.
1. Identify prospects: the first thing you should do as a brand is to identify your potential customers. You can achieve this by using demographic segmentation to target your customers in the general market of a nation.
For example, your brand target audience may be single women between the age group of 20 to 35 who have over 150,000 dollars earning power per year. The next thing to do is to refer to the censor board of the country to ascertain the number of women who meet your desired target market.
The number obtained from that research will be the estimate of potential clients your brand can accrue in the general market of that nation.
2. Estimate your target market: calculate the entire size of your target market then add to the number of your potential customers in the national market.
3. Market penetration: find out what the market penetration of your products is. A normal market penetration percentage for a consumer product is mostly between 2% and 6%, while it is between 10% and 40% if it is a business product.
To understand how your market product has penetrated the market, multiply the customers in your target market by 2% of the consumer products then multiply the same number of your target market by 6%. The range obtained between these two percentages determines the penetration level of your products in the market.
For instance, if your target market is estimated to be 5,000 consumers you will multiply that number by 2%. You will get 100. Also, multiply the 5,000 consumers by 6% you will get 300. Therefore, the estimate of the number of people who use your product is between 100-300 consumers.
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To calculate the category development index of Pepsi, for example, you will divide the percentage of Coke, total sales in the X market by the percentage of the total population in X market. Then you will multiply the result by 100 (which is the index score) to get the category development index number.
Category development index = percentage of your market sales by the total number of consumers in the market / the percentage of your total sales in product category X 100.
Here are the factors that cause a low brand development index and category development index.
The implications of brand and category development indices are:
1. Low brand development index – Low Category development index: it means that you have a low brand share in the market and you also have low product sales in the market. This shows that both your brand and your products are not doing good in the market.
2. Low Category development index – High brand development index: this indicates that although you have low product category sales in the market you still have high brand potential in the market. This means that your brand is doing good but not your products.
3. Low brand development index – High Category development index: in this case, you have low brand potential in the market but your category is doing good. This means that your product is selling but your brand is not doing well in the general market. So you have to work on gaining more customers.
4. High Category development index High brand development index: this means that you have high product category sales in the market and you also have a high brand potential in the market share. So both your brand and your product are doing good. If the brand and the category are doing well in the market it means that your brand may decide to expand its business.
We have discussed the factors that can affect both indexes and the implication for the brands and their products in the market. Let us look at how brands can improve their brand development index and category development index scores.
Brands should consider their marketing strategy and allocate funds accordingly.
The brands should focus on either improving the brand development index or the category development index at a time.
If your brand development index is high, focus your marketing spending on improving the category development index.
If it is your category development index that is high, focus on allocating more money to develop your brand index.
If you want to conduct a brand development index, hurry down to Formplus. Formplus has one too many survey templates and many brand measurement templates you can choose from. These templates range from brand name testing to logo testing and many more.
1. Brand Personality Template: If you want to know your customers’ opinion of your brand, your best bet at finding out is to simply use the Formplus brand personality form.
This form will help you gather insightful information about your brand perception from your target market. You’d be surprised at how useful the information can be for your brand’s improvement.
2. Brand Name Testing Template: You can implement this form to let your employees or other people you choose decide which name best fits your products or services even before you officially launch.
3. Brand Logo Testing Template: You can use this Formplus logo testing form to get people to decide which logo is right for your brand, and it is very easy to use.
4. Brand Awareness Template: Do you want to know how popular your brand is in the market? Then use the Formplus brand awareness survey.
This form is designed to help you understand how well you’re known among your target market.
5. Competitive Analysis Survey Template: This survey helps your brand to discover information on what sets you apart from the crowd. You can use this form to gain knowledge on your competition, you can even learn one or two of their weaknesses and their strengths.
6. Product Testing Template: You can use a product testing survey to discover from your target market what their opinion is about your product. You can even use the form builder feature to add more form fields.
All these templates by Formplus are extremely easy to use and easy to navigate. So go ahead and use them to test for your brand.
If you desire to build a long-lasting brand that will stand the test of time, you must first understand that it won’t be easy. To stay on top, make it a habit to assess your brand from time to time, conduct surveys to understand where you stand, and keep finding ways to improve.
In this post, we’ve considered the usefulness of the brand development index and category development index. Be careful to use each of these measurement techniques where appropriate as the brand development index is important for your company’s marketing strategy.
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