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Brand Development Index (BDI) is defined as the ratio that ultimately shows a brand’s overall performance for a market segment. As a metric, it is used to identify the relationship between the total sales for a particular segment of users compared to the number of users in that segment. BDI essentially indicates the strong and weak segments of a company and helps inform advertisement budgeting decisions.
The BDI formula, along with its contemporary CDI formula, basically helps compare the relative strength of sales of a market to overall sales. In calculating BDI using the BDI formula, you only consider a section of the market; restricted either geographically or demographically. The metric then compares the strength of that brand for that section of the market with respect to the whole market.
Let’s try to understand this using an example. Suppose, company A wanted to calculate their brand development index for region X. Here region X is part of a larger region M. So the brand/company will calculate their sales in region X and check what percentage it accounts for when considering the sales for the whole region M. Now this percentage of sales in region X is compared to the overall population of region X. This comparison in form of a ratio indicates the BDI of that brand for that segmented region.
This metric is used by companies to understand the impact of their brand on a partial segment of their customer base. With this information, companies can appropriately allot their marketing and branding budgets so the returns add significant value to the brand. It also ensures that the brand reaches the untapped regions or demographics without committing to unnecessary advertising spending.
The BDI metric also facilitates models and plans for audience segmentation, targeted strategy and helps enhance the company’s position in the market.
Now let’s define the BDI formula, which is essential in calculating the brand development index of any brand.
The formula of the brand development index is given as follows:
Brand Development Index (BDI) = (% Market Brand Sales/ % Market Population) x 100
Another term that is used with the brand development index is the category development index. They are both referred to as BDI and CDI respectively. We have defined what brand development index means, lets move on to understand the term category development index.
Category development index is an index that compares the sales of a particular goods category for a segment of the market. The index essentially helps companies understand the performance of a category of products among a segmented group of customers.
CDI is different from BDI, as it mainly focuses on a product category, whereas BDI focused on a market segment.
The CDI is calculated using the following formula:
Category Development Index = (% Market Category Sales/ % Market Population) x 100
The method to calculate BDI using the BDI formula can be a little confusing. So let’s take an example, to calculate the BDI of a particular brand.
Let’s consider Brand A. Below is the population and sales metrics Brand A is dealing with.
Population of Total Market = 30000
Population of Market X for = 15000
Total Sales of Brand A = $20,000
Sales of Brand A in Market X = $5,000
Therefore, brand development index can be calculated as follows:
BDI = (% Market Brand Sales/ % Market Population) x 100
= [(15000/30000*100) / (5000/20000*100)] X 100
= [50/25] X 100
So, in this case, the BDI of Brand A for Market X is 20.