Price index
A price index compares your price for a product with a competitor's price for the same product as one number, where a set value (often 100) is parity.
- Measures
- Your price against a competitor's for the same product, as one number.
- Formula
- Your price ÷ competitor price × 100, where 100 is parity and above 100 you are priced above (the convention twelfth uses).
- Watch for
- Which way the ratio runs, and mismatched pack sizes underneath it.
Updated
Meaning / 01
What it means for retail and category teams
A price index is usually calculated per matched product and then rolled up across a category or basket. Conventions vary: some teams divide the competitor's price by yours, so a lower number means the competitor is cheaper; others divide yours by theirs, so a higher number means you are more expensive. Either works, as long as everyone reading it knows which way it runs and where parity sits.
Roll-ups need care. A simple average treats a slow line and a best-seller alike, so many teams weight the index by sales, or build it from a basket of the known-value items shoppers use to judge a store's prices.
Stakes / 02
Why it matters
An index turns hundreds of individual price comparisons into something a category manager can scan, trend and act on. It is only as trustworthy as the matching underneath it. If a listing is a different pack size, a different variant or a marketplace reseller, the index built on it looks precise and is wrong.
In twelfth / 03
How Twelfth handles this
twelfth's Pricing intelligence uses one index everywhere: your price divided by the competitor's, times 100. 100 is parity and a value above 100 means your price is above the competitor's, on the Pricing page, the Brief, the Tracked set and a single SKU's detail. A line without a match, or without enough paired price history, shows a dash where the index would be.
Example / 04
Illustrative example
The business and figures are illustrative. None of it is customer data.
| Item | Price index (yours ÷ competitor × 100) | Result |
|---|---|---|
| Competitor A ($18.00) | 111 | You are 11% above |
| Competitor B ($21.00) | 95 | You are 5% below |
| Reference line | Parity: 100 | |
Above 100 you are priced above the competitor; below 100, under them.
Read the example as text
A retailer sells a 1 kg bag of coffee beans for $20.00 and a competitor sells the same product for $18.00. On a scale where 100 is parity and your price is divided by the competitor's, the index is 111: you are priced about 11% above them. If a second competitor charges $21.00, that comparison reads 95. Across a 50-line basket the category might average close to parity while a handful of lines sit well above it, and those lines are where attention should go.
Work through the calculation
Price index = your price ÷ competitor price × 100
Try your own figures and see a fuller worked example on the price index calculator.
Related / 05
Related concepts
Next step
Look at the price gaps that matter
Bring a few products and competitors. We can walk through matching, observation dates and which gaps deserve a closer look.
