Price Index: A cherry on top of a competitor monitoring tool
by Manjari Balu on 3 mar 2023 (4-minute read)
Identifying your competitors is not a one-time process. As your business evolves
and you find your niche, so will your competitors. So, basing your competitors
based on your initial analysis, business size, and revenue is not enough.
• Price Index is the ratio of your product’s price in comparison to your
• It allows you to identify your true competitors, understands the
impact of competitor prices and sales on your business.
• It also helps you optimise your pricing and avoid price wars.
• When combined with competitors’ price and promotion details, the data
help you price your products strategically in response to industry trends.
Pricechecker price index will help you ensure that you are competing with the
right people for each product and product segment in your business.
What is the price index?
Simply put, Price Index for a product is the ratio of the price of your product
versus the price of your competitor’s product.
Similarly, Price Index for a product segment is the sum of the prices of the
products in that segment vs the sum of a competitor’s in the same segment.
Calculating this manually for a growing retail business can be tedious with high
margins of error. Pricechecker calculates the Price Index of both product and
product segment wise and gives you data on the basis of product, product
segment, and brand. PC does this both accurately and dynamically so every time
you check, you see the Price Index for that moment and also present the data
visually for any period of time that you choose.
How does it help retailers?
Price index helps you identify your true competitors and understand the impact of
your competitors’ prices and sales on your business so you can avoid price wars
by modifying your pricing strategy accordingly.
For instance, if the price index for a product or product segment is extremely
low, it means that your prices are significantly higher than your competitors.
This could mean,
• Your competitors have extremely low margins or they are compromising on
• Your competitor is compromising on quality or value addition to be able to
sell the product for that low a price
In both cases, they are not your true competitors because you will have to
compromise on your margins or value to be able to sell at that low price. BUT,
if neither of these is the case, then you will have to relook at your pricing
strategy to adjust.
Similarly, if your price index is extremely high, then it means your competitors
are selling at a much higher price than you are. This could again mean,
• They are targeting a different segment of consumers, in which case this
could be a potential opportunity but not the right competitor, or
• They are adding value that is helping them sell at a higher price without
losing customers, in which case you have an opportunity to capitalise on.
Adjusting pricing strategies based on Price Index
Any pricing strategy will include a margin over the cost and how much of this
margin you can afford to lose in order to remain profitable. When your price
index is marginally below or above 1, then you can adjust your price to match or
compete as long as it does not affect your margins significantly. This way you
can be competitive without affecting your business.
However, when your PI is off by a significant margin that is a sign to dive deep
to find out the cause and adjust your strategy accordingly.
For instance, if you are a multi-brand retailer whose Price Index for a
particular product is very low, then there is a chance that your competitor is
getting a better deal from their supplier than you are. You can use this
information to renegotiate with your supplier.
Price Index on its own helps you identify the real competitors for your business
and understand your position among them for a product or product segment.
Pricechecker Price Index when combined with competitors’ price and promotion
data will give you actionable insights that will not only make your pricing
strategy unparalleled but ensure that your strategy evolves in response to
market trends and competitor prices.