Pricing and commerce
Price index
Also called: Competitive price index
A single number comparing your prices with a competitor's or the market's across a basket of matched products, often with 100 as parity.
In practice
Define the basket, weights and matching rules, or the index can say anything.
Specify the formula
A competitive price index summarises relative prices across matched products. One possible method is your basket total divided by a competitor basket total, multiplied by 100. Other methods average item-level ratios or apply sales weights. State which method you use, because the same prices can produce different results when the weighting or aggregation changes.
Example: interpreting 105
If your matched basket totals 210 and the competitor basket totals 200, this basket-total method gives an index of 105. Your basket is 5% higher on that basis. It does not mean every product is 5% higher. A small number of expensive items can dominate an unweighted basket total, so inspect item-level gaps before deciding which prices to change.
Keep comparisons like for like
Use the same variants, pack quantities, currency and treatment of tax, shipping and promotions. Report match coverage alongside the index. Removing unavailable or unmatched products can change the basket enough to move the index without any actual repricing. For trend analysis, distinguish a stable matched basket from a changing assortment and explain how missing observations are handled.
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