The Importance of BDI and CDI
As business owners, we often jump to conclusions when it comes to determining our brand’s performance in a particular market segment. This is because we often forget to investigate the numbers further when it appears that we are selling more of our goods or services in one market over another. This is where BDI and CDI come into play.
Brand Development Index and Category Development Index help brands identify robust and feeble segments in the market.
Brand Development Index
Brand Development Index, also known as BDI, enumerates how a brand performs in a specified segment compared to its performance in an entire market.
Let’s suppose you own an orchid business and sell potted orchids. You sell and ship your potted orchids all over the United States. As the business owner, you decide to measure your brand’s performance in the State of Florida because you are pondering the idea of no longer distributing your orchids throughout the United States and only focusing on your sales in Florida. So, you decide to calculate your sales per capita.
Your orchid business has 5 orchid sales per-capita in Florida and 7 orchid sales per-capita in the United States. You discover that your orchid business has a BDI in Florida of 71% and a BDI of 140% in the United States.
BDI in Florida: 5 / 7 = 0.7143 or 71%
BDI in the United States: 7 / 5 = 1.4 or 140%
As a result, you realize that your orchid business makes higher quantity sales to individuals outside of the state of Florida and is underperforming in Florida as opposed to the rest of the United States. People who live in states other than Florida purchase 7 orchids per transaction as opposed to the 5 orchids you are selling per transaction to individuals who live in Florida. Therefore, your brand’s performance in the broader market segment of the United States is more robust compared to its performance in the smaller market segment of Florida. After calculating your BDI, you realize that the majority of your sales don’t occur in Florida, after all. Confused, you decide to investigate further.
While we think we can make our decision based on the results of our BDI, we can’t, because it is essential to understand how our brand is performing in a specific target market compared to the orchid industry as a whole. To do this, we need to calculate the CDI.
Category Development Index
Category Development Index, also known as CDI, measures the category sales performance in a specified segment compared to sales of the category in the entire market.
For example, if there are 15 potted orchid sales per-capita in the state of Florida compared to the 22 potted orchid sales per-capita in the entire United States, you discover that the CDI for Florida is 68%.
CDI in Florida: 15 / 22 = 0.68 or 68%
CDI in the United States: 22 / 15 = 1.46 or 146%
To better understand where our brand stands in the market, we would need to measure our BDI divided by the CDI for the entire market segment.
71% / 68% = 4%
After calculating our improved measure of performance, it is safe to say that while our brand is underperforming in Florida as opposed to our brand sales in the entire United States, our brand is performing approximately 4% better in Florida than the average orchid business. It is also important to note that the orchid industry itself is underperforming in the state of Florida as well.
As you can see, it was essential for our brand to calculate both our BDI and CDI because we now realize that we are underperforming in the state of Florida in comparison to our U.S sales, so we definitely should not consider discontinuing our distribution throughout the United States. But we now know that our business is performing 4% above the industry in the state of Florida. As a result, we can focus on enhancing our marketing efforts in the state of Florida to reach a wider audience and potentially continue to grow our market share in Florida. Or we can consider enhancing our marketing throughout the United States to improve our performance throughout the country.
The example above shows the importance of calculating both the BDI and CDI for your business to monitor your brand’s performance compared to your brand’s entire market segment and your industry’s market segment. If you are interested in learning more, drop a comment below.
