When it comes to allocating marketing budgets, marketers use a lot of techniques to come up with the most effective mix of marketing expenditure. Every marketer would want their marketing dollars to provide them with the maximum impact. Also, they want their advertisement efforts to reach a maximum number of people by keeping the spending to the minimum. One such technique or tool is known as the Brand Development Index.
What is Brand Development Index?
Brand Development Index is used for identifying the relationship between the total sales of a brand in a particular market and the total population of the market. Brand development index is also known as BDI.
Let’s try and understand this with an example. Suppose the Coca-Cola Company wants to calculate the brand development index for a particular region in the US, let’s say Atlanta. In order to get the BDI for Atlanta, Coke will calculate its sales in Atlanta as a percentage of its total sales in the US. And it will compare this with the population of Atlanta as a percentage of the total population of the US. Using these two percentages, Coke will get its brand development index (BDI) for the Atlanta region.
So if Coke’s sales in Atlanta are $5 million and its total US sales are $5,000 million (these numbers are illustrative), this would mean that Coke’s sales in Atlanta are 0.10% of total US sales.
As of 2013, Atlanta’s population is 447,841 and the total population of United States is 318.9 million. This means that Atlanta’s population as a percentage of the total US population is 0.14%.
Formula for BDI
The formula for BDI is as follows:
BDI =[Brand sales to region / Population in region] / [Total brand sales ÷ Total population]
BDI = [% of Brand sales in a particular region from total brand sales in a country] x 100/ [% of Population of the region from total population of the country]
Continuing the above example, Coke’s BDI for Atlanta region will be 71.42 (0.10 x 100/0.14).
Note that BDI need not be restricted to region. It can also be used in the context of target segments. For example, Pepsi may want to check its BDI among 18 to 30 year olds in Japan in relation to the brand’s adoption among all age groups in Japan.
Why is BDI essential?
As mentioned above, BDI is used by marketers for effective allocation of their marketing dollars. Depending on the strategy, a brand may want to allocate higher or lower marketing dollars in relation to a market’s BDI.
If the brand is adopting a defensive marketing strategy, it will allocate a higher percentage of its advertising dollars to a region with a higher BDI, or in other words a region where the brand is more popular. Usually, advertising cost is directly proportionate to the number of users or recipients. If the BDI of a particular market is high, marketers can reach more people.
In other cases if the BDI of a particular region or a market is much lower than the national average, a brand may want to spend more dollars in that particular region/market and try to improve the BDI.
Overall, BDI plays a very important role in the marketing initiatives of a company. BDI is often used along with CDI (Category Development Index).