An Introduction to Market Price Index

Some of the world’s biggest game changers came into the world in small forms. The computer chip, the battery, even the thumbtack. These are small items that make normal, everyday life much easier. Could you imagine how different life would be without these items? Small items carry a big punch, and that is especially true when it comes to your store’s market price index.

One powerful number explains where you are in comparison to the competition: the market price index (MPI). Your MPI acts as a single score that tells you where your price stands against key competitors across your brands, categories, or custom groups of SKUs, and if you use it you’ll have a hard time wondering what you did without it before.

If your MPI is 1.00, that means your category’s prices are at the same level as your competitors. This is of course only true for the items you matched with them. So you could have 600 items, but if only 300 of those items match with your competitors’ assortment, that’s what your MPI will be based on.

If your MPI is less than 1, that means that you are more competitive against the market (0.97 is 3% cheaper, 0.80 is 20% cheaper, etc.) An MPI that is over 1 means that you are more expensive in that category of products than your competition (1.03 means you’re 3% more expensive on average, 2.00 would mean you were double their price, and so on.)

How it’s Applicable

MPI gives you a great view of how you stand compared to your competitors during a specific time period. It would take a lot of time to go through every one of your competitors’ sites and view the prices of all their products.

While your MPI might be a small number, it packs a lot of information that would otherwise take hours to sift through. To know where you’re competitive and where you’re more expensive is useful for knowing who you need to keep an eye on at the moment and who you can beat at certain times of day.

Leverage areas where you have a cheaper price position to promote via marketing channels and optimize for revenue. These products can be the doorbusters that get shoppers to your store, based on their popularity. If you know a lot of other retailers carry them and they sell well, then it’s definitely a sign to use these products to your advantage.

On the other side of the same coin, you can understand areas where you’re more expensive and investigate if you have the ability to command a price premium and continue profitable growth. Are you growing profits with those high prices? If the answer is yes, then you can maintain that price position or even go slightly higher and see what the effect is.

MPI will change the way retailers look at their pricing strategy in comparison to their competition. Your market price index leaves little information to speculation, so you’ll always be in the know. Looking through pages of prices is ineffective and leaves room for error. MPI can change that.

MPI is just the first step to an optimized pricing strategy. Check out our free whitepaper about MPI, featuring exclusive Amazon data. Or, connect with Wiser today to learn more about MPI and discuss with one of our price strategists to get the lowdown on how market price index can change your business for the better.

Brian Smyth

Brian Smyth is a former content writer at Wiser, a dynamic pricing and merchandising engine for online retailers. He holds a BS in business with a concentration in marketing from San Francisco State University.

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