Procurement Glossary & Terminologies

Glossary / Letter I / Index pricing

Index pricing


The value that distinguishes your pricing plan from that of the competitors is the price index. It enables you to determine whether the sales evolution you’re experiencing is proceeding according to plan. As a result, programmers and pricing and development managers use the price index as a value to understand the company’s status and establish an optimization strategy for each sales channel. E-commerce companies use the price index to show how their brands, product categories, or products are positioned in the market.

Primary Benefit of Having PI Information

PI knowledge aids you in the following:

  1. Control your positioning
  2. Analyse the strategies of the competitors
  3. Make informed choices decisions
  4. Create a long-term strategy

Let’s say that a competitor’s PI for a single brand is significantly lower than yours across all goods. The most sensible reason is that the rival negotiated a better contract with the vendor. In addition to giving you leverage when negotiating with the supplier, this information is quite significant because it sheds light on a facet of the rival’s corporate strategy.

Let’s imagine your company works well in the consumer electronics market but struggles to compete in the clothing market. Depending on your business strategy, you can either invest in the troublesome sector or concentrate on retaining your competitive edge in the electronics market. The most crucial thing to keep in mind is that PI enables you to base your choices on knowledge about the market and your competitors. In other words, it aids in the informed decision-making for your pricing image.

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