twelfth · Glossary · Pricing
Price index
A price index compares your price for a product with a competitor's price for the same product as one number, where a set value (often 100) is parity.
What it means for retail and category teams
A price index is usually calculated per matched product and then rolled up across a category or basket. Conventions vary: some teams divide the competitor's price by yours, so a lower number means the competitor is cheaper; others divide yours by theirs, so a higher number means you are more expensive. Either works, as long as everyone reading it knows which way it runs and where parity sits.
Roll-ups need care. A simple average treats a slow line and a best-seller alike, so many teams weight the index by sales, or build it from a basket of the known-value items shoppers use to judge a store's prices.
Why it matters
An index turns hundreds of individual price comparisons into something a category manager can scan, trend and act on. It is only as trustworthy as the matching underneath it: an index built on a listing that is not genuinely the same article — a different pack size, a different variant, a marketplace reseller — is a confident number about nothing.
Illustrative example
The business and figures are illustrative, not customer data
A retailer sells a 1 kg bag of coffee beans for $20.00 and a competitor sells the same product for $18.00. On a scale where 100 is parity and the competitor's price is divided by yours, the index is 90: the competitor is 10% cheaper. If a second competitor charges $21.00, that comparison reads 105. Across a 50-line basket the category might average close to parity while a handful of lines sit well below it, and those lines are where attention should go.
In twelfth
twelfth's Pricing intelligence uses two scales. The Brief and the Tracked set use a 100-based index where 100 is parity and a value below 100 means the competitor is cheaper; the detail view for a single SKU uses a direct price ratio, where 1.00 is parity and a higher value means your price is above the competitor's. A line without a match, or without enough paired price history, shows a dash rather than an index.
Related terms
Related on twelfth.ai
- twelfth for grocery & convenience
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