# 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.

- **Measures:** Your price against a competitor's for the same product, as one number.
- **Formula:** Your price ÷ competitor price × 100, where 100 is parity and above 100 you are priced above (the convention twelfth uses).
- **Watch for:** Which way the ratio runs, and mismatched pack sizes underneath it.

## 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. If a listing is a different pack size, a different variant or a marketplace reseller, the index built on it looks precise and is wrong.

## How Twelfth handles this

twelfth's Pricing intelligence uses one index everywhere: your price divided by the competitor's, times 100. 100 is parity and a value above 100 means your price is above the competitor's, on the Pricing page, the Brief, the Tracked set and a single SKU's detail. A line without a match, or without enough paired price history, shows a dash where the index would be.

## Illustrative example

The business and figures are illustrative. None of it is 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 your price is divided by the competitor's, the index is 111: you are priced about 11% above them. If a second competitor charges $21.00, that comparison reads 95. Across a 50-line basket the category might average close to parity while a handful of lines sit well above it, and those lines are where attention should go.

**1 kg coffee beans: your price $20.00**

| | Price index (yours ÷ competitor × 100) | Result |
| --- | --- | --- |
| Competitor A ($18.00) | 111 | You are 11% above |
| Competitor B ($21.00) | 95 | You are 5% below |

Reference line: Parity: 100.

Above 100 you are priced above the competitor; below 100, under them.

## Calculate a price index

Price index = your price ÷ competitor price × 100

This page uses your price ÷ competitor price × 100, the index twelfth uses. 100 is parity; above 100 means you are priced above the competitor. Check that the products and pack sizes match.

[Use the calculator](https://twelfth.ai/tools/price-index), [explore the worked examples](https://twelfth.ai/tools), [download the Excel / Google Sheets workbook](https://twelfth.ai/resources/retail-metrics-template.xlsx) or [download this metric's CSV template](https://twelfth.ai/resources/retail-csv/price-index.csv).

## Related concepts

- [Price position](https://twelfth.ai/glossary/price-position): Read this one comparison against the wider pricing stance for the category.
- [Matched SKU](https://twelfth.ai/glossary/matched-sku): Verify that the comparison uses the same product, pack size and seller.
- [Price intelligence](https://twelfth.ai/glossary/price-intelligence)
- [Tracked set](https://twelfth.ai/glossary/tracked-set)

## Next step

### Look at the price gaps that matter

Bring a few products and competitors. We can walk through matching, observation dates and which gaps deserve a closer look.

- [Book a demo](https://twelfth.ai/book-a-demo)
- [twelfth for grocery & convenience](https://twelfth.ai/industries/grocery): Continuous margin, cover and price monitoring across thousands of grocery lines, with recommendations ranked by commercial impact.

Source: https://twelfth.ai/glossary/price-index