Brand Potential Index (BPI)

By
Adam Hayes
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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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Updated January 31, 2023
Reviewed by
Erika Rasure
erika
Reviewed by Erika Rasure
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Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

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What Is the Brand Potential Index (BPI)?

The brand potential index (BPI) is a measure of the correlation between a brand's development index (BDI) and its market development index (MDI) for a specific market or area. 

The Brand Potential Index (BPI) takes the number of actual and potential customers within a market area and compares it to the percentage of consumers within a geographic area in a nation who buy a product. Then the BPI compares that number to the percentage of all consumers in the entire nation who buy the same product.

The BPI is always calculated for a limited geographic region to give its users a better idea of how specific areas factors into its sales and marketing planning and forecasts. 

Key Takeaways

  • The brand potential index (BPI) measures how many potential customers a brand may reach within a certain market or region.
  • The BPI is used to measure the size of the market share that may be available to them and to inform marketing and advertising strategy.
  • The BPI makes use of the brand development index and the market development index, each of which is used extensively in marketing.

Understanding the Brand Potential Index

The brand potential index is a tool that can be used to forecast future sales and assist in the budgeting process for advertising allocations.

Using the brand potential index can be part of a firm's arsenal to find a competitive advantage. The index, which can help identify key drivers that have the greatest influence on brand strength, is based on the rational, cognitive, emotional, and behavioral characteristics of perception.

Companies ranging from giants like the major airlines to small and mid-sized businesses use the BPI as part of their brand management and development strategies.

Brand Potential Index Calculation

To figure a brand potential index, the brand's market development index and the brand development index must be utilized.

  • A market development index (MDI) is used in business development to figure out at what point maximum market penetration will happen. It is expressed as a ratio between the actual number of consumers vs. potential consumers in a specific market.
  • The brand development index (BDI) is defined as a ratio that is a comparison of the percentage of sales earned in a specific area or region to the percentage of the total population of that area or region. Such data can help companies tailor their sales, marketing, and advertising efforts because it gives insight into where most of their customers live.

In particular, the BPI is computed as the ratio of the BDI divided by the MDI.

Brand Potential Index Example

Say that a brand gets 5% of its sales in an area that is also home to 15% of the nation's population; then that area's brand development index is the product of 5 x 100 / 15 or 33.33%.

If the total number of customers in that area is 10,000 while the number of potential customers is 100,000, then the market development index will be the result of the ratio: 10,000 / 100,000 or 0.1.

The brand potential index would be the relationship between those two factors, or 0.33 / 0.1 = 3.3.