What is the Brand Potential Index (BPI)
The brand potential index (BPI) is the correlation between a brand's development index and its market development index 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 compares that to the percentage of all consumers in the entire nation who buy the same product. 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.
Breaking Down Brand Potential Index (BPI)
The brand potential index is a tool that can be used to forecast future sales, and to assist in the budgeting process for advertising allocations. Use of the brand potential index can be part of a firm's arsenal in finding 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 (BPI) Calculation
To figure a brand potential index a brand's market development index and its brand development index must be utilized. A market development index 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 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.
Brand Potential Index (BPI) Example
If a brand gets 5% of its sales in an area that is 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 10,000 / 100,000 or 0.1. The brand potential index would be the relationship between those two factors.