What is the category development index (CDI)?

The category development index (CDI) is a metric used in marketing to measure the relative strength or potential of a specific product category in a particular market or region. It helps brands understand how well a category is performing in a given geographic area or demographic segment compared to its average performance across the broader market.

Formula for CDI

The CDI is calculated by dividing the percentage of total sales of a category in a specific market by the percentage of the population in that same market, and then multiplying by 100. The formula is:

CDI= \left(\frac{\text{% of category sales in market}}{\text{% of population in market}}\right) \times 100

Interpretation of CDI

• CDI > 100: A CDI above 100 indicates that the category is performing better in that market than the national average. It suggests a higher demand or stronger market penetration in that area.
• CDI < 100: A CDI below 100 suggests the category is underperforming in that market relative to the national average, highlighting areas for improvement or potential opportunity for growth.

For example, if a product category (e.g. premium coffee) makes up 10% of total sales in a specific region but that region only represents 5% of the national population, the CDI for that region would be:

CDI= (10%/5%) × 100 = 200

This indicates that the category is performing significantly better than average in that region.

Applications of CDI

1. Targeted marketing: Businesses use CDI to identify regions or demographics where a product category is either over-performing or under-performing, allowing for more targeted marketing efforts.
2. Market entry or expansion: High CDI scores can signal regions with potential for new product launches, while low CDI areas may indicate the need for increased awareness or tailored marketing strategies.
3. Resource allocation: By analyzing CDI, companies can allocate resources more effectively, focusing on high-potential areas or markets.

The CDI is often used alongside the brand development index (BDI), which looks at the performance of a specific brand within a category. Together, they provide a comprehensive view of both category potential and brand performance.