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What is Category Development Index (CDI)?

Category Development Index (CDI) is a marketing tool that is used to measure the sales performance of a particular product category in a specific geographic area compared to the overall sales of the same product category in a larger market. By comparing local sales to national trends, Category Development Index provides insights into whether a product category is over- or under-performing in a specific region, helping advertisers recognize which areas show the greatest potential for further growth or where adjustments are needed. For advertisers and CMOs, Category Development Index is helpful because it allows them to allocate resources more effectively by identifying regions that present the best opportunities for increased advertising and promotional efforts, ultimately driving profitability and market share.

How to Calculate Category Development Index

The Category Development Index is calculated by dividing the percentage of total sales of a specific product category in a particular geographic area by the percentage of the total population in the same geographic area. The resulting number is then multiplied by 100, giving you the CDI percentage.

The formula can be expressed as:

CDI = (% of product category sales in geographic area / % of total population in geographic area) x 100

For example, let’s say the sales of soft drinks in Miami account for 5% of the total soft drink sales in the United States, while the population of Miami accounts for 2% of the total US population. Using the CDI formula, we can calculate the CDI for soft drinks in Miami as:

CDI = (5% / 2%) x 100 = 250

This means that the soft drink category in Miami is performing better than the overall US market by a factor of 2.5. Advertisers and chief marketing officers can use this information to make data-driven decisions on how to allocate their advertising and promotional budgets in Miami.

Who uses Category Development Index? Why does it matter?

Category Development Index is mostly used by advertisers and chief marketing officers, and there are three core uses for it:

Identifying Growth Opportunities: The Category Development Index (CDI) helps advertisers and CMOs identify specific geographic areas where a product category is performing exceptionally well. A high CDI indicates that the category is popular in that area, suggesting opportunities for growth and increased market share.
Shaping Advertising Budgets: By using CDI data, advertisers can allocate their budgets more effectively. If a region has a high CDI, it means there is already strong demand for that product category, and focusing advertising efforts there can lead to a higher return on investment (ROI).
Targeting Promotional Efforts: When the CDI shows significant potential in a particular area, it enables marketing teams to create localized campaigns. These campaigns can be tailored to the consumer preferences in that region, ensuring more efficient promotional strategies that resonate with local audiences.

Category Development Index + Other KPIs To Know

When analyzing the Category Development Index (CDI), it can be beneficial to use other Key Performance Indicators (KPIs) to get a more complete picture of market opportunities and brand performance. Below are some KPIs that complement CDI:

Brand Development Index (BDI)

BDI measures the performance of a specific brand in a particular geographic area relative to its performance in the overall market. While CDI focuses on the product category, BDI narrows down to the brand level, helping advertisers and CMOs understand how their brand stacks up against competition in the same area.
Example: A high CDI and a low BDI may suggest that while the product category is performing well in that region, your specific brand might not be capturing its full potential, signaling a need for better brand marketing in the area.

Market Share

Market share represents the percentage of total sales in a market that is earned by a particular company or brand. It provides insights into how dominant a brand is within a product category and geographic area.
By comparing CDI with market share, marketers can gauge how their brand performs within a growing or shrinking product category. A high CDI and increasing market share indicate strong brand positioning, while a high CDI and flat market share could point to increased competition.

Return on Ad Spend (ROAS)

ROAS measures the revenue generated for every dollar spent on advertising, making it a key metric for assessing the efficiency of advertising campaigns. When used in conjunction with CDI, ROAS can help advertisers determine whether their campaigns are driving sales effectively within high-opportunity areas.
Example: A high CDI with low ROAS might suggest that although the category is performing well, the advertising efforts aren’t fully capitalizing on the potential, signaling the need to refine the ad targeting or creative strategy.

Customer Lifetime Value (CLV)

CLV is a metric that estimates the total revenue a business can expect from a single customer throughout their relationship with the brand. This KPI helps marketers focus on long-term customer retention rather than just short-term sales.
When CDI is high, it indicates strong potential for sales growth in a geographic area, and combining this with CLV can help marketers decide where to invest in customer retention strategies to maximize long-term profitability from loyal customers in that area.
See how Criterion Global’s COPPA-compliant strategies helped a leading retailer maximize customer lifetime value by keeping Gen Z shoppers engaged and excited as they transition through their tween and teen years.

Using these KPIs together with CDI provides advertisers and CMOs a holistic view of how their brand and category perform in various regions, allowing for more informed budget allocation and targeting strategies.

Overall, the Category Development Index is an important tool for advertisers and chief marketing officers as it provides valuable insights into consumer behavior and helps them make data-driven decisions on advertising and promotional strategies. The following are additional tips on developing KPIs for your organization, and suggested readings: