Market Index: The market index refers to the strength of demand and competition. The market index for a particular product can vary between two extremes. At one extreme, where the strength of demand is high and competition is weak, you could set HIGHER prices for more profitable per unit sales or COMPETITIVE prices to attract a large number of customers for maximum market share and maximum profit.
At the other extreme, where the strength of demand is low, and competition is strong, you would set LOWER prices. To assist you in making your pricing decisions, the company’s marketing research department has devised a rough measure of the market conditions for each of your products. This market index is on a scale of zero to 100. The upper end of the scale (towards 100) indicates high demand, weak competition, and the ability to set higher prices. The lower end of the scale (towards zero) indicates low demand, strong competition, and the need to set lower prices.
An index of 50 indicates a product will have an average mark-up of 100%.
