So in 2019 you sold a Widget for $49.99 at a cost of goods of $19.99.
And now that Widget costs you $26.99.
You have choices.
- Sell the Widget for $49.99 and instead of earning $30.00 of gross margin you earn $23.00. Your CFO doesn't like this idea.
- Sell the Widget for $56.99 and you earn $30.00 of gross margin but you see a reduction in annual rebuy rates and a reduction in number of new/reactivated buyers.
- Some companies can raise prices and maintain rebuy rates. Those are well-managed companies.
- Some companies raise prices, which causes reductions in rebuy rates and orders per buyer and items per order but the price increase offsets the reductions. This is a common outcome.
- Some companies raise prices but the reductions in rebuy rates and orders per buyer and items per order yield a net "zero" gain. This is a common outcome, and it is an awful outcome.