Yeah, I keep hearing the story ... "we had no choice but to raise prices, and now customer response is suffering".
Because each merchandise category is a "mini-brand", and because I usually look at multiple years of customer transactions, I can build a relationship showing how rebuy rates within a brand change as prices increase/decrease.
Here is the relationship for one brand.
That's just a beautiful image!
The relationship above explains 38% of the reason why rebuy rates declined as prices increased. Here is the equation:
- Change in Rebuy Rate = 2.521 - 1.457*(Change in Average Price per Item Purchased).
- Change in Rebuy Rate = 2.521 - 1.457*(1.10).
- Change in Rebuy Rate = 0.9183.