December 21, 2022

What Impact Did Price Increases Have On Repurchase Rates?

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).
Let's evaluate an example. Assume that prices increased by 10%.
  • Change in Rebuy Rate = 2.521 - 1.457*(1.10).
  • Change in Rebuy Rate = 0.9183.

In other words, if you increase prices by 10%, you lower rebuy rates by 8%.

You probably want to understand this relationship, correct?

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