You will lose some customers. The question is how many you can lose before the rise costs more than it earns. That number is easy to work out, and almost nobody writes it down.

The rule

This is the standard break-even sales formula from Thomas Nagle and Georg Müller’s The Strategy and Tactics of Pricing Published. It works because a rise adds its whole amount to each unit’s contribution. At a 40% margin, a 10% rise takes contribution per unit from 40 cents on each old dollar of price to 50, so four units at the new price earn what five did at the old one.

Use contribution margin, not gross margin: take out landed product cost with duty, pick and pack, the shipping you pay, packaging, payment fees and the average discount the SKU actually sells at. The Whole Machine covers contribution per order.

DerivedRise ÷ (margin + rise), for the margins and rises shown.

A worked example

Say a brand sells 10,000 units a month of its main product at $40. Product, freight, duty, pick and pack, shipping and fees come to $24 a unit, so contribution is $16, a 40% margin, and $160,000 a month. It raises the price 8%, to $43.20. Contribution per unit becomes $19.20. To earn $160,000 at $19.20 it needs 8,333 units. So it can lose 1,667 units a month, 16.7% of volume, before the rise costs money.

If it loses 5%, it sells 9,500 units and makes $182,400, up $22,400 a month. If it loses 20%, it makes $153,600, down $6,400. Same rise, a win or a quiet loss, depending on a number nobody knows yet. So write the break-even down first and measure against it after (chapter 14).

Write the break-even next to the rise. A 10% drop in orders is a win or a loss, and only that number says which.

With the defaults, the rise can lose 16.7% of volume, about 1,667 units a month, and at a 5% loss it adds $22,400 of contribution a month. The break-even elasticity is −2.08: if your buyers respond less strongly than that, the rise pays. Compare that with the −2.62 average from the last chapter and you can see why the margin matters. A brand at a 40% margin whose buyers responded like that average would have lost money on this rise.

If your costs already rose

When a tariff or supplier raises your cost, compare the rise with doing nothing at the new cost. Put today’s landed cost into the tool. Your margin is lower, so the same rise can afford to lose more buyers. A cost increase is the easiest time to raise a price, in the arithmetic and, as chapter 5 shows, in customers’ eyes.

Run it per SKU, not per store

A store-wide number hides the risky SKUs. Run the tool for each product line above a tenth of revenue. Low-margin SKUs have the most room. A high-margin hero has the least, and its price is the one customers know best (chapter 6).

Do this

• Put the break-even next to each SKU in the plan. Any SKU where your honest guess at volume loss is more than two-thirds of its break-even gets a smaller rise or a tier instead.