Pricing power is the most important factor in evaluating business.
We have heard this statement numerous times to speakers on business forums that we have attended.
- if you have the total control to raise your price
- without affecting or losing your business to your competitor,
then all we can say is that you have a good business. And if you have hard time thinking items or some elements before you can raise your price even by just 10 percent, then we are sure that you have a very bad business.
At this moment, let us ignore the statement “pricing power”. But all we want for you is to focus on the description itself.
It says pricing power, this means on the ability to raise price in your product a little without any huge impact (negative) on the demand.
Now the million dollar question is, what type of product or companies should it be with that characteristic?
We have here at least 3 types of companies or products that we believed to have this power.
1. The “Will I?” Categorized Products
If you came across with the magazine called “Pragmatic Pricing” and for sure a regular reader that subscribe with it knows what are those so called “Will I” products in which buyers make decision for them to buy or not. The good thing is that, customers do not choose viable products in the market.
Let us take popcorn as our example, it is a Will I product in a movie theater, obviously most movie theater has this and this has become on the top of the list for those who are planning go in theatres.
Another thing, your meat grinder is an option on kitchen mixer, in hotel room bottled water is always there and lastly any other products with monopoly are considered “Will I”.
So, in every scenario, companies can raise its prices slightly without any impact in its demand.
2. The “Highly distinguish” Products
If you can provide products that can stand among others, then you have a significant differentiation.
The idea is true specially when your target is niche involved so you can add specifics to the niche in which your main competitors is lacking with.
The product is somewhat similar to the “Will I” but this time it has its competitor, but the competitor is inferior with your product.
3. Large Company Portfolios
This is the last key in pricing power in which a company owns the whole ecosystem.
The best example is Apple, with this brand you can have Macs, iPads, iTunes, iPhones and even Apple watches that can be synchronized and work with the system or using single platform.
For we know, the company which is “Apple” can set high prices and maintain it since its customers are already embedded their ecosystem.
I know you agree with me that “most people prefer using Apple because they know that each of the items will work together with no problems”.