It is the ability to raise the prices you are charging for the value that you are offering & the effect of that on your customers
It answers the question: how much can I increase the prices before customers feel that the value isn’t worth that money and start to flee away
- For example: if I double the pricing, will I lose half or more of my customers so that the net total is financial loss?
- Notice that it is not always about money, you may lose the exact half (in the previous question, and that would be profitable to you in terms of time, energy and employees' salaries
The more pricing power you have, the more flexible you can be and the more you can maintain sufficient and resilient to market changes.
Also it is a great indicator of your weight in the market among your competitors