Does the business have the ability to increase the prices of its products and not loose customers

Does the business have the ability to increase the prices of its products and not loose customers

Following companies have pricing power
Luxury goods mfg Louis Vuitton
Ice cream mfg Haagen Dazs

In contrast commodity type businesses like Steel producers do not have pricing power

Common characteristics of firms with Pricing power

Have high customer retention rates
Business with a high renewal rate on its services typically has pricing power

Low Price Sensitivity
The higher the % of the customers budger spent on a product/service, the more likely the customer will be price sensitive
Medical laboratory testing business have pricing power because their cost to the customer represents 3% of overall medical spending

Customers have profitable Business Models
If customers have plenty of cash or their businesses are highly profitable, they will be less sensitive to pricing
Bloombergs customers are mostly traders who have a high profitable business

High quality products/services
Sometimes the quality of the product is more important to the purchaser than the price
Jet engine mfg use Precision castparts castings, parts to manufacture Jet engine for aircrafts. These are very critical parts.

Keep an eye out of important pricing power indicators

Multiple years of increase

Pricing higher than competitors
Increases that don’t offset costs

Check if increase in price results in additional revenue

Check if increase is lasting or not

Check if price increases is translated to operating income growth or if they are used to offset expenses

Another method to identify pricing power is to calculate historical operating profit metrics

If a business has pricing power, it will disclose the increase in prices.
Whether Pricing power is found through the overall business or only a segment of the business

Some businesses have pricing power in certain products/services.
Airlines have pricing power only on certain routes where there is less competition
Indian airlines flight from Mumbai to Belgaum

Apple Iphone, Ipad

Technology creates Transparency
Internet creates Price transparency especially in Hotel room rates