Pricing power refers to the extent to which a supplier can enforce its pricing vis-à-vis customers and competition on the market.
Pricing power not only refers to the downstream-, but to the entire value chain. Car manufacturers or large retailers often have a high pricing power vis-à-vis suppliers or manufacturers and therefore have a great deal of influence on the purchasing conditions, which are to be negotiated. As an example, the German business model of food discounters is based on an extremely strong pricing power in purchasing.
In downstream stages of the value chain, brand image plays one of the most important roles in pricing power that exists in the market. The outstanding pricing power of vendors like Apple is based to a large extent on the strong position of the brand. A significant increase in market transparency due to the Internet makes the topic of pricing power increasingly important. The involvement of top management in price management often leads to a significant rise in pricing power.