What Is Pricing Power?

By Jeremy Bowman – Updated Aug 13, 2025 at 2:14 AM EST

Key Points

Investors should seek stocks with pricing power as it indicates strong competitive advantage.
Companies like Coca-Cola and P&G show pricing power by raising prices with little customer loss.
Evaluate company margins and past price changes to assess potential investment returns.

Pricing power is a key concept in economics and business, and investors should understand how it manifests and influences competition. Almost every business wants pricing power because it gives them a competitive advantage and allows them to generate higher margins.

Pricing power has a wide range of implications for both businesses and investors and understanding the concept can help you choose better stocks.

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A graphic defining and explaining the term "pricing power." — Image source: The Motley Fool

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Competitive Advantage

A term used in business contexts to describe what drives superior profits, better product sales, and the continuous ability to innovate.

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Person holding a smartphone with images of conversation bubbles seemingly floating above it. — Image source: Getty Images.

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The company has consistently raised prices at Disney World and other parks. And despite grumblings from some of its fans, attendance continues to swell to record levels.

Disney has also begun testing its pricing power in its Disney+ streaming service and has seen promising results. It raised its subscription service prices from $7.99/month to $10.99/month, with little customer churn. CEO Bob Iger addressed a question on pricing power on the recent earnings call, saying the company did have "pricing elasticity," another way of saying it can raise prices with little pushback.

Whether you're investing in a bull or bear market, it pays to invest in companies with pricing power. These stocks tend to have proven their worth over a long period and have sound competitive advantages that should drive above-average performances for the long term.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.