Jason Green, managing director of The Cambridge Group – a member of the Nielsen holding – is the author of the book The Power of Pricing, according to which there is nothing like the power of setting your own prices. In his view when a company offers something that can’t be beaten, it creates a significant business advantage.

His starting point is that this is something few companies can do, most brands simply accept the prices established by the market. According to famous US business magnate and investor Warren Buffet, pricing power is the single most important competitive factor. Jason Green agrees, in his view for most companies, managing pricing is the most effective, lowest-risk lever for driving major growth and enhancing profitability. Several studies have shown that a 1-percent increase in pricing can have a much greater impact on profitability than bringing variable costs down by 1 percent or increasing sales by 1 percent. However, recent Nielsen research across categories has shown wide discrepancies in how successful companies are in their abilities to realise pricing power. While pricing strategy plays a key role in the success of any business, managers often report lacking confidence about their approach and ability to optimise pricing, partly because they don’t have the necessary insights into consumer demand. As a result, their pricing strategy generates lower than expected sales because prices are too low or too high. Fortunately, three basic principles can help firms assess their current approaches in order to use their pricing power’s potential well.