Written By: Mudit Lunawat
Imagine this.
You walk into a store looking for your favorite soap. You’ve been using it for years. But today, the price tag is ₹10 higher. You grumble a little, maybe frown at the shelf, but you pick it up anyway. Why? Because, quite simply, you trust it. It works. You love how it smells, how it feels, how it makes you feel.
Now imagine this on a global scale, millions of people doing exactly what you just did.
That, dear reader, is pricing power. And in the world of business, it’s gold dust.
But let’s not get ahead of ourselves. To understand why some companies soar and others crawl, we need to unpack two very different, yet deeply connected, ideas: pricing power and volume growth.
The Tug of War: Volume vs. Pricing
At its heart, every company that makes or sells a product has two main levers to pull for growth:
- Sell more units (volume growth)
- Charge more per unit (pricing power)
But here’s the thing: both strategies have consequences, and neither is always right.
Sometimes it’s better to sell a lot of something cheap. Other times, it’s smarter to sell less, but make more from each item. And the true titans of industry? They know exactly when to pull which lever.
Let’s Break It Down: Volume Growth
Volume growth is easy to spot.
If a biscuit company sold 1 crore packets last year, and this year it sells 1.2 crore, that’s volume growth.
When does this happen?
- When the company enters new markets
- When it launches aggressive promotions or discounts
- When it sells at rock-bottom prices to beat competitors
- Or simply when more people start using the product due to rising demand
But here’s the catch: volume growth often comes at a cost.
Slashing prices to win customers may increase sales, but it hurts profits. You’re running faster, but not necessarily earning more.
Example – Think of local FMCG brands that flood the market with ₹5 shampoo sachets. They grow like wildfire, but margins? Razor-thin.
Now flip the coin.
What Is Pricing Power?
This is the real deal.
Pricing power means a company can raise its prices without losing customers.
It’s the dream.
And it doesn’t come easy.
Companies with pricing power usually have one or more of the following:
– A strong brand (Think Apple. Or Amul.)
– Loyal customers (who won’t easily switch)
– A unique product or service (Monopoly or near-monopoly)
– High entry barriers (where competition can’t jump in easily)
Example – Look at Apple. Every year, new iPhones are more expensive. And every year, people queue up to buy them. Apple doesn’t rely on massive volume growth — it thrives on margins. That’s pricing power flexing its muscles.
So… Which Is More Important?
For early-stage companies or businesses trying to penetrate a market, volume is the name of the game.
They’re fighting for visibility, adoption, relevance. They’ll price lower, run offers, beg for shelf space.
But once they’ve got a loyal base?
Pricing power becomes the real profit engine.
It’s a transition — like climbing a hill. Volume gets you up there. But pricing keeps you standing strong.
Example – Hindustan Unilever (HUL)
HUL didn’t always have pricing power in every category. Years ago, it was all about getting into every Indian home. Now, with iconic brands like Surf Excel, Dove, and Horlicks, HUL can tweak prices with little impact on demand. The trust is built. The base is loyal. The margins roll in.
The Long-Term Game
Investors, analysts, and CEOs often debate: what truly drives sustainable success?
And while both strategies have merit, pricing power is the holy grail in the long run.
Because here’s a hard truth:
Volume growth has limits.
You can’t keep selling more forever. Populations stabilize. Markets saturate. Consumption plateaus.
But pricing power is infinite — if earned.
It allows you to expand margins, absorb inflation, weather competition, and even innovate more freely.
It gives you freedom.
Real World, Real Lessons
Example 1: Pricing Power – SJS Enterprises Ltd.
– Q2 & H1 FY25 revenue growth: 18.1% YoY to ₹1,928 million
– EBITDA margins jumped from 22.9% → 26.6% (370 bps rise)
– Driven by premium product sales (advanced touchscreens, illuminated logos, optical covers) and pricing improvements — not just higher volumes.
– “Kit value” per vehicle rose from ₹1,200–1,500 (legacy) to ₹3,500–₹5,000 (new-age cars).
Insight:
They didn’t just sell more — they made more per sale. This is textbook pricing power.
Example 2: Volume Growth – Zomato Ltd.
- FY24: 16% YoY food order volume growth (753M orders)
- Blinkit volumes up 71% YoY
- Average Order Value (AOV) growth in food delivery: only 5% YoY — meaning revenue growth was mostly from more orders, not higher prices.
Insight:
Volume-led growth works great in high operating leverage businesses like delivery — until market saturation or price wars hit.
Example 3: The Fall of Pricing Power – Nokia
In the mid-2000s, Nokia could charge a premium for its phones. Customers lined up for the latest models.
But then came the iPhone and Android revolution. Suddenly, Nokia’s product was no longer the “must-have.”
Its pricing power evaporated almost overnight because innovation stalled and consumer perception shifted.
Lesson:
Pricing power is not forever — it must be constantly defended with innovation, relevance, and customer loyalty.
Outlook & Learnings
– Pricing Power companies (like SJS): Weather downturns better but must keep innovating.
– Volume Growth companies (like Zomato): Shine in fast-growing markets but face risk if growth slows.
Quick Checklist: How to Spot Pricing Power
If you want to identify companies with pricing power, look for:
- Stable or rising gross margins over years despite inflation
- Ability to raise prices without a big drop in sales volumes
- Strong repeat purchase rates or high customer loyalty
- Premium brand positioning or a differentiated product few can copy
The Final Word
If you’re an entrepreneur, investor, or just curious about what makes companies tick — here’s the simple truth:
– Volume gets you in the game.
– Pricing power wins you the game.
The world’s most valuable companies aren’t just the biggest sellers — they’re the ones who can charge what they want, when they want, and still keep you coming back.