Definition
Pricing power is the ability to raise prices without losing demand. It affects ARPA/ARPU, margin, and payback.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Pricing Power" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Document common pitfalls so the metric doesn't get gamed.
Where to use this on MetricKit
Calculators
- Deferred Revenue Rollforward Calculator: Bridge billings to recognized revenue by rolling deferred revenue forward for a period.
- Break-even Revenue Calculator: Estimate the revenue needed to break even given fixed costs and gross margin.
- NPV Calculator: Calculate net present value (NPV) from initial investment, annual cash flow, years, and discount rate.
- IRR Calculator: Estimate internal rate of return (IRR) for an investment using yearly cash flows.
- Discounted Payback Period Calculator: Estimate discounted payback period using a discount rate (and compare to simple payback).
Guides
- Cash conversion cycle: turn working capital into runway: A practical guide to the cash conversion cycle (CCC): how AR/AP timing changes cash, how to reduce days outstanding, and why runway depends on working capital.
- NPV vs IRR: which metric to trust (and the traps): A practical guide to NPV vs IRR: why IRR can mislead, when NPV is superior, and how to compare projects with different scale and timing.
- NPV (Net Present Value): definition, formula, and example: NPV explained: what net present value means, how to calculate NPV, how to pick a discount rate (MARR), and common pitfalls.
- IRR (Internal Rate of Return): definition, formula, and how to use it: IRR explained: what internal rate of return means, how to calculate IRR, and when IRR can be misleading (use NPV too).
- Discounted payback period: definition, formula, and how to calculate: Discounted payback explained: how it differs from simple payback, the formula, and when discounted payback is the right metric.