Gabor Granger Method: Optimal pricing process with CX and market research software from QuestionPro

With the Gabor Granger method, the van Westendorp price sensitivity method and the conjoint analysis, QuestionPro provides you with important tools for determining product prices

Pricing is a critical success factor

What value consumers attach to products and services so that they consider purchasing them is the main question of the Gabor Granger method, a simple but efficient method for pricing Setting the price for a product or service is an essential step before launching it on the market and a the most critical decisions for any company. It is essential to price a product so that customers actually buy it and at the same time make a profit. If you ask for a price that is too high, there is a risk that customers will not buy it. If you set the price for a product too low, there is a risk that it will not generate a significant profit, even though customers buy it very frequently.

Gabor Granger method for price discovery

The Gabor Granger Pricing Method is a technique used within market research and Customer Experience Management to determine the price elasticity of products and services. The Gabor Granger Method involves asking potential customers about the likelihood that they will purchase a product or service at different price points. The Gabor Granger method was developed in the 1960s by the two British economists and then professors at the University of Nottingham, Clive Granger and André Gabor. Clive Granger shared the Nobel Prize in Economics with Robert Engle in 2003 for their work in the field of statistical methods for testing economic theories.

How does the Gabor Granger method work?

With the Gabor Granger method, also known as the Gabor Granger pricing technique, respondents are shown different prices for a product and asked about the likelihood of purchase at different price points. In this way, a sales and demand curve can be created to determine the optimal price to achieve maximum sales.

Gabor Granger curve to determine the optimal price

Implementation and process of the Gabor Granger method

When carrying out the Gabor Granger method with QuestionPro, survey participants first receive a description of the product along with a picture as well as all the features and specifications that characterize this product. Different price points for this product are then displayed, each linked to the question: “Would you buy this product at price X?” If your survey respondent says no, the next lower price point will be displayed; if they say yes, a higher price point will be displayed. The process repeats until the pricing model has determined an optimal price point.

The Gabor-Granger pricing technique method helps answer the following two critical questions for businesses:

• Can you increase the price of products or offers without affecting sales?
• At which price points does it become clear that consumers' willingness to pay for the products or services mentioned increases or decreases?

Carry out the Gabor Granger method using the market research and CX software QuestionPro

Creation of the Gabor Granger method

QuestionPro offers you a “turnkey” question type with which you can use the Gabor Granger method quickly and easily without having to program it yourself.

First, select the Gabor Granger question type from the question library

When the Gabor Granger question type settings screen appears, set your price points and describe the product

The starting point of the Gabor Granger method is the price that should be shown to respondents for the first time. Assuming the respondent is willing to buy the product at this price, the next higher price from the given price list is displayed. If the respondent is not willing to purchase the good at the primary price shown, a low price is shown. This pattern is repeated several times until the highest price point a respondent is willing to pay is determined.

QuestionPro offers you the use of the Gabor Granger method with two different price paths, namely sequential and random:

• Sequential: The sequential price path shows respondents the subsequent prices in the sequential, i.e. pre-sorted, order, just as you previously defined the prices. This can be a rising price or a falling price.
  
• accidentally: In the random price path, the subsequent price is randomly displayed following the respondent's first answer. The algorithm decides whether to randomly show the user decreasing price points or increasing price points.
  

Evaluation and data analysis of the Gabor Granger method

The Gabor Granger method is evaluated via the analysis dashboard integrated into QuestionPro.

Alternatives: Van Westendorp method and conjoint analysis

Within market research there are different approaches and methods for determining prices. These approaches include direct methods such as willingness to pay estimation, indirect methods such as the Gabor and Granger and Van Westendorp techniques, and price/attribute mix methods such as conjoint analysis. Indirect methods are more accurate than direct methods because respondents are exposed to more realistic scenarios. These methods are quick and easy to use. These methods can be used to derive information about why respondents chose not to purchase a product or service. Indirect pricing methods are widely used and recognized in market research. You can find more information about the van Westendorp method here. The market research software QuestionPro makes pricing easy for you!

1:1 live online presentation:
Gabor Granger method for price discovery

In a live demo at an appointment of your choice, we would be happy to show you how you can quickly and easily use the Gabor Granger method with QuestionPro and find the optimal price for your products.

Make an individual appointment now.

You have questions about pricing procedures using the Gabor Granger method Simply contact us using the contact form. We look forward to the dialogue!

Test software to determine the best price using the Gabor Granger method

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