Gabor-Granger Pricing Method
What is Gabor-Granger pricing technique?
The Gabor-Granger pricing technique is defined as a pricing question used in survey research to determine the price elasticity of products and services. Determining the price for a product or service is an essential step and one of the most important decisions for any organization. As companies need to cover their costs, it is important to price an item high enough to cover expenses, but not so high that customers won’t be willing to pay for the product. Finding your customers’ willingness to pay for services or products is considered the main reason for market research. What value do your consumers put for your product is the main question that needs to be answered. A common method to understand this is to expose people to a price and then ask if people would buy it or not—a technique commonly known as Gabor-Granger.
How do I setup Gabor-Granger question type?
To add Gabor-Granger question:
- Go to: Login » Survey (select a survey) » Edit » Workspace
- Click on add question button
- Under advanced question types » pricing analysis, click on Gabor-Granger question
What are the different Price Setup options?
We support two types of Price Setup:
- Manual: You can define the price range by manually providing all the price points.
- Automatic: You can set the price range just be providing the minimum price, the price interval and the number of steps/levels. The maximum price will be auto calculated with the given inputs.
What is starting price point?
Starting price point is price which is shown to respondent for the first time and user will be asked if he/she is willing to buy a product at shown price. Suppose the respondent is willing to buy the product at that price, then the product is shown again, but this time with a higher price from the predetermined price list. If the respondent is not willing to get the merchandise at the primary price shown, the merchandise is shown again with a lower cost from the predetermined list. This pattern is iterated multiple times until the highest price point a respondent is willing to pay, is determined. The median price point from the predetermined price list will be set as the starting price point. Survey creator can change it based on the requirenment.
What price paths do you support?
We have 2 price paths:
- Sequential: Sequential price path will show subsequents prices to the respondent in the sequential order. It can be increasing price or decreasing price based on the respondent selection for the starting price point.
- Random: In case of random once the respondent answers primary question for starting price the subsequent price shown will be random. The AIA based algorithm decides if to show user decreasing price points in random or increasing price points in random will be decided by the engine based on the respondent seletion.
How do I analyse the output for Gabor-Granger question?
We provide 2 charts in the dashboard
- Willingness to pay(%) and Revenue curve: This chart will provide a simulated demand curve that helps us understand how the demand for the product changes with the price increase. The revenue curve allows us to identify the revenue-maximizing price points. Combining these two charts helps us decide an ideal price point that is high enough to cover expenses and maximize the revenue, but not so high that the product's demand declines.
- Price Elasticity: This chart helps us understand customers' willingness to pay for the product at different price points.