Gabor-Granger vs. Van Westendorp

When introducing a new product or service into the marketplace, the right price can make all the difference to its success. If you price your product or service too low, consumers could perceive it as being low quality, whereas if it’s priced too high, they could perceive it as being overpriced. So how do you price your product or service so that it sells? By utilising feedback and insights, the Van Westendorp and Gabor-Granger methods help you determine how much consumers are willing to pay for it. 

This analysis is also good for reassessing your product or service pricing. A shift in the marketplace, such as supply chain challenges and related logistics, could affect your business and cause you to increase your pricing. However, determining how much to increase it by without losing business to competitors will require research. 

Price Optimisation, powered by SurveyMonkey, can help you set a new price and optimise an existing product or service price based on a niche target market. Find out how to determine a fair price for your product or service. 

This article will explore the Van Westendorp and Gabor-Granger pricing survey models and recommend which one to use depending on the kind of marketing research you're conducting.  

The Gabor-Granger survey, which is also referred to as The Gabor-Granger Pricing Technique, helps you gauge the optimal price for a product or service. It’s a marketing design created by Andre Gabor and Clive Granger to determine the relationship between the price and demand for each product or service. It reveals the best price point that consumers are willing to pay. 

You may have to change your price point if your product or service forms part of a highly competitive market. Obtaining consistent consumer feedback about what consumers are willing to pay for your product or service is therefore crucial, since the demand for your product can also be reflected in the cost.  

Tip: Learn about price analysis and optimisation to get the ideal price for your product or service. 

This method helps you price a new product or service coming into the market and adjust your current pricing. It’s also the way to go if you want to find out how much consumers are willing to pay for your product or service. Additionally, it can assess the elasticity of a price point, which is also referred to as the Gabor-Granger demand curve, to reflect the impact of changes if the price is increased or decreased from the optimal price point. 

The Gabor-Granger pricing method aims to determine what each respondent will pay for your product or service using the five-point purchase intent format. This format asks the respondent five questions based on a specific amount that they’re willing to pay for a product or service. Each question is presented on a single page because the model wants respondents to consider each question independently of the others. The answers can be set up as yes or no or displayed as a rating scale to provide more granular feedback. 

Tip: Learn more about rating scales with Likert scale use cases and examples. 

Each question presents a specific price point, increasing from low to high. If the respondent’s answer to the first question is positive, the subsequent questions will present a higher price until the respondent answers negatively. Once that happens, the next question will ask whether the respondent is willing to pay a lower price. This conditional method of surveying is known as skip logic. 

Tip: Learn about skip logic and how to use it in your Gabor-Granger survey. 

For example, if you wanted to present a new toy in the marketplace, you’d ask five questions, such as: 

If the respondent answered positively to all five questions, you’d know that this person is willing to pay at least £30 for this new toy. On the other hand, if the respondent answered negatively to question 3, you’d know that £20 is too much for this person but £15 isn’t. So this respondent will provide feedback of £15 being their price point. 

When you survey at least 100 respondents matching your customer profile, you’ll get a better idea of how highly you can price your product or service. And this gives you your Gabor-Granger variable. You’ll determine the demand curve by calculating the cumulative percentage of respondents willing to pay at their respective price point. 

If you want to avoid pricing your product or service too low, the Gabor-Granger demand curve is the best marketing research approach.   

The Gabor-Granger demand curve is used in market research for many reasons, but it also has some challenges that may influence you to use another price point approach, such as the Van Westendorp method. But before we look into other options, let’s learn about the benefits of the Gabor-Granger pricing model. 

Advantages

Firstly, Gabor-Granger surveys are a good option for establishing price points, and they're even better for identifying price points for a new product or service. By determining the price point that consumers are willing to pay, you’ll be able to cumulate the total demand according to your pool of respondents. You’ll also be able to forecast your revenue, and you’ll have a gauge of the elasticity of the price point. This will tell you how much you should increase the price to keep up with inflation, or if you’re priced too low. 

Tip: Get a full market analysis of the product or service you’re selling using AI-fuelled insights powered by SurveyMonkey. 

Disadvantages

A challenge that you may face with the Gabor-Granger pricing method is that it doesn’t offer insight into wider price sensitivity in the market. The Gabor-Granger model is designed to gauge one product or service at a time. Researching your competitors’ price points would require other marketing techniques. It also doesn’t specifically tell you what consumers want to pay, because you’re providing the price options for them.  

Peter Van Westendorp created the Van Westendorp Price Sensitivity Meter (PSM) to determine the psychologically acceptable price range for a product or service. Instead of providing the respondent with a series of price points, you allow the respondent to provide the price points for you. This approach gives you a deeper understanding of what price ranges consumers perceive to be too inexpensive or too expensive. You’ll also gain better insights into your demographic by using the right market research platform. 

Tip: Find out how to gather demographic information from your surveys. 

The Van Westendorp pricing analysis is helpful when you’re unsure what price point the market will accept for your product or service. For example, if your product or service is in high demand but sales are low, you can use the Van Westendorp pricing model to determine whether you’re priced too low or too high. It’s also useful for obtaining quick pricing results when introducing a new product or service that doesn’t fit into an existing market category. Unlike the Gabor-Granger method, you can assess the price range that the market considers to be fair pricing (instead of providing respondents with five prices). 

The Van Westendorp pricing analysis offers you a more nuanced understanding of what the customer wants to pay for a product or service compared with what they would actually pay. This model focuses on price sensitivity and customer perception of what is affordable, and even what’s considered inexpensive, too inexpensive, moderately priced and too expensive. 

This pricing model is displayed differently from the Gabor-Granger model in many ways: 

The Van Westendorp method provides four questions based on what the respondent thinks is too inexpensive, a bargain, expensive and unaffordable. Here are a few examples:

Question: What price would you consider so low that you would question the quality of this product or service?

Question: At what price would you consider this product or service to be very well priced or even a bargain?

Question: At what price do you think the product or service is getting expensive 

and would take some thought before buying?

Question: At what price would you consider this product or service to be too expensive to purchase? 

The Van Westendorp response coding will provide a cumulative frequency plotting based on the respondents' input, presenting four lines with four intersections. The range between the leftmost and rightmost of what’s too inexpensive and too expensive is the respondents’ psychologically acceptable price range. 

The more people who match your customer profile and take the survey, the better gauge you’ll have into the consumers’ idea of affordability. The Van Westendorp pricing model also provides you with a more specific price point regarding the elasticity of your product or service. 

One of the advantages that the Van Westendorp survey offers is that you’ll obtain consumer-set price points. This valuable information gives you a specific baseline of what they want to pay rather than what they might pay. It also provides specific price points of what’s a bargain and what they consider to be too inexpensive or too expensive to purchase. These insights also can help you more effectively identify price sensitivity in the marketplace. 

On the other hand, the Van Westendorp response coding doesn’t offer insight into potential revenue because the price points provided may vary greatly between respondents. However, you can take five price points from this model to use for the Gabor-Granger pricing questions. 

Tip: Identify the right price for your product or service with the Van Westendorp Price Sensitivity Meter. 

Whenever you’re unsure how to price a new product or service, the Van Westendorp PSM helps you gain a psychological understanding of consumers’ pricing sensitivity. Demographics such as income and region can have an effect on what consumers consider so inexpensive that they’ll question the quality, what’s a bargain, what’s pricy but affordable, and what’s just too expensive to buy. 

The Gabor-Granger pricing model is great for measuring the elasticity of the price of a product or service. It can help you determine how low and how high to move your pricing to keep up with market fluctuations that might increase certain business costs. It also helps you determine how much of a discount you can afford to give for sales so you’re not pricing items or services too low.  
Utilising market research is a very useful way to set the best price for your product or service. Gauge a range of prices all at once using SurveyMonkey AI-powered insights and methodologies. Optimise product pricing with marketing techniques that meet your needs today.