Gabor-Granger vs Van Westendorp

When introducing a new product into the marketplace, the right price can make all the difference in its success. Pricing your product or service too low may be interpreted as low quality, and pricing it too high could be seen as overpriced. So, how do you price your product to sell? The Van Westendorp and Gabor-Granger methods help you determine how much consumers are willing to pay for your product through feedback and insights. 

This analysis is also good for reassessing your product pricing. A shift in the marketplace, like supply chain challenges and related logistics, can affect your business and may cause you to increase your pricing. But to determine how much without losing business to competitors will require research. 

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

This article will explore the Van Westendorp vs Gabor-Granger pricing model and recommend which of these surveys to use for certain kinds of marketing research.  

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

You may have to change your price point when your product or service is in a highly-competitive market. So getting consistent consumer feedback on what they're willing to pay for your product or service is crucial, since the demand for your product can also reflect the cost.  

TIP: Learn about price analysis and optimization to get the ideal price for your product or services. 

This method helps price new products into the market and adjust 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. Additionally, it can assess the elasticity of a price point, also referred to as the Gabor-Granger demand curve, to reflect the impact of changes if the price is raised or lowered 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 5-point purchase intent format. This format asks the respondent 5 questions based on a specific amount they’re willing to pay for an item or service. Each question is presented on a single page because the model wants respondents to consider each question independent from the other. 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 of those questions presents price points different from the last ascending low to high. If the respondent's answer to the first question is positive, the next question will present a higher price until the respondent answers negatively. In this case, the next question will ask if 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 5 questions, such as: 

If the respondent answers positively to all 5 questions, you'd know this person is willing to pay at least $30 for this new toy. On the other hand, if the respondent answers negatively to question 3, then you'd know $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 one hundred respondents that fit the profile of your customers, you'll get a better gauge of how high you can price your product. And this provides 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 products or services too low, the Gabor-Granger demand curve is the best marketing research approach.   

There are plenty of reasons market research uses the Gabor-Granger demand curve, but it also has some challenges that may influence you to use another price point approach like the Van Westendorp method. But before we look into other options, let's learn what makes the Gabor-Granger pricing model a benefit. 

Advantages

First, it's a good option for establishing price points, and it's even better for identifying price points for a new product or service. By determining the price point 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 to increase to meet inflation or if you're priced too low. 

TIP: Get a full market analysis on the product or service you’re selling using AI-fueled insights powered by SurveyMonkey. 

Disadvantages

A challenge 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 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 learn the psychologically acceptable 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 ranges from too cheap to too expensive for the consumer. You'll also get better insights into your demographic 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 the sales are low, you can use the Van Westendorp pricing model to determine if you're priced too low or too high. It's also useful for getting quick pricing results when introducing a new product 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 5 prices to the respondents). 

The Van Westendorp pricing analysis offers you a more in-tuned understanding of what the customer wants to pay for a product or service vs. what they would pay. This model focuses on price sensitivity and customer perception of what is affordable and even what's considered cheap, too cheap, moderately priced, and too expensive. 

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

The Van Westendorp method provides 4 questions based on what the respondent thinks is too cheap, a bargain, expensive, and unaffordable. Here are a few examples:

Question: At what price would you consider this product so low that you would question the quality?

Question: At what price would you consider a great price, even a bargain?

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

and would take some thought before buying?

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

The Van Westendorp response coding will provide a cumulative frequency plotting based on the respondent's input presenting 4 lines with 4 intersections. The range between the left and right-most of what's too cheap and too expensive is the respondents’ psychologically acceptable price range. 

The more people who fit 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. 

Advantages

One of the benefits the Van Westendorp survey offers is that you’ll get consumer-set pricing points. This valuable information gives you a specific baseline for what they want to pay instead of what they might pay. It also provides specific price points of what they consider is too cheap to buy, what’s a bargain, and what they believe is too expensive to purchase. These insights also can help you better identify price sensitivity in the marketplace. 

Disadvantages

On the other hand, the Van Westendorp response coding doesn’t offer insight into potential revenue because the price points provided will be a substantial amount of insights to assess. However, you can take the 5 price points from this model to use for the Gabor-Granger pricing questions. 

TIP: Identify the right price for your products or services 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 get a psychological understanding of consumers’ pricing sensitivity. Demographics like income and region can vary what consumers consider so cheap 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 a product or service’s price. 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.  
Using market research is a very useful way to set the best price for your products and services. Gauge a range of prices all at once using SurveyMonkey AI-powered insights and methodologies. Optimize product pricing with marketing techniques that meet your needs today.