Developed in the 1960s by Clive Granger and André Gabor, the Gabor-Granger method is a specialized form of monadic price testing. It's particularly effective for determining the optimal price for new products or services.
At its core, the Gabor-Granger method involves identifying the highest price a consumer is willing to pay for a product or service. This is typically done by presenting respondents with five different price points in a survey. Each respondent is asked a purchase intent question for a randomly chosen price from these five options. Based on their response, categorized as 'Definitely Buy' or 'Probably Buy', they are then asked about their purchase intent at a higher or lower price point. This process continues until the highest price at which the respondent shows a strong purchase intent is identified. If a respondent does not show a strong intent for the lowest price, they are usually excluded from the analysis.
The real power of this method lies in its ability to produce a demand chart and a revenue curve. The demand chart plots the percentage of people willing to pay at different price points (prices on the x-axis and percentage on the y-axis), while the revenue curve shows the predicted revenue at these different prices. These reports are valuable for businesses to understand how pricing changes can impact demand and revenue.
Discover your customers' true price sensitivity with our Gabor-Granger surveys. Reach out to us now and find out how we can elevate your business's success.