Identifiying the Optimum Price through Negotiation with Participants

The Gabor Granger model for identifying the optimum price of a product is suitable under two specific conditions:    

Your company already has firm ideas about the price of the product.

It can be assumed that the target group has only vague ideas about an adequate price for the product. This can be the case, for example, with newly introduced products, or with products that are purchased very rarely.

In contrast to the Price Sensitivity Meter from Van Westendorp as described below, with the Gabor Granger model, various price points are established and the respondents say whether they would buy the product presented at the relevant price. If the start price is not accepted, then the price is reduced until a price is accepted or until the minimum price point has been reached.

Alternatively, the respondent can be presented with a mid-range price as a start price, and if that is accepted then the price rises or, if rejected, is reduced, until the respondent refuses or accepts it. However, the respondents grasp the principle of the rising and falling prices relatively quickly, and thus try to either avoid higher prices and/or achieve lower prices by answering strategically.

For this reason only a limited number of price points can be proposed with the Gabor Granger model; we generally recommend three price points:

The highest price that might be considered for the relevant product according to the company's internal evaluations.

The lowest price that might be considered for the product within the company without it becoming commercially unviable.

A price point between the two.    

Zoom: In the Gabor Granger model the optimum price for a product is identified by negotiating with the respondents. Only 22 per cent would already buy the sample product at a price of CHF 5.90, whilst the willingness to buy increases by 13 per cent with the second proposal of CHF 4.90. Sixty-nine per cent of those questioned would buy the product for CHF 3.90, whilst 31 per cent would not buy the product even at the lowest price.

Only 22% would already buy the sample product at a price of CHF 5.90, whilst the willingness to buy increases by 13% with the second proposal of CHF 4.90; 69% of those questioned would buy the
product for CHF 3.90, whilst 31% would not buy the product even at the lowest price.