Choosing the perfect price for an item is one of the most important decisions a business can make - and it’s all about striking the perfect balance.
If an item is priced too low, consumers may think it's lower quality and not bother purchasing it.
At the same time, overpriced items also have the ability to turn off potential buyers. Thankfully, the van Westendorp and Gabor-Granger pricing models shed light on what prices will appeal to consumers.
Below, we'll dive into each model and which one is best suited for a business based on its needs.
Pricing Research at Its Core: What’s the Price?
Pricing market research provides businesses with a deeper understanding of the worth consumers put on their products/services. In turn, businesses can directly tailor their prices to match the needs of the consumers.
In some cases, businesses may want to know how their current pricing is perceived, or they're developing something new and need to find the optimal price point. Regardless of the reason, they want to determine the best price for their customers.
Will customers find the pricing too expensive? Or will a business vastly underestimate how much customers are willing to pay and set a lower price?
These are both questions that can be answered by either the van Westendorp or Gabor-Granger models.
Recommended Reading: How To Conduct Pricing Research [Methods + Benefits]
Why Van Westendorp Is Better
Generally, the van Westendorp model is a straightforward approach to determining price and revolves around four main questions.
These questions determine the best price point for a product or service, and responses will give insight into when the price becomes too cheap or too expensive.
A key feature of van Westendorp questions is that they rely on the respondent to provide a price point, versus having them react to a given price point.
Example van Westendorp question:
- At what price do you think the product is priced so low that it makes you question its quality?
- At what price do you think the product is a bargain?
- At what price do you think the product begins to seem expensive?
- At what price do you think the product is too expensive?
But for certain types of services, this becomes a challenge.
Primarily, this occurs when respondents are asked to provide answers for an offering that doesn't have a baseline price (we see this specifically with new products or services). In these cases, responses can be all over the place and may require additional evaluation.
Why Gabor-Granger Is Better
The Gabor-Granger pricing model gathers feedback from respondents about specific price points. It can be a simpler choice when compared to the van Westendorp model, as respondents have a specific point to react to.
Gabor-Granger questions will cover how much respondents are willing to pay for an item by listing increasing prices.This can help businesses better understand pricing fluctuations and how they impact consumer spending.
Example Gabor-Granger question:
At a price of $150, how likely are you to purchase this device?
- Definitely would purchase
- Probably would purchase
- Might or might not purchase
- Probably would not purchase
- Definitely would not purchase
Furthermore, there might be a notable drop-off where respondents are no longer willing to pay for an item at a certain price. As a result, a business can look at this and decide to price an item accordingly.
This information is key for businesses wanting insight into consumer demand and consideration for an item (AKA, when it becomes too expensive).
Comparing the Two Methods
At the end of the day, each of these methods cover the same thing: analyzing price points so businesses can make the right choice based on the needs of their target audience.
However, certain differences arise when it comes to how these methods obtain that information…
Question Style
The biggest difference between the van Westendorp and Gabor Granger models is the type of questions they ask.
Gabor-Granger questions list specific price points respondents can choose from, whereas van Westendorp questions ask respondents to list desired price points. Each option comes with benefits, but it’s important for businesses to use the right method based on their needs.
Responses
Due to the differences in question styles, response types will vary for each of these methods. For instance, Gabor-Granger question responses will be specific and thus simpler to evaluate/draw conclusions from.
On the flip side, van Westendorp responses may need some additional wrangling, which can be more time-consuming.
Which One to Use?
The short answer: there is no specific answer! It all depends on the needs of a business (and its customers).
The long(er) answer: When using these models, businesses are at the mercy of their respondent's opinions on price. Businesses will have to be prepared to make data-driven decisions based on this factor. Meaning, they may need to shift their idea of what the “perfect price" is to match the needs of their audience.
For businesses that have no idea where to start with their pricing, Gabor Granger may be a better fit due to its structured nature. Additionally, this can help businesses establish a clear pricing baseline if they don't have one.
If a business is more established and has a strong pricing strategy, van Westendorp may be a better option. The feedback from these questions can help businesses benchmark prices, versus creating a baseline.
Discover Your Optimal Pricing Strategy
Drive Research is a market research firm serving brands across industries, delivering high-quality insights with every project.
Our team of experienced researchers is well-versed in both the van Westendorp and Gabor-Granger pricing models and will work with your team to choose the best option.
To learn more about our market research services, contact us today.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
Chris Coville
As the Director of Research of Drive Research, Chris has 10 years of experience in the market research field and has completed projects with organizations across the globe. He was also named a 2017 40 Under 40 Award winner.
Learn more about Chris, here.
