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Data Analytics Corp. periodically issues technical memorandaon methodologies useful to those in the market research andpredictive modeling communities. The memoranda alsoillustrate some of the analysis capabilities of Data AnalyticsCorp.
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The Gabor Granger pricing methodology is an old method fordetermining a demand curve for a product. The price elasticityand revenue curve can then be derived.
The economists Clive Granger (2003 Nobel Memorial Prize inEconomic Sciences) and Andre Gabor developed themethodology in the 1960s. Since then, more sophisticatedtechniques have been developed. The Gabor Grangermethodology is still occasionally used because of its intuitiveappeal, but it is dated and not the best.
See the section Other Pricing Research Methodologies belowfor a discussion of issues with Gabor Granger and otherapproaches that could be used. Also see other Data AnalyticsCorp. Technical Memorandum.
The Gabor Granger pricing methodology is an old method fordetermining a demand curve for a product. The price elasticityand revenue curve can then be derived.
The economists Clive Granger (2003 Nobel Memorial Prize inEconomic Sciences) and Andre Gabor developed themethodology in the 1960s. Since then, more sophisticatedtechniques have been developed. The Gabor Grangermethodology is still occasionally used because of its intuitiveappeal, but it is dated and not the best.
See the section Other Pricing Research Methodologies belowfor a discussion of issues with Gabor Granger and otherapproaches that could be used. Also see other Data AnalyticsCorp. Technical Memorandum.
The Gabor Granger pricing methodology is an old method fordetermining a demand curve for a product. The price elasticityand revenue curve can then be derived.
The economists Clive Granger (2003 Nobel Memorial Prize inEconomic Sciences) and Andre Gabor developed themethodology in the 1960s. Since then, more sophisticatedtechniques have been developed. The Gabor Grangermethodology is still occasionally used because of its intuitiveappeal, but it is dated and not the best.
See the section Other Pricing Research Methodologies belowfor a discussion of issues with Gabor Granger and otherapproaches that could be used. Also see other Data AnalyticsCorp. Technical Memorandum.
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?”
”How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?”
”Would you be willing to pay $Y for this product?”
The approach involves asking a series of questions. . .
The consumer is presented with a price for a product.
The first price point sets a standard for comparing otherprices, so this point is often set at random or based on an”expected” price level.Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy theproduct at that price point.
There is no ”standard” way to ask this question. Somepossibilities are. . .
”Would you buy the product at this price?””How likely are you to buy this product at this price?””Would you be willing to pay $Y for this product?”
The consumer is then shown another price and the question isrepeated.
There are several ways to determine the next price toask. . .
Purely random selectionIncrease or decrease the price dependent on whether therespondent said they would or wouldn’t buy, respectively.Increase or decrease at random
The consumer is then shown another price and the question isrepeated.
There are several ways to determine the next price toask. . .
Purely random selectionIncrease or decrease the price dependent on whether therespondent said they would or wouldn’t buy, respectively.Increase or decrease at random
A better analysis approach is to recognize that the responsefrom each consumer is binary – buy or not buy. Theseresponses are better analyzed using a logistic regression modelto model the probability of a randomly selected consumerresponding ”buy” to a particular price. The model is. . .
A better analysis approach is to recognize that the responsefrom each consumer is binary – buy or not buy. Theseresponses are better analyzed using a logistic regression modelto model the probability of a randomly selected consumerresponding ”buy” to a particular price. The model is. . .
The Gabor Granger Pricing Method is old. The vanWestendorp Price Sensitivity Meter is sometimes consideredthe next generation methodology beyond this one. See theData Analytics Corp. Technical Memorandum #2009:001.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.
The Gabor Granger Pricing Method has several majorproblems. . .
1 It does not ask the consumer to trade-off price for otherproduct attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
2 Consumers may understate the price they will pay.Therefore, phrasing the ”Will you buy?” question is veryimportant.
3 Consumers are not given a reference frame for answeringthe questions. Research shows they need a consistentreference frame.
4 Most consumers do not consider buying a product at asingle price – a make or break price point – but instead arewilling to buy within a range of prices, and Gabor Grangerdoes not allow for a range.