1. Technical
Memorandum
2009:003
W.R
Paczkowski
Technical Memorandum
Gabor Granger Pricing Method
Walter R. Paczkowski, Ph.D.
Data Analytics Corp.
September 25, 2009
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 1 / 26

2. Technical
Memorandum
2009:003
W.R
Paczkowski
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 2 / 26

3. Technical
Memorandum
2009:003
W.R
Paczkowski
Part I
Technical Memoranda
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 3 / 26

4. Technical Memoranda
Technical
Memorandum
2009:003
W.R
Paczkowski Data Analytics Corp. periodically issues technical memoranda
on methodologies useful to those in the market research and
predictive modeling communities. The memoranda also
illustrate some of the analysis capabilities of Data Analytics
Corp.
Please feel free to send constructive comments and project
inquiries to
info@dataanalyticscorp.com
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 4 / 26

5. Technical
Memorandum
2009:003
W.R
Paczkowski
Part II
Introduction
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 5 / 26

6. Introduction
Technical
Memorandum
2009:003
A very important question all product managers must
W.R
Paczkowski eventually ask is:
”What price should I set for my product or service?”
Price is the only marketing ”P” directly affecting the
bottom-line.1
1
The marketing ”Ps” are price, product, promotion, place, position.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 6 / 26

7. Introduction
Technical
Memorandum
2009:003
A very important question all product managers must
W.R
Paczkowski eventually ask is:
”What price should I set for my product or service?”
Price is the only marketing ”P” directly affecting the
bottom-line.1
Knowing the demand curve is critical for setting price.
1
The marketing ”Ps” are price, product, promotion, place, position.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 6 / 26

8. Introduction
Technical
Memorandum
2009:003
A very important question all product managers must
W.R
Paczkowski eventually ask is:
”What price should I set for my product or service?”
Price is the only marketing ”P” directly affecting the
bottom-line.1
Knowing the demand curve is critical for setting price.
An equally important item is the price elasticity.
1
The marketing ”Ps” are price, product, promotion, place, position.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 6 / 26

9. Introduction
Technical
Memorandum
2009:003
A very important question all product managers must
W.R
Paczkowski eventually ask is:
”What price should I set for my product or service?”
Price is the only marketing ”P” directly affecting the
bottom-line.1
Knowing the demand curve is critical for setting price.
An equally important item is the price elasticity.
This is used to gauge how much prices can be changed.
1
The marketing ”Ps” are price, product, promotion, place, position.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 6 / 26

10. Introduction
Technical
Memorandum
2009:003
A very important question all product managers must
W.R
Paczkowski eventually ask is:
”What price should I set for my product or service?”
Price is the only marketing ”P” directly affecting the
bottom-line.1
Knowing the demand curve is critical for setting price.
An equally important item is the price elasticity.
This is used to gauge how much prices can be changed.
It’s directly used in determining the amount of revenue
that can be earned.
1
The marketing ”Ps” are price, product, promotion, place, position.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 6 / 26

11. Introduction
(Continued)
Technical
Memorandum
The Gabor Granger pricing methodology is an old method for
2009:003 determining a demand curve for a product. The price elasticity
W.R
Paczkowski
and revenue curve can then be derived.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 7 / 26

12. Introduction
(Continued)
Technical
Memorandum
The Gabor Granger pricing methodology is an old method for
2009:003 determining a demand curve for a product. The price elasticity
W.R
Paczkowski
and revenue curve can then be derived.
The economists Clive Granger (2003 Nobel Memorial Prize in
Economic Sciences) and Andr´ Gabor developed the
e
methodology in the 1960s. Since then, more sophisticated
techniques have been developed. The Gabor Granger
methodology is still occasionally used because of its intuitive
appeal, but it is dated and not the best.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 7 / 26

13. Introduction
(Continued)
Technical
Memorandum
The Gabor Granger pricing methodology is an old method for
2009:003 determining a demand curve for a product. The price elasticity
W.R
Paczkowski
and revenue curve can then be derived.
The economists Clive Granger (2003 Nobel Memorial Prize in
Economic Sciences) and Andr´ Gabor developed the
e
methodology in the 1960s. Since then, more sophisticated
techniques have been developed. The Gabor Granger
methodology is still occasionally used because of its intuitive
appeal, but it is dated and not the best.
See the section Other Pricing Research Methodologies below
for a discussion of issues with Gabor Granger and other
approaches that could be used. Also see other Data Analytics
Corp. Technical Memorandum.
Jump to Other Pricing Research Methodologies
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 7 / 26

14. Technical
Memorandum
2009:003
W.R
Paczkowski
Calculations
A Better Part III
Approach
Methodology
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 8 / 26

15. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

16. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

17. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
Consumers respond with a ”buy-not buy” response to
each price.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

18. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
Consumers respond with a ”buy-not buy” response to
each price.
The method is sometimes called the ”buy-response
method”.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

19. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
Consumers respond with a ”buy-not buy” response to
each price.
The method is sometimes called the ”buy-response
method”.
The constant querying enables the pricing analyst to trace
out a demand curve.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

20. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
Consumers respond with a ”buy-not buy” response to
each price.
The method is sometimes called the ”buy-response
method”.
The constant querying enables the pricing analyst to trace
out a demand curve.
Once the demand curve is derived, a revenue curve can be
overlayed to help determine the optimal price.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

21. Methodology
Technical
Memorandum
For pricing, consumers can be asked their willingness to buy a
2009:003 product at different price points
W.R
Paczkowski It is assumed that this querying will reveal the price point
Calculations
at which the consumer will no longer be interested in
A Better
buying the product
Approach
Consumers respond with a ”buy-not buy” response to
each price.
The method is sometimes called the ”buy-response
method”.
The constant querying enables the pricing analyst to trace
out a demand curve.
Once the demand curve is derived, a revenue curve can be
overlayed to help determine the optimal price.
The optimal price is determined where the revenue curve is
a maximum.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 9 / 26

22. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

23. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

24. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

25. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

26. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy the
product at that price point.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

27. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy the
product at that price point.
There is no ”standard” way to ask this question. Some
possibilities are. . .
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

28. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy the
product at that price point.
There is no ”standard” way to ask this question. Some
possibilities are. . .
”Would you buy the product at this price?”
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

29. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy the
product at that price point.
There is no ”standard” way to ask this question. Some
possibilities are. . .
”Would you buy the product at this price?”
”How likely are you to buy this product at this price?”
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

30. Methodology
(Continued)
Technical
Memorandum
2009:003
The approach involves asking a series of questions. . .
W.R
Paczkowski The consumer is presented with a price for a product.
Calculations The first price point sets a standard for comparing other
A Better
prices, so this point is often set at random or based on an
Approach ”expected” price level.
Most studies start at a pre-determined price point.
The consumer is then asked if he/she would buy the
product at that price point.
There is no ”standard” way to ask this question. Some
possibilities 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?”
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 10 / 26

31. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
The consumer is then shown another price and the question is
Calculations
A Better
repeated.
Approach There are several ways to determine the next price to
ask. . .
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 11 / 26

32. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
The consumer is then shown another price and the question is
Calculations
A Better
repeated.
Approach There are several ways to determine the next price to
ask. . .
Purely random selection
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 11 / 26

33. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
The consumer is then shown another price and the question is
Calculations
A Better
repeated.
Approach There are several ways to determine the next price to
ask. . .
Purely random selection
Increase or decrease the price dependent on whether the
respondent said they would or wouldn’t buy, respectively.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 11 / 26

34. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
The consumer is then shown another price and the question is
Calculations
A Better
repeated.
Approach There are several ways to determine the next price to
ask. . .
Purely random selection
Increase or decrease the price dependent on whether the
respondent said they would or wouldn’t buy, respectively.
Increase or decrease at random
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 11 / 26

35. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Calculations
A Better
Approach
Calculations
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 12 / 26

36. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Across all consumers, calculate the proportion responding
favorably at each price point
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 13 / 26

37. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Across all consumers, calculate the proportion responding
favorably at each price point
Calculations
A Better
Plot the proportions of consumers vs. price points
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 13 / 26

38. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Across all consumers, calculate the proportion responding
favorably at each price point
Calculations
A Better
Plot the proportions of consumers vs. price points
Approach
Also calculate the expected revenue per 100 people at
each price point
Revenue = (Percent Responding Favorably) · Price
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 13 / 26

39. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Across all consumers, calculate the proportion responding
favorably at each price point
Calculations
A Better
Plot the proportions of consumers vs. price points
Approach
Also calculate the expected revenue per 100 people at
each price point
Revenue = (Percent Responding Favorably) · Price
Plot Revenue vs. price point
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 13 / 26

40. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Across all consumers, calculate the proportion responding
favorably at each price point
Calculations
A Better
Plot the proportions of consumers vs. price points
Approach
Also calculate the expected revenue per 100 people at
each price point
Revenue = (Percent Responding Favorably) · Price
Plot Revenue vs. price point
The optimal price is where the revenue curve is a
maximum.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 13 / 26

41. Demand and Revenue Curves
Expected Revenue
$ 0 $1,000 $2,000 $3,000 $4,000 $5,000
$10
$8
$6
Optimal Price: $5
Price
$4
$2
Demand
Revenue
$0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percent Responding Favorably

42. Methodology
(Continued)
Technical
Memorandum Elasticities can also be calculated. Several possible ways are. . .
2009:003
W.R
Paczkowski
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 15 / 26

43. Methodology
(Continued)
Technical
Memorandum Elasticities can also be calculated. Several possible ways are. . .
2009:003
W.R
Calculate the mean percentage change in responses per
Paczkowski percentage change in price.
Calculations
A Better
Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 15 / 26

44. Methodology
(Continued)
Technical
Memorandum Elasticities can also be calculated. Several possible ways are. . .
2009:003
W.R
Calculate the mean percentage change in responses per
Paczkowski percentage change in price.
Calculations Estimate a simple linear (or linearized) model with
A Better responses as the dependent variable and prices as the
Approach
independent variable.
Response = β0 + β1 Price +
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 15 / 26

45. Methodology
(Continued)
Technical
Memorandum Elasticities can also be calculated. Several possible ways are. . .
2009:003
W.R
Calculate the mean percentage change in responses per
Paczkowski percentage change in price.
Calculations Estimate a simple linear (or linearized) model with
A Better responses as the dependent variable and prices as the
Approach
independent variable.
Response = β0 + β1 Price +
The elasticity, η, would then be for this model. . .
Price
η = β1 ·
Response
where X is the average.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 15 / 26

46. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
Calculations
A Better
Approach
A Better Approach
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 16 / 26

47. Methodology
(Continued)
Technical
Memorandum A better analysis approach is to recognize that the response
2009:003
from each consumer is binary – buy or not buy. These
W.R
Paczkowski responses are better analyzed using a logistic regression model
Calculations
to model the probability of a randomly selected consumer
A Better responding ”buy” to a particular price. The model is. . .
Approach
eZ
Pr (Buy ) =
1 + eZ
where Z = β0 + β1 Price
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 17 / 26

48. Methodology
(Continued)
Technical
Memorandum A better analysis approach is to recognize that the response
2009:003
from each consumer is binary – buy or not buy. These
W.R
Paczkowski responses are better analyzed using a logistic regression model
Calculations
to model the probability of a randomly selected consumer
A Better responding ”buy” to a particular price. The model is. . .
Approach
eZ
Pr (Buy ) =
1 + eZ
where Z = β0 + β1 Price
The elasticity if then. . .
η = β1 · Price · [1 − Pr (Buy )]
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 17 / 26

49. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski Revenue is estimated as. . .
Calculations
Revenue = Addressable Market · Pr (Buy ) · Price
A Better
Approach
where the Addressable Market is the number of consumers.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 18 / 26

50. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski Revenue is estimated as. . .
Calculations
Revenue = Addressable Market · Pr (Buy ) · Price
A Better
Approach
where the Addressable Market is the number of consumers.
A simulator can be built to allow the marketing analyst to vary
the price to gauge the effect on. . .
1 Units sold (= Addressable Market · Pr (Buy ))
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 18 / 26

51. Methodology
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski Revenue is estimated as. . .
Calculations
Revenue = Addressable Market · Pr (Buy ) · Price
A Better
Approach
where the Addressable Market is the number of consumers.
A simulator can be built to allow the marketing analyst to vary
the price to gauge the effect on. . .
1 Units sold (= Addressable Market · Pr (Buy ))
2 Revenue
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 18 / 26

52. Technical
Memorandum
2009:003
W.R
Paczkowski
Part IV
Other Pricing Research Methodologies
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 19 / 26

53. Other Pricing Research Methodologies
Technical
Memorandum
2009:003
W.R
Paczkowski
The Gabor Granger Pricing Method is old. The van
Westendorp Price Sensitivity Meter is sometimes considered
the next generation methodology beyond this one. See the
Data Analytics Corp. Technical Memorandum #2009:001.
Return .
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 20 / 26

54. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R
Paczkowski
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

55. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R 1 It does not ask the consumer to trade-off price for other
Paczkowski
product attributes, a normal consumer decision
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

56. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R 1 It does not ask the consumer to trade-off price for other
Paczkowski
product attributes, a normal consumer decision
The preferred pricing research methods allow trade-offs
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

57. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R 1 It does not ask the consumer to trade-off price for other
Paczkowski
product 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 very
important.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

58. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R 1 It does not ask the consumer to trade-off price for other
Paczkowski
product 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 very
important.
3 Consumers are not given a reference frame for answering
the questions. Research shows they need a consistent
reference frame.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

59. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
The Gabor Granger Pricing Method has several major
2009:003 problems. . .
W.R 1 It does not ask the consumer to trade-off price for other
Paczkowski
product 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 very
important.
3 Consumers are not given a reference frame for answering
the questions. Research shows they need a consistent
reference frame.
4 Most consumers do not consider buying a product at a
single price – a make or break price point – but instead are
willing to buy within a range of prices, and Gabor Granger
does not allow for a range.
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 21 / 26

60. Other Pricing Research Methodologies
(Continued)
Technical
Memorandum
2009:003
W.R
Paczkowski
These other pricing research methodologies are described in
three other Data Analytics Corp. Technical Memoranda
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 22 / 26

61. Technical
Memorandum
2009:003
W.R
Paczkowski
Part V
Recommended Readings
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 23 / 26

62. Recommended Readings
Technical
Memorandum
2009:003
W.R
Paczkowski Gabor, A.
Pricing: Concepts and Methods for Effective Marketing
2nd edition.
Gower Publishing
Haqmpshire, U.K. (1988)
Monroe, K.
Pricing: Making Profitable Decisions
2nd edition
McGraw-Hill Publishing Co.
New York (1990)
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 24 / 26

63. Technical
Memorandum
2009:003
W.R
Paczkowski
Part VI
Contact Information
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 25 / 26

64. Technical
Memorandum
2009:003
W.R
Walter R. Paczkowski, Ph.D.
Paczkowski
44 Hamilton Lane Voice: 609-936-8999
Plainsboro, NJ 08536 Fax: 609-936-3733
www.dataanalyticscorp.com info@dataanalyticscorp.com
W.R Paczkowski (Data Analytics Corp. ) Technical Memorandum 2009:003 September 25, 2009 26 / 26