Marketing Control: Exogenous Aspects Of Price Variance

Abstract

Marketers should compare the relative impact of changing their price and the impact of a changing market price using variance analysis. In 1977 Hulbert and Toy improved the traditional analysis of variance by expanding the quantity variance to include the variance in market share and the variance in the size of the market. They successfully argued that if managers were to understand the impact that changes in quantity were having on the differences between the planned profits and actual profits they should measure the impact that changing market size and changing market share have on revenues and contribution margins. In this paper we present a method for expanding the price variance to include the variances in the market price and the firm’s choice of relative market price.