| Summary: | The objective of the research programme that forms the basis of this thesis was to investigate the factors which influence relative price change both in terms of levels of price change within industries and, from the perspective of the individual business, the size and direction of relative price change. In addition, as a preliminary step in the development of a further research area, the impact of changes in relative price on the major measures of business performance i.e. return on investment change and market share change are investigated. A model of relative price change is advanced involving market structure factors, product factors, cost factors and non-price marketing decision variables. Hypotheses in the industry context consider the magnitude of relative price change and use absolute measures of relative price change as dependent variables. In the individual business context hypotheses consider both magnitude and direction of relative price change. Hypotheses are tested on the Profit Impact of Marketing Strategies data base of the Strategic Planning Institute. The methodology employed is multiple regression analysis and cross-tabulation. A range of statistical tests is put forward to assess model validity, the strength of hypothesised relationships and the relative importance of explanatory variables. The results show initial relative price dispersion, changes in relative direct costs, changes in relative product quality and entry VI of new competitors to be most important in explaining the variation of the magnitude of relative price changes within industries. For the individual business relative price change, including both magnitude and direction of change, emerges as a function of initial relative price, relative direct cost change and initial relative cost position together with cross-product terms in relative price and relative cost. The level of relative advertising expenditure and relative product quality change also emerge as substantial explanatory variables. Significant patterns in the linkage of relative price change to changes in business performance measures emerge and there is evidence of a significant relationship between business performance and relative price change deviation from the expected level.
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