A method to infer coupon availability from coupon redemption in the supermarket scanner panel data

Measuring the impact of coupon availability on consumers’ purchase decisions often poses a problem in forecasting market shares of brands in a retail environment. Because, data on actual coupon availability do not exist or can only be obtained by costly field experiments. The widely used supermarket scanner panel data sets offer information on coupons redeemed by the household for only the specific brand that is bought. However, using the redemption variable introduces bias in brand choice or purchase incidence models because redeeming a coupon implies buying the brand or making the purchase. This study presents a way to infer availability from coupon redemption data and to predict market shares for each brand in a supermarket product category.     

Category-specific coupon proneness: The impact of individual characteristics and category-specific variables

In seeking to enhance the effectiveness of coupon promotions, researchers have long sought to identify “coupon prone” consumers. Previous measures of coupon proneness have not examined differences in coupon usage across product categories and have ignored the confounding effect of coupon attractiveness. An Item Response Theory (IRT)-based framework overcomes these limitations and yields category-specific estimates of propensity to redeem coupons that are independent of coupon attractiveness. The authors utilize an IRT-based model to estimate consumers’ category-specific propensities to redeem coupons for two product and two service categories, and investigate how coupon proneness varies across consumers and across categories as a function of individual characteristics and category-specific variables.The authors find that category-specific measures of propensity to redeem coupons achieve an average accuracy of 89 percent in predicting redemption intentions. Propensity to redeem coupons is also found to be related to category-specific brand loyalty and perceived coupon availability, as well as to individual characteristics such as general coupon proneness, value consciousness and price consciousness. These findings highlight the importance of studying coupon proneness at the category level and suggest that the IRT-based approach has considerable promise as a methodology for studying coupon usage. Using the approach proposed in this study, marketers can forecast the impact coupons are likely to have in their particular category, rather than relying on general coupon proneness measures to predict coupon redemption rates at the category level. The study's findings can also be used to identify categories and consumer segments where coupon promotions are likely to have a larger impact, and have important implications for managers planning joint couponing strategies.     

The relationship between purchase regularity and propensity to accelerate

Identifying random and regular-buying household segments and relating them to demographic and shopping characteristics has been the focus of many marketing studies. Missing from the marketing literature, however, is a study that relates purchase regularity to marketing mix sensitivities. Such study could provide substantive implications since it would explore a practical dimension of a segmentation scheme based on purchase regularity. In this article, we investigate the relationship between purchase regularity and propensity to accelerate through the use of a mixture Weibull model of purchase timing. Applying this perspective to purchase timing data on four product categories (ketchup, sugar, bathroom tissue, margarine), we show that in the frequently purchased categories of bathroom tissue and margarine, random buyers do not exhibit any propensity to accelerate while regular buyers do. In the occasionally purchased categories of ketchup and sugar on the other hand, random buyers exhibit at least as much propensity to accelerate their purchases as regular buyers do. Our rationale for these results is based on information-theoretic arguments suggesting that propensity to accelerate depends on the frequency at which a product category is purchased.     

The effects of constrained mobile coupons in the mobile channel

Despite the popularity of constrained mobile coupons in recent years, little research has examined their effectiveness. This paper presents a hidden Markov model (HMM) framework to examine the short-term and long-term effectiveness of minimum-threshold coupons (i.e., threshold-constrained coupons) and limited-time, low-price coupons (i.e., time-constrained coupons). We find that both of them boost consumers' purchase probability during the coupon redemption period. Furthermore, minimum-threshold coupons not only increase consumers’ purchase quantity during the redemption period, but also improve the customer-firm relationship beyond the redemption period. By contrast, limited-time, low-price coupons strengthen the customer-firm relationship only for consumers in a higher relationship state but not a lower relationship state. This study can help marketers allocate limited marketing resources effectively, strengthen and manage the relationship between consumers and firms, and increase product sales.     

Influences on consumer response to direct mail coupons: An integrative review

A substantial and growing body of research on coupons and coupon effectiveness has emerged in the marketing literature. The objective of this paper is to review and consolidate the findings of previous studies to provide a better understanding of the factors that influence consumer response to direct mail coupons. The effects of coupon, brand, product category, and consumer characteristics on redemption behavior and incremental sales are examined, and their implications for the effectiveness of direct mail coupon promotions are discussed. Based on the findings of prior studies, a theoretical model of coupon effects on purchase behavior is proposed. Several key issues that need to be addressed in future research are identified. © 1996 John Wiley & Sons, Inc.     

Omnichannel retailing operations with coupon promotions

This paper explores an omnichannel retail system under which the retailer offers coupons via online channels for market share and profit. It investigates the action mechanism of coupon promotion on omnichannel price and operational decisions by employing a theoretical model. Three coupon distribution modes are investigated; a scenario in which the omnichannel retailer does not offer coupons, offers coupons with a common face value, or offers coupons with a different face value. The results show that the distribution of coupons does not always lead to increased market share. Rather, market volume may be reduced if the competition between different channels is intense. When conducting a coupon promotion, the retailer always charges a higher price, but if the negative effects of coupon promotion for the competitive channel are relatively large, the retailer will reduce their price. Larger cross-selling revenue comes from ‘Buy Online, Pick Up in Store’ channel, indicating a stronger willingness to offer coupons and higher profits for the retailer. If the retailer takes the channel characteristics and consumers' channel preferences into consideration and offers different coupon face values across channels, they will derive higher profits.     

Digital coupon promotion and platform selection in the presence of delivery effort

In recent years, physical retailers have started selling products to consumers through either third-party or self-operated online platforms. Doing so, they face demand which depends on digital coupon promotions, delivery effort by the platform (i.e., deliver products from retailers to consumers), and channel preference. In this paper, we develop a game-theoretic model to examine the interactions between the physical retailer's distribution channel choices and coupon promotions. In normal operation, retailers prefer to pay lower fees to the third-party platform, but we find, counterintuitively, that when carrying on a digital coupon promotion, the retailer can be better off paying a higher participation fee to the third-party platform. We also identify the conditions under which the retailer prefers the third-party platform over the self-operated platform with and without coupon promotions. Furthermore, we show that digital coupon promotions and delivery effort boost the retailer's profits by price discriminating among consumers with differing purchase utilities.     

Effects of sales promotion type and promotion depth on consumer perceptions: the moderating role of retailer reputation

This study uses a between-subjects experimental design to test the effect of two sales promotion formats (coupon versus markdown) with either high and low face values on consumer attitudes toward the deal, perceived product quality, and purchase intentions. The reputation of the retailer offering the deal is predicted to moderate the relationship between the promotional offer and consumer responses. Consumers perceive product quality to be higher when offered a high value coupon vs. markdown but there is no significant difference in perceived quality across promotion types when the promotion face value is low. When a deep price discount is offered by a retailer with a negative reputation, however, consumers have more favorable attitudes toward the deal and higher purchase intentions when provided with a markdown vs. coupon. Conversely, a high value coupon elicits more favorable evaluations than a markdown when the retailer has a positive reputation. When the value of the promotion is low and the retailer has a positive reputation, consumers have more positive deal attitudes and purchase intentions when offered a markdown vs. coupon. There is no significant difference in the effects of promotion type when the retailer has a negative reputation. The findings therefore establish retailer reputation as an important moderator of sales promotions effectiveness. This research is limited by the use of a single product category and a student sample. Process measures are also needed to validate the proposed theoretical conceptualization. The results provide managers insight into the type and value of the sales promotion to offer based on consumer perceptions of the retailer's reputation in the market.     

The different faces of coupon elasticity

Coupons account for over two-thirds of all consumer promotional efforts initiated by the manufacturers of consumer goods. In this study, the impact of coupons on brand sales is investigated and how that impact decays over the life of the coupon is demonstrated. Specifically, we present an econometric model that can capture coupon effects in terms of equivalent price reduction, account for coupon effects over time, allow inference of coupon effects when retailers decide to double or triple the coupon value, and provide both self-coupon and cross-coupon elasticities at different levels of aggregation. A widely used sales response model is adapted, and an analytical model is proposed to estimate both the self-coupon and cross-coupon (face value) elasticities of sales at the store level. From the store-level elasticity estimates for a given week, the authors analytically derive the coupon elasticities for the chain level by aggregating across stores, and over the life of the coupon by aggregating over time. The proposed sales response model is estimated with the data obtained from three markets for various product categories, and the coupon elasticities are computed. The proposed framework allows one to demonstrate the hypothetical equivalence of a shelf-price reduction for a given coupon face value in each week. Also, the effect of doubling the face value of a coupon results in more than a proportionate increase in elasticity. The authors find that both self and cross-coupon elasticities are much smaller in magnitude than the average self and cross-price elasticity measures reported in the literature.     

Coupon face value: Its impact on coupon redemptions,brand sales,and brand profitability

Although much research has examined the impact of coupons on redemption rates, incremental sales, and market share, only a few studies have addressed the impact of coupons on brand profitability. One possible reason is lack of readily available profitability data. In the absence of such data, researchers have used managerial judgments (Neslin and Shoemaker, 1983) and experiments (Chapman, 1986) to investigate the profitability of coupons. We propose an integrative framework for evaluating the impact of coupon face value on brand profitability and implement it by using readily available scanner data. The research reveals that when a manufacturer optimizes the market-level profitability from a coupon program, profit for individual chains in the market could be suboptimal.     

Coupon characteristics and brand choice

The effects of coupons on brand choice and repurchase behavior were examined in a laboratory panel experiment. Each of the 122 consumers purchased a candy bar on 10 different occasions; on the seventh purchase occasion, each consumer received an announcement of a new candy bar and one of four versions of a coupon. Results showed that whether or not a consumer will use a coupon depends on the size of the coupon offer, how easily the consumer can redeem the offer, how brand loyal the consumer is, and whether or not the consumer is deal prone. We also found, after statistically adjusting for our censored sample, that loyalty and coupon Characteristics influence whether or not a consumer will continue to purchase a formerly discounted brand. Information aggregation theory (Tybout & Scott, 1983) explains better than attribution theory how the coupon affects repurchase decisions.     

The relationship between FSI advertising style and coupon redemption

We investigate the relationship between free-standing insert advertising style and coupon redemption. Results from two experiments indicate that the propensity to clip a coupon can be enhanced by matching ad tone (emotional vs rational) to the nature of a consumer’s primary motivation with respect to coupon usage. Moreover, this result appears to hold for consumers with both procoupon and anticoupon inclinations.

Do Shoppers Like Electronic Coupons?: A Panel Data Analysis

Past research has yielded valuable insights into the drivers of traditional coupon redemption, but the applicability of these results to electronic coupons remains an open question. We investigate the determinants of electronic coupon redemption, employing a large panel dataset for five product categories (detergent, milk, cookies, shampoo, and orange juice) for the period 2003-2005. Our findings reveal that education and employment positively influence redemption rates and our analysis indicates that these findings are not due to unobserved individual effects. The focus is on comparing coupon-use discrepancies between national and private label brands when the characteristics of coupons are taken into account. A higher face value appears to be a critical element in electronic coupon format, and this gives rise to more purchases for nonperishables (shampoo and detergent). Results also show significant seasonal variations in milk and orange-juice coupon usage. Furthermore, the distance of consumers from the redemption location has a significantly negative effect, whereas the expiration date has no evident effect. The implications for electronic coupon research and practice are discussed.     

Coupons in context: discounting prices or decreasing profits?

A coupon is a commonly used sales promotion device offering the user a discount on the purchase of a product. Consumer coupon offerings are also becoming increasingly diverse: from “% off” and “$ off” to “Buy one, Get one free” (BOGO) offers and co-promotions (Buy X, Deal on Y). This paper reports the results of three experiments that examine whether the economic value of a coupon is a source of information to infer the price of the product/service, and the quality of the product/service, which inference can undercut the economic value, with resulting consequences for deal evaluations and purchase intentions. The framework predicts, and empirical results show, that increasing the value of the coupon does not always improve deal evaluations or purchase intentions. This could imply lower profits for the company. The presence of past price information about the brand, information about prices of other brands offered by the company, and information about competitors’ prices moderate the impact of coupon value on brand-related inferences. When such alternate sources of information are present and are diagnostic of the price of the promoted product, consumers are less likely to infer price and quality from the value of the coupon and higher coupon values are more likely to increase deal evaluations and purchase intentions. Implications for managers designing and communicating promotions are offered.     

The framing effect of coupon value for new products: an empirical study in China

Two experiments tested the coupon framing effect with both existing products and new products, whereby the percentage-off format (vs. cents-off format) held an overall advantage in consumers' value perception, thus leading to higher purchase intention. We also found that different product price levels (high vs. low) and product types (physical goods vs. services) moderated this framing effect. Moreover, the context of new products' purchase significantly made this effect more salient than that in existing products. These results could contribute to the guidance of price and promotion strategy for business practitioners, especially in new product launch management.     

The effects of mobile promotions on customer purchase dynamics

While mobile promotions have become increasingly popular in recent years, limited research has examined the effects of mobile promotions over time. This research investigates the effects of two popular types of promotional offers, price discount and non-price free sample coupons, on purchase behavior. To this end, we present a dynamic model of customer purchase behavior that incorporates time-varying effects of mobile coupons, enabling us to investigate both the short-term and longer-term effects of mobile promotions. Using transaction and mobile promotion data, we find that both price discount and free sample coupons increase customers' purchase likelihood and expenditures during the coupon redemption period. We also find that free sample coupons have an enduring effect that increases the purchase propensity beyond the promotion period, thereby contributing to incremental purchases over a longer period of time. We demonstrate how our approach can help marketers improve mobile couponing decisions by considering the dynamic effects of mobile promotions that manifest over time.     

Reward redemption effects in a loyalty program when customers choose how much and when to redeem

The redemption of loyalty program (LP) rewards has an important impact on LP members' behavior, particularly on purchase behavior before and after redeeming a reward. However, little is known about the interplay between members' purchase and redemption behavior when members are not pressured with point expiration and they choose for themselves when and how much to redeem. In this context, the effects of redemption are not straightforward, as little additional effort is required from an LP member to obtain the reward. Analyzing the behavior of 3094 members in such an LP, we find that the mere decision to redeem a reward significantly enhances purchase behavior before and after the redemption event, even when members redeem just a fraction of their accumulated points. Conceptually, we refer to this enhancement as the redemption momentum, which is an alternative and novel explanation of the existence of pre-reward effects that do not depend on points-pressure. In addition to the overall impact of redemption on purchases, prior purchase behavior also enhances redemption decisions. Finally, we find a number of moderating effects on purchase and redemption behavior that derive from the length of LP membership, age, income and direct mailings. Our study's most important managerial implication is that firms should avoid imposing point expiry and/or binding thresholds in order to enhance members' purchase behavior.     

The Effects of Coupon Promotion on Repeat Visits in Restaurants

Abstract

Will customers' intention to return to a restaurant increase with coupon promotion? To answer this question, this study examines the hypothetical effects of coupon promotion on return visits to restaurants. Based on a literature review, three hypotheses were developed to test the effect of a coupon, its face value, and a patron's prior dining experience on return intention. The authors found that neither coupon use nor coupon face value contributed to explaining respondents' return intentions. However, repeat customers have a greater likelihood of returning to the restaurant than new customers. The study also showed that the quality of food and service were key indicators of return intention.     

An exploratory investigation into how socioeconomic attributes influence coupons redeeming intentions

In this study, we examine the effects that opportunity cost, income effect, coupon proneness and devaluation effect have on coupon redemption intention. Overall, the results of a survey received from approximately 2250 respondents suggest that prospect of savings and coupon proneness are positively associated, while opportunity cost is inversely associated with coupon redemption intention. The results are consistent across several sub-samples of grocery stores, which further underline the robustness of our hypotheses. Our analyses are more exhaustive than and therefore, contribute to, extant literature on promotions using coupons, because we base our study on behavioral, social and economic factors that influence coupon redemption intentions.     

Price,online coupon,and store service effort decisions under different omnichannel retailing models

This paper explores three omnichannel retailing models—that is, a Buy-Online, Pick-Up In-Store (BOPS) model, a Showroom model, and an Interactive model (a model that combines the characteristics of BOPS and Showroom)—under which the retailer offers coupons online and invests in service efforts offline. For each omnichannel retailing model, three coupon distribution scenarios (i.e. no coupon, coupon with a common value, and coupon with a different value) are discussed to investigate coupon promotion policies and omnichannel operation strategies. Profits in the omnichannel system and under each model are compared by deriving three decision values: price, coupon value, and service effort. The key findings show that the retailer achieves profit improvement when the incremental purchasing reaches a large value. In addition, a great service effort coefficient leads to a high price, service effort, and retailer profit. The service effort and coupon value in the Showroom model are the largest among the three omnichannel models, while its profit is the lowest. Conversely, although the retailer invests less in service effort, and the price and coupon value are not too large in the BOPS model, the retailer still gains the highest profit. Additionally, in the BOPS model, it is profitable for the retailer to distinguish the coupon value for the online-only and BOPS channels when consumers are less sensitive to the online-only channel’s coupon. However, in the Interactive model, the retailer derives increasing profit by providing coupons with a common value for the online-only and BOPS channels.