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.     

Consumer Response to Coupon Advertising

Because coupon advertising has both the characteristics of advertising and sales promotion, it may have distinctive effects on consumers that cannot be explained solely by coupons or advertising. Past studies present contradicting results as to the consumers' response to coupon advertising. Our experiment shows that while the coupon may be an incentive for loyal consumers of competing brands, it may be a distractor for brand-loyal consumers in processing the coupon advertising. For multi-brand users, coupons do not appear to have any distinctive effects on processing the coupon advertising. An empirical investigation of an integrated consumer response model to coupon advertising indeed shows that there are various interactive effects between the coupon and the main advertisement. These results may provide guidelines for making targeting and promotion decisions, especially for an internationally well-known brand that is entering a new market where local or other international brands are already serving the customers.     

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.     

Similarity-Based Spatial Methods to Estimate Shelf Space Elasticities

A retailer may allocate shelf space to brands based on factors, unobservable to researchers, which also determine sales. As a consequence, both sales and shelf space are endogenous in historical data, and this leads to inconsistent estimates of shelf space elasticities based on OLS. To obtain valid estimates of shelf space elasticities for allocation decisions, we propose an approach that incorporates the spatial correlation between shelf space and the error term resulting from store-, consumer- and competitor characteristics. The empirical results suggest that our model based on a single cross section of stores corrects for endogeneity and provides valid shelf space elasticities. We also obtain superior predictions compared to several benchmark models. With the same cross section and two observations over time, the alternative methods we use provide comparable shelf space elasticity estimates. However, our proposed method is still superior in the sense that its estimates have somewhat smaller standard errors.     

Coupon characteristics and redemption intentions: A segment-level analysis

The authors investigate how different segments of consumers react to different coupon characteristics, such as face value and method of distribution. They utilize a latent segmentation approach to identify the underlying segments. The empirical analysis suggests that different segments of consumers place varying emphasis with regard to economic benefits, psychic benefits, effort costs, and substitution costs. A further examination of the derived segments with respect to consumer correlates such as psychological, attitudinal, behavioral, and demographic characteristics reveals that coupon-related consumer characteristics, rather than demographics, exhibit significant and meaningful differences across these segments. Implications of the segment-level analysis for evaluating coupon drops and managing promotional expenditures are also discussed. © 1998 John Wiley & Sons, Inc.     

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.     

Estimating the effects of higher coupon face values on the timing of redemptions,the mix of coupon redeemers,and purchase quantity

One of the key decisions a manager must make in designing a coupon promotion is to decide on the face value. In this study we examine the effects of higher face values on coupon redemption timing, category purchase timing, the mix of buyers who redeem the coupon, and purchase quantity. Data from a field experiment on coupon face values are used to test the hypotheses. A new method of measuring the effects of a coupon on category purchase timing is proposed. We find that coupons per se tend to advance category purchase timing, but higher face values do not increase the magnitude of this effect. Surprisingly, higher face values appear to increase redemption rates for both the prior nonbuyers and prior buyers of the brand in a similar way. However, higher face values have little effect on the package size purchased, the number of units purchased, or the total quantity (package size times units) purchased.     

Understanding interstate trade patterns

This paper models and estimates bilateral trade patterns of U.S. states in a CES framework and identifies the elasticity of substitution across goods, the elasticities of substitution across varieties of each good, and the good-specific elasticities of distance by using markup values obtained from the production side. Compared to the international trade literature, the elasticity of substitution estimates are lower across both goods and varieties, while the elasticity of distance estimates are higher. Although home-bias effects at the state level are significant, there is evidence for decreasing effects over time.     

Price Elasticity Dynamics over the Product Life Cycle: A Study of Consumer Durables

Extending the work of Parker (1992), which considers only firstpurchases, and Simon (1989), which considers brand-level sales, weempirically provide support for the hypothesis that total categorysales price elasticities first decease in absolute value but thenultimately increase if the product in question faces the decline phaseof the product life cycle (due to competitive substitutes, changes intastes, and so on). As an interesting artifact of the methodology, thearticle also shows how the Bass model can be easily modified to accountfor total category sales (first plus repeat purchases) and that, in thelimit, the Bass model converges to stochastic repeat purchase models(bridging two radically different modeling traditions). If unadjusted,the Bass model applied to sales data is grossly misspecified when thetime series studied exceeds five to ten years for consumer durables.     

An Empirical Investigation Into the Effect of Music Downloading on the Consumer Expenditure of Recorded Music: A Time Series Approach

The downloading of music from the internet has been proliferating over the past three years. The recording industry believes that this phenomenon is responsible for the decline in recorded music sales since the year 2000, and to a certain extent this is supported by consumer surveys and previous studies that have used panel or cross-sectional data. In this analysis, an econometric, time-series model of consumer spending on tapes, LPs, and CDs is estimated which takes into account factors that are posited as effecting the consumption of recorded music, but not used in previous studies. The most significant finding is that music downloading, subsequent to 2000, affects consumer spending on tapes, LPs, and CDs through the price elasticity of demand. Falling DVD prices have also served to reduce the demand of recorded music during this same period.     

Coupon Trading and its Impacts on Consumer Purchase and Firm Profits

When a retailer distributes manufacturer coupons to consumers without perfectly identifying their product valuations, consumers may have incentives to trade coupons. We develop a model to capture the coupon trading phenomenon and compare three scenarios: (I) no coupon, (II) coupon without trading, and (III) coupon with trading. We find that coupon trading can increase the profits of either the retailer or the manufacturers, but not at the same time. The retailer benefits from coupon trading when the coupon market is competitive and consumer hassle cost is low, while the manufacturers benefit from coupon trading when the coupon market is uncompetitive and consumer hassle cost is high. In addition, coupon trading does not always increase total demand. Firms benefit from coupon trading by charging higher prices, which leads to a decreased total demand. As a result, consumers end up with a higher average cost under coupon trading. We also compare coupon trading with improved coupon targeting, and find that coupon trading may allow firms to gain higher profits than improved coupon targeting. Further, we extend the main model to a competitive setting where the products are substitutable, and find that the main results still hold. Finally, we employ numerical analysis to identify the optimal coupon face values in different scenarios, and the results suggest that coupon trading combined with incentive mechanisms may lead to Pareto improvement for the channel as a whole.     

Advertising and Word-of-Mouth Effects on Pre-launch Consumer Interest and Initial Sales of Experience Products

This study examines how consumers' interest in a new experience product develops as a result of advertising and word-of-mouth activities during the pre-launch period. The empirical settings are the U.S. motion picture and video game industries. The focal variables include weekly ad spend, blog volume, online search volume during pre-launch periods, opening-week sales, and product characteristics. We treat pre-launch search volume of keywords as a measure of pre-launch consumer interest in the related product. To identify probable persistent effects among the pre-launch time-series variables, we apply a vector autoregressive modeling approach. We find that blog postings have permanent, trend-setting effects on pre-launch consumer interest in a new product, while advertising has only temporary effects. In the U.S. motion picture industry, the four-week cumulative elasticity of pre-launch consumer interest is 0.187 to advertising and 0.635 to blog postings. In the U.S. video game industry, the elasticities are 0.093 and 1.306, respectively. We also find long-run co-evolution between blog and search volume, which suggests that consumers' interest in the upcoming product cannot grow without bounds for a given level of blog volume.     

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.     

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.     

Consumer Preference for Status Symbolism of Clothing: The Case of the Czech Republic

During the past three decades, consumer demand for luxury goods has been growing on a global scale. The luxury and status market base has expanded beyond the traditional affluent consumer segment to include an increasingly heterogeneous group of consumers. Despite the substantial size, greater reach, and significant growth of the luxury goods market, status consumption has been treated as an atypical and peripheral subject in consumer research. The authors develop a conceptual model of psychological determinants of status seeking through consumption. The model considers the effects of three general traits (namely, status concern (SC), public self‐consciousness (PSC), and self‐esteem (SE)) and one consumption‐related consumer trait (namely, susceptibility to normative social influence (SNSI)) on preference for status meaning, which in turn influences consumer interest in the product. The conceptual model is tested with data from a survey of 1000+ respondents drawn from the Czech Republic, a country where the recent market liberalization has unleashed an inflow of luxury goods from marketers from the West. Face‐to‐face home‐based structured interviews were conducted by an international market research agency. The hypothesized causal relationships are all supported. The effects of SC, PSC, and SE on SNSI and preference for status meaning (PSM) are significant and in the expected direction. Additionally, SNSI is found to exert a significant positive influence on PSM, and these two constructs, in turn, have significant positive effects on consumer interest in clothing. The conceptual model and empirical evidence enhance the existing knowledge of the antecedents and outcomes of status consumption. The study advances a better understanding of the psychology of consumer adoption of status consumption; equally important, it also highlights the value of extending consumer theories from established to emerging market economies and back again from still‐evolving to long‐standing marketplaces.     

Estimation of product category sales responsiveness to allocated shelf space

A retail chain manager must draw on experience based on data available from his points of sale to diagnose space misallocations in stores and to make recommendations. This paper presents an empirical estimate of shelf space elasticities from a variety store chain database at product category level with a share of space vs. share of sales econometric model. It suggests that external influences could explain space elasticity differences. Results show that space elasticities increase with the impulse buying rate of the product category and do not depend on the type of store.     

Antecedents of Coupon Proneness: A Key Mediator of Coupon Redemption

Coupons increase the buying power of consumers. Businesses use coupons to increase sales, new products adoption, and repeat buying. Billions of coupons are distributed annually via different methods. However, consumers redeem only a small fraction of these, thereby forgoing the potential cost savings. The authors investigated several factors that motivate coupon redemption. The data were obtained by surveying 353 U.S. consumers. Price consciousness, pride, and satisfaction in using coupons, and value consciousness were found to increase coupon use. The perception that the savings are not worth the effort decreased their use. The results suggest ways for managers to boost coupon use.     

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.     

Increasing repurchase rates: A reappraisal of coupon effects

One criticism of the use of sales promotions, particularly couponing efforts, is that they may contribute to the deterioration of a brand's consumer franchise. A consumer may be less inclined to repurchase a couponed brand than a brand bought without a coupon. Cognitive evaluation theory is used as a means of further understanding this phenomenon, and a study is conducted to testspecific hypotheses derived from the application of this theory. As hypothesized, this study presents evidence that allowing coupon users to choose between two defferent deals on the same brand may increased the repurchase rates of the couponed brand. © 1994 John Wiley & Sons, Inc.     

Shelf space elasticity: A meta-analysis

This article presents a meta-analysis of 1,268 estimates of shelf space elasticities, that is, the ratio of additional sales to additional space allocated in retail settings. The study finds several new empirical generalizations about shelf space elasticity. The most important generalizations are as follows: The average observed shelf space elasticity is .17, which varies across product categories, with the lowest estimates for commodities, followed by staples, and the highest estimates for impulse buys. Store size moderates the effect of product characteristics on shelf space elasticity: in large stores, the difference between elasticities for brand versus category is greater than in small stores. Furthermore, the shelf space elasticity estimates are less dependent on method characteristics than commonly assumed in the literature. Regarding the influence of the direction of space variation, the study finds that shelf space increases results in greater elasticity estimates than shelf space reduction, a finding that emphasizes the application of shelf space variation as a useful marketing tool. These findings provide several implications for managers and researchers.