Coordinating price reductions and coupon events

Eric T. Anderson, Inseong Song

Research output: Contribution to journalArticle

28 Scopus citations

Abstract

In this article, the authors use an economic model to show that it may be optimal to lower the retail price during a coupon event when marginal consumers have moderate hassle costs of coupon redemption. Results from the model offer predictions on the relationships among coupon redemptions, shelf price, and coupon face value. The authors test these predictions on a large data set of hundreds of coupon events across six packaged goods categories. The data show that when a small coupon face value is offered, the shelf price is likely to be reduced. They also find that coupon efficiency increases when there is a lower retail price. The results are of interest to managers planning a promotion calendar and deciding whether to coordinate price promotions with coupon events, and they contribute to economic theory. When a firm moves from uniform pricing (e.g., no coupons) to second-degree price discrimination (e.g., coupons), all consumers may face a lower price. This finding has public policy implications because second-degree price discrimination may increase the welfare of every consumer.

Original languageEnglish (US)
Pages (from-to)411-422
Number of pages12
JournalJournal of Marketing Research
Volume41
Issue number4
DOIs
StatePublished - Nov 2004

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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