Short- or Long-Duration Coupons: The Effect of the Expiration Date on the Profitability of Coupon Promotions

Aradhna Krishna and Z. John Zhang
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Aradhna Krishna: Graduate School of Business, University of Michigan, Ann Arbor, Michigan 48109
Z. John Zhang: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 1999, vol. 45, issue 8, 1041-1056

Abstract: United States firms collectively spend over $6.5 billion annually on coupon promotions and are becoming increasingly concerned with their profitability. FSI (free-standing-insert) data show that coupon duration varies across brands. In this paper, we show how coupon duration can affect coupon profitability. We also provide answers for some empirical observations on coupon duration. We explain, for example, why (i) coupon duration will vary across firms, such that large market share firms will give short-duration coupons and small market share firms will give long-duration coupons; (ii) longer coupon duration for one brand will increase redemption for coupons of that brand and of a competing brand; (iii) coupon duration will affect coupon profitability.

Keywords: promotion; competitive strategy; buyer behavior (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:45:y:1999:i:8:p:1041-1056

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