A Model for Evaluating the Profitability of Coupon Promotions

Scott A. Neslin · Robert W. Shoemaker

104 citations0/0 files storedMarketing Science

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Consumer Market Behavior and Pricing Marketing and Advertising Strategies Supply Chain and Inventory Management

Abstract

In the experience of the authors, most firms do not have good procedures for estimating the net profitability of coupon promotions. Instead, managers generally examine a number of subsidiary measures such as: redemption rates, market share and the direct costs of the coupon promotion. A user-oriented computer model is presented for simulating the effect of coupon promotions on sales and calculating net profitability. The model includes the actions of the manufacturer, retailers, and consumers. It takes into account three key phenomena of consumer response: the acceleration of product category purchases, the brand loyalty of coupon redeemers, and repeat purchase effects. The model also incorporates the effects of retailer promotions that often accompany a coupon program. Data from an actual application are used to illustrate use of the model.

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References

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1993A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity 1992Price Sensitivity and Television Advertising Exposures: Some Empirical Findings 1999Short- or Long-Duration Coupons: The Effect of the Expiration Date on the Profitability of Coupon Promotions 1995The Effects of Retailer and Consumer Response on Optimal Manufacturer Advertising and Trade Promotion Strategies 1996Consumer inventory sensitivity and the postpromotion dip

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