We propose a stochastic choice model, and supporting empirical analyses, to understand the effect of package coupons on brand choice. Package coupons can be broadly classified into three types: peel off coupons, on-pack coupons, and in-pack coupons. Our model helps understand the relative impact of these three types of coupons on market share. We find that on-pack coupons may lead to a higher market share than peel-off coupons. What makes this result potentially interesting is that while the benefit of a peel-off coupon is realized immediately, the consumer has to wait until the next purchase occasion to cash in the benefit of an on-pack coupon. Though we primarily examine situations where package coupons are dropped frequently, a scenario that is quite representative of today's marketplace, we show that our results are also applicable when a manager is evaluating a particular coupon campaign. We compare the key predictions of our model with data collected from a series of in-store quasi-experiments. The data are consistent with the model's predictions.
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