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A recent issue of The Wall Street Journal reported that manufacturers distribute an estimated 267.6 billion coupons annually --an average of 2,910 per household. The average face value is 50 cents, resulting in total potential savings of nearly $132 billion. The study by D'Arcy Masius Benton & Bowles indicates that couponing may be reaching a plateau due to market saturation (The Wall Street Journal, 1991). It would therefore seem very important to determine what makes an effective coupon in a sea of competitive offers.
Although several studies have dealt with the nature of coupon-prone customers, methods of coupon delivery, or effects of coupon value, relatively few have dealt with the characteristics of the coupon itself. For example, do physical characteristics such as size, color or graphics affect coupon effectiveness? Are coupons that look like currency more effective? Does requiring the customer to mark, fill out or modify the coupon influence effectiveness?
This article reports a case study involving incremental sales generated by two different coupons in a direct mail business. One coupon required very little customer effort; the other required the customer to "earn" the right to use the coupon. Further research is needed to determine whether the reported results apply to more general coupon usage.
PREVIOUS RESEARCH
Most early coupon studies focused on factors influencing coupon redemption rates. Reibstein and Traver (1982), for example, developed a model to predict redemption rates as an aid in budgeting coupon promotions. Several authors eventually pointed out that coupon effectiveness should be measured not by redemption rates but by the incremental sales generated by the coupon promotion (Bawa and Shoemaker, 1989; Klein, 1981). If coupon redemptions come from loyal buyers who would have bought the brand anyway, a high redemption rate may actually decrease profitability.
Additional research (Shoemaker and Tibrewala, 1985) determined that regular buyers of a brand were in fact those most likely to redeem coupons for that brand, thus undermining the promotion's profitability. Although higher coupon face values did seem to increase redemption rates (at least temporarily) among infrequent and non-buyers, Bawa and Shoemaker (1987a) found coupon promotions difficult to justify if their only purpose was to convert permanent new buyers.
The most recent studies on coupon effectiveness have continued to focus primarily on the user...