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

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Author Info

  • 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)

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    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.

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    File URL: http://dx.doi.org/10.1287/mnsc.45.8.1041
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 45 (1999)
    Issue (Month): 8 (August)
    Pages: 1041-1056

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    Handle: RePEc:inm:ormnsc:v:45:y:1999:i:8:p:1041-1056

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    Related research

    Keywords: promotion; competitive strategy; buyer behavior;

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    Cited by:
    1. Alessandro Acquisti, 2014. "Inducing Customers to Try New Goods," Review of Industrial Organization, Springer, vol. 44(2), pages 131-146, March.

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