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Modeling coupon values for ready-to-eat breakfast cereals

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Author Info

  • Gregory K. Price

    (Economic Research Service, U.S. Department of Agriculture, 1800 M Street, NW, Room S-5199, Washington, DC 20036-5831. E-mail: gprice@ers.usda.gov)

  • John M. Connor

    (Department of Agricultural Economics, Purdue University, 1145 Krannert Building, West Lafayette, IN 47907-1145. E-mail: jconnor@purdue.edu)

Abstract

This study identifies the determinants of coupon values at the brand level within the context of a complex marketing program. A two-equation, fixed-effects, panel-data model accounts for the bidirectional causality between brand prices and discount levels. The empirical model is fitted with data on household purchases of ready-to-eat (RTE) breakfast cereals and captures the industry's 1996 price cuts and discount reductions. Higher brand prices cause coupon values to rise, supporting the price discrimination hypothesis. Coupon values fall with in-store displays and more intense advertising but rise when couponed products are featured in store flyers. Discount levels are positively related to brand market share and the size of discounts redeemed for rival cereals. Coupon values fall with increasing brand loyalty among RTE cereal purchasers. Cereal prices are positively affected by coupon values, advertising expenditures, input costs, and the prices of competing brands. Inventory levels are negatively correlated with brand price. [EconLit citations: Q130, D120, L130]. © 2003 Wiley Periodicals, Inc. Agribusiness 19: 223-243, 2003.*

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 19 (2003)
Issue (Month): 2 ()
Pages: 223-243

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Handle: RePEc:wly:agribz:v:19:y:2003:i:2:p:223-243

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Ronald B. Larson, 1997. "Using price discrimination theory to plan promotions," Agribusiness, John Wiley & Sons, Ltd., vol. 13(4), pages 401-408.
  2. Price, Gregory K. & Connor, John M. & Fulton, Joan R., 1999. "Modeling Coupon Values For Ready-To-Eat Breakfast Cereals," 1999 Annual meeting, August 8-11, Nashville, TN 21553, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Greg Shaffer & Z. John Zhang, 1995. "Competitive Coupon Targeting," Marketing Science, INFORMS, vol. 14(4), pages 395-416.
  4. John M. Connor, 1996. "Breakfast Cereals: The Extreme Food Industry," Issue Papers 12, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  5. Chakravarthi Narasimhan, 1984. "A Price Discrimination Theory of Coupons," Marketing Science, INFORMS, vol. 3(2), pages 128-147.
  6. Stanley, Linda R & Tschirhart, John, 1991. "Hedonic Prices for a Nondurable Good: The Case of Breakfast Cereals," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 537-41, August.
  7. Connor, John M., 1997. "Couponing As A Horizontal And Vertical Strategy: Theory And Effects," Working Papers 14344, University of Minnesota, The Food Industry Center.
  8. Ronald W. Cotterill, 1999. "High cereal prices and the prospects for relief by expansion of private label and antitrust enforcement," Agribusiness, John Wiley & Sons, Ltd., vol. 15(2), pages 229-245.
  9. Scott A. Neslin, 1990. "A Market Response Model for Coupon Promotions," Marketing Science, INFORMS, vol. 9(2), pages 125-145.
  10. Gerstner, Eitan & Hess, James D & Holthausen, Duncan M, 1994. "Price Discrimination through a Distribution Channel: Theory and Evidence," American Economic Review, American Economic Association, vol. 84(5), pages 1437-45, December.
  11. Gerstner, Eitan & Hess, James D, 1991. "A Theory of Channel Price Promotions," American Economic Review, American Economic Association, vol. 81(4), pages 872-86, September.
  12. Capps, Oral, Jr. & Seo, Seong-Cheon & Nichols, John P., 1997. "On The Estimation Of Advertising Effects For Branded Products: An Application To Spaghetti Sauces," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(02), December.
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Cited by:
  1. Gregory K. Price & John M. Connor, 2003. "Modeling coupon values for ready-to-eat breakfast cereals," Agribusiness, John Wiley & Sons, Ltd., vol. 19(2), pages 223-243.
  2. Price, Gregory K. & Connor, John M., 2002. "The Determinants Of Coupon Discounts For Breakfast Cereals," 2002 Annual meeting, July 28-31, Long Beach, CA 19838, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Golub, Alla A. & Binkley, James K., 2005. "Determinants of household choice of breakfast cereals: healthy or unhealthy?," 2005 Annual meeting, July 24-27, Providence, RI 19181, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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