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Online daily coupons: Understanding how prepayment impacts spending at redemption

Author

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  • Besharat, Ali
  • Nardini, Gia
  • Roggeveen, Anne L.

Abstract

Online daily coupons (ODCs) (e.g., Groupon) differ from conventional coupons, in that they require customers to make a prepayment for a product or service to receive a substantive discount at a later point in time. Drawing from escalation of commitment literature, this article examines how ODCs’ unique prepayment structure might affect customers’ spending upon redemption. The results reveal that a high prepayment enhances redemption spending, but only if the temporal distance between the prepayment and the redemption is small. A high prepayment also can enhance redemption spending if the consumer purchases the ODC (versus receives it as a gift). In combination, this evidence reveals a joint impact of the prepayment amount and redemption spending on the revenue generated for the ODC provider.

Suggested Citation

  • Besharat, Ali & Nardini, Gia & Roggeveen, Anne L., 2021. "Online daily coupons: Understanding how prepayment impacts spending at redemption," Journal of Business Research, Elsevier, vol. 127(C), pages 364-372.
    • Handle: RePEc:eee:jbrese:v:127:y:2021:i:c:p:364-372
    DOI: 10.1016/j.jbusres.2021.01.047
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    References listed on IDEAS

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