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Competitive Coupon Targeting

Author

Listed:
  • Greg Shaffer

    (University of Michigan)

  • Z. John Zhang

    (University of Michigan)

Abstract

With the advent of panel data on household purchase behavior, and the development of statistical procedures to utilize this data, firms can now target coupons to selected households with considerable accuracy and cost effectiveness. In this article, we develop an analytical framework to examine the effect of such targeting on firm profits, prices, and coupon face values. We also derive comparative statics on firms' optimal mix of offensive and defensive couponing, the number of coupons distributed, redemption rates, face values, and incremental sales per redemption. Among our findings: when rival firms can target their coupon promotions at brand switchers, the outcome will be a prisoner's dilemma in which the net effect of targeting is simply the cost of distribution plus the discount given to redeemers.

Suggested Citation

  • Greg Shaffer & Z. John Zhang, 1995. "Competitive Coupon Targeting," Marketing Science, INFORMS, vol. 14(4), pages 395-416.
  • Handle: RePEc:inm:ormksc:v:14:y:1995:i:4:p:395-416
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    File URL: http://dx.doi.org/10.1287/mksc.14.4.395
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    References listed on IDEAS

    as
    1. Hauser, John R. & Urban, Glen L., 1975. "A normative methodology for modeling consumer response to innovation," Working papers 785-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Griffin, Abbie. & Hauser, John R., 1991. "The marketing and R & D interface," Working papers #48-91. Working paper (Sl, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Green, Paul E & Srinivasan, V, 1978. " Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Oxford University Press, vol. 5(2), pages 103-123, Se.
    4. George P. Huber, 1974. "Multi-Attribute Utility Models: A Review of Field and Field-Like Studies," Management Science, INFORMS, vol. 20(10), pages 1393-1402, June.
    5. John R. Hauser, 1977. "Testing the Accuracy," Discussion Papers 286, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    More about this item

    Keywords

    competitive strategy; promotion;

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