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Modeling coupon values for ready-to-eat breakfast cereals

Author

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  • 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.*

Suggested Citation

  • 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.
    • Handle: RePEc:wly:agribz:v:19:y:2003:i:2:p:223-243
    DOI: 10.1002/agr.10048
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    References listed on IDEAS

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    1. 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).
    2. Jing Li & Edward C. Jaenicke & Tobenna D. Anekwe & Alessandro Bonanno, 2018. "Demand for ready‐to‐eat cereals with household‐level censored purchase data and nutrition label information: A distance metric approach," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 687-713, October.
    3. 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.
    4. 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).
    5. Zhu, Chen & Lopez, Rigoberto A. & Liu, Xiaoou, 2019. "Consumer responses to front-of-package labeling in the presence of information spillovers," Food Policy, Elsevier, vol. 86(C), pages 1-1.

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