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Coupons : the choice of the promotional vehicle by the producer

Author

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  • Bergès-Sennou, F.

Abstract

Couponing is a marketing instrument widely used by producers to compete and price discriminate. This article analyzes the producer's choice of the promotional vehicle (mass media, targeted coupons,...) for discrimination purposes. In a framework with heterogeneous demand and search costs, conditions on market parameters are derived in order to see the determinants of the coupons' promotional vehicle chosen by the producer. The analysis shows that there are only two relevant discrimination policy for couponing : wide covering (all consumers use their coupon) with an offered discount sufficiently large, and narrow covering (only low-valuation consumers buy with coupon) with a high time of use required in order to deter high-valuation consumers from using their coupon. Thus, the producer faces a trade-off between each of these policies or single pricing (no discrimination). We show that the promotional vehicle associated with a wide couponing policy will be direct-mail coupons, whereas the best propotional vehicle for a narrow couponing policy is Free-standard insert coupons. ...French Abstract : Les coupons sont un outil de marketing très utilisé par les producteurs à des fins de concurrence ou de pratiques discriminatoires en prix. Cet article a pour but d'analyser le véhicule promotionnel (journaux, adressés par courrier, etc...) choisi par le producteur lorsque les coupons ne servent qu'à des fins de discrimination en prix. Dans un cadre classique oû les consommateurs possèdent une demande et des coûts de recherche hétérogènes, les déterminants du marché conditionnant le choix du véhicule promotionnel par le producteur sont mis à jour. L'analyse montre que seules deux politiques de coupons sont pertinentes : une politique large (oû tous les consommateurs utilisent leur bon de réduction) avec des coupons dont la valeur faciale est élevée, et une politique restreinte avec un coupon nécessitant un temps d'utilisation élevé afin de dissuader les consommateurs ayant une forte propension à payer d'utiliser le leur (seuls les consommateurs à faible propension à payer achètent alors s'ils ont un coupon). Le producteur fait donc face à un arbitrage entre ces deux politiques de coupons et des politiques de prix uniques (sans discrimination). On montre que pour une politiue large, le véhicule promotionnel choisi sera un adressage par courrier, tandis que pour une politique restreinte, le meilleur véhicule promotionnel est la diffusion dans les encarts de journaux (FSI).

Suggested Citation

  • Bergès-Sennou, F., 2000. "Coupons : the choice of the promotional vehicle by the producer," Economics Working Paper Archive (Toulouse) 9, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  • Handle: RePEc:rea:inrawp:9
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    More about this item

    Keywords

    COUPONS; PROMOTIONAL VEHICLE; PRICE DISCRIMINATION; SEARCH COST ; MARKETING; SUPPORT PUBLICITAIRE; PRIX; COUT MARGINAL; RECHERCHE;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other

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