Coupon Attractiveness and Coupon Proneness: A Framework for Modeling Coupon Redemption

Abstract

The measurement of consumers’ coupon proneness and the prediction of their redemption behavior is important to the evaluation of marketers’ couponing programs. Although considerable attention has been paid in the couponing literature to the identification of factors that influence coupon usage behavior, relatively little work has been done to develop models that can help managers predict consumer response to specific coupons and design effective coupon promotions. The authors propose a model of coupon redemption that extends previous models of coupon usage by considering the joint effects of coupon attractiveness and coupon proneness on redemption, and does not require explicit measurement of these variables. Empirical application of the model shows that it correctly predicts redemption intentions for nearly 90% of consumers in a holdout sample and substantially outperforms a logit model that includes traditional measures of coupon proneness, coupon characteristics, and demographics. The proposed model also provides insights into consumer response to coupons that are not provided by the logit model. Overall, the model shows considerable promise as an aid to managers in designing coupon promotions and developing precision targeting strategies.