Short- or Long-Duration Coupons: The Effect of the Expiration Date on the Profitability of Coupon Promotions

Management Science, 45(8):1041-1056,1999

17 Pages Posted: 21 Jan 2015

See all articles by Aradhna Krishna

Aradhna Krishna

University of Michigan, Stephen M. Ross School of Business

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing

Date Written: 1999

Abstract

United States firms collectively spend over $6.5 billion annually on coupon promotions and are becoming increasingly concerned with their profitability. FSI (free-standing-insert) data show that coupon duration varies across brands. In this paper, we show how coupon duration can affect coupon profitability. We also provide answers for some empirical observations on coupon duration. We explain, for example, why (i) coupon duration will vary across firms, such that large market share firms will give short-duration coupons and small market share firms will give long-duration coupons; (ii) longer coupon duration for one brand will increase redemption for coupons of that brand and of a competing brand; (iii) coupon duration will affect coupon profitability.

Suggested Citation

Krishna, Aradhna and Zhang, Z. John, Short- or Long-Duration Coupons: The Effect of the Expiration Date on the Profitability of Coupon Promotions (1999). Management Science, 45(8):1041-1056,1999. Available at SSRN: https://ssrn.com/abstract=2552244

Aradhna Krishna (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing ( email )

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