Redemption, Exposure, and Spillover Effects of Electronic Coupons: An Empirical Analysis

Abstract

Coupon promotions have been increasingly used with the development of electronic commerce technologies. The outcomes of the long-term effect of coupon promotions have been mixed, likely due in part to the challenge in data and methodology. Using two field experiments at a firm that owns and operates a large online classified ads website, we examine exposure, redemption and spillover effects of coupon promotions. We find negative exposure effect and positive redemption effect. For customers who received coupons but did not redeem them (i.e., exposure effect), they purchased less than those who did not receive coupons; and for the customers who redeemed coupons (i.e., redemption effect), they purchased more than those who did not redeem them. The exposure effect can potentially reduce the customer’s purchases by as much as 16.31% and the redemption effect can potentially increase the customer’s purchases by as much as 10.37%. We also find that the positive redemption and negative exposure effects extend to other products that are not on promotion (i.e., spillover effect). Managerial and theoretical implications are discussed.

Keywords: Electronic Coupons, Exposure Effect, Redemption, Spillover Effect, Field Experiment

JEL Classification: M37