The Antecedents and Consequences of Promo Code Redemptions

48 Pages Posted: 28 Sep 2021

See all articles by Scott Neslin

Scott Neslin

Dartmouth College - Tuck School of Business

Wenyu Jiao

School of Management, University of Science and Technology of China

Date Written: September 4, 2021

Abstract


Promo code coupons delivered via email are a popular promotion tool. We study the effectiveness of these promotions by examining the factors that influence consumers to redeem promo codes, and the impact of redemptions on profits. We analyze a field experiment conducted by a national retailer involving more than 400,000 customers. We study the open/click/redemption process using a five-equation model, for opens, clicks, and three purchase types: (1) eligible redemptions, (2) eligible non-redemptions, and (3) ineligible and hence non-redemption purchases. We find consumers’ motivations and abilities have a sequential impact: they determine opens, which expose them to the promo code and hence the opportunity to redeem, and then determine which type of purchase consumers make. Eligible non-redemptions represent “slippage”, whereby consumers purchase but do not redeem although they could have. We find that customers with relatively low motivation and ability are associated with slippage, providing a sensible explanation of slippage. We find promo code coupons induce purchase acceleration, undoubtedly due to their limited duration, but are still profitable after accounting for acceleration. We conclude managers should consider using emailed promo code promotions; their dependence on customer motivation and ability means firms can target customers to effect price discrimination.

Keywords: Promo Code; Email Marketing; Promotions; Digital Coupons; Email Opens and Clicks; Coupon Redemption; Multi-equation Probit

JEL Classification: M30, M31, M37

Suggested Citation

Neslin, Scott and Jiao, Wenyu, The Antecedents and Consequences of Promo Code Redemptions (September 4, 2021). Available at SSRN: https://ssrn.com/abstract=3930720 or http://dx.doi.org/10.2139/ssrn.3930720

Scott Neslin (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Wenyu Jiao

School of Management, University of Science and Technology of China ( email )

Hefei, Anhui
China

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