An Analysis of Factors Associated with Consumers' Use of Grocery Coupons

Abstract

A conceptual model of grocery coupon usage is developed and maximum likelihood estimates of a Tobit model are used to assess the influence of several economic and demographic variables on consumers' use of grocery coupons. Specific factors considered include income, age, household size, race, education, shopping practices, and size and composition of grocery transactions. The analysis includes a combination of scanner and survey data collected from 1,047 consumers. Results confirm strong effects for household size, race, shopping practices, and size and composition of grocery transactions. Grocery coupons are an important marketing tool used by food firms to promote their products. In 1984 expenditures on coupon-related promotional activities for foods were over $1.2 billion, accounting for over 14% of total food promotion expenditures. By 1987 coupon-related promotional expenditures had risen to over $1.9 billion, representing over 17% of total food promotion expenditures [U.S. Department of Agriculture (USDA)]. In 1990 over 277.1 billion coupons were issued and 7.2 billion coupons were redeemed, representing a $3.89 billion credit to total food expenditures by consumers (Hume). Grocery coupons come in various forms, including discounts off the purchase price, two-for-one offers, and mailin rebates. Coupons are distributed through various channels including newspapers, magazines, direct mailings, and product packaging. In 1989, 86.1% of coupons were distributed through newspapers, 4.3% through direct mailings, 3.9% through package attachments, 3.3% through magazines, and 2.4% through other distribution means (Newspaper Advertising Bureau). Coupons perform a variety of promotional functions for the food supplier. Coupons may be used to exercise price discrimination (Narasimhan), to introduce new products (Blattberg, Eppen, and Lieberman), to promote brand switching (Haugh), and to maintain brand loyalty (Dodson, Tybout, and Sternhal). The selective offering of coupons in various geographic or demographic sectors may also allow grocery suppliers to gather specialized market data (Narasimhan). In particular, insights into advertising effectiveness often are generated through carefully monitored coupon promotions. In spite of the large amount of resources devoted to sales promotion through the use of coupons, relatively little research has addressed the factors which are related to consumers' use of grocery coupons. Although it is estimated that over 75% of U.S. households use coupons to some degree (Aycrigg), grocery coupon usage patterns may vary systematically across individual households and may differ substantially according to the nature of individual transactions. A 1981 Nielsen study evaluated consumer characteristics associated with coupon use and determined that the most common user is a consumer between the ages of 31 and 60, from a household of three to six members, with an annual household income of more than $25,000, and a weekly grocery bill in excess of $71. However, this study failed to reveal large differences in coupon use across household sizes, incomes, ages, and grocery expenditures. The objective of this article is to investigate the economic and demographic factors which influence a consumer's use of grocery coupons. Specific objectives are to isolate and quantify the effects of such factors on a consumer's willingness to use grocery coupons and to identify target groups inclined to use grocery coupons. Data collected from a survey of 1,047 consumers are used in conjunction with scanner data associated with individual consumers' purchases.