Category-specific coupon proneness: The impact of individual characteristics and category-specific variables

Abstract

In seeking to enhance the effectiveness of coupon promotions, researchers have long sought to identify “coupon prone” consumers. Previous measures of coupon proneness have not examined differences in coupon usage across product categories and have ignored the confounding effect of coupon attractiveness. An Item Response Theory (IRT)-based framework overcomes these limitations and yields category-specific estimates of propensity to redeem coupons that are independent of coupon attractiveness. The authors utilize an IRT-based model to estimate consumers’ category-specific propensities to redeem coupons for two product and two service categories, and investigate how coupon proneness varies across consumers and across categories as a function of individual characteristics and category-specific variables. The authors find that category-specific measures of propensity to redeem coupons achieve an average accuracy of 89 percent in predicting redemption intentions. Propensity to redeem coupons is also found to be related to category-specific brand loyalty and perceived coupon availability, as well as to individual characteristics such as general coupon proneness, value consciousness and price consciousness. These findings highlight the importance of studying coupon proneness at the category level and suggest that the IRT-based approach has considerable promise as a methodology for studying coupon usage. Using the approach proposed in this study, marketers can forecast the impact coupons are likely to have in their particular category, rather than relying on general coupon proneness measures to predict coupon redemption rates at the category level. The study's findings can also be used to identify categories and consumer segments where coupon promotions are likely to have a larger impact, and have important implications for managers planning joint couponing strategies.