Two Dimensional Targeted Coupon Strategy in Competition

Abstract

Targeted coupons is an effective marketing tool for the firms. Consumers' preferences and their geographic positions are main factors the firms need to consider in competition. Hence, when firms set their targeted coupons strategies, they need to consider customers' geographic positions and product preferences. We analysis firms' competitive targeted coupons strategy with considering customers' geographic position and product preference. Meanwhile, we explain how targeted coupons influence firm's pricing strategy and customers' purchase decisions. The results indicate that, when the transportation cost caused by consumers' geographic position is more important to the customers, firms don't target any coupons. When customer preference is more important, firms will target coupons to semi-loyal customers. The face value of the targeted coupon is less than the difference between unit transportation cost and utility per unit caused product preference. Meanwhile, firms adapt higher price with a higher possibility in dynamic pricing. Furthermore, targeted coupons can soften the competition between firms and bring the firms more profits, and it leads to win-win results for both consumers and firms.