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Personalizing Coupons

Study examines impact of new technology on consumer choice

As with many phases of life, mobile computing is transforming consumer decision making by making it easier to compare products and potential discounts in real time. One of the newer components of this phenomenon is the growth of mobile coupons which offer the ability to provide discounts based on previous shopping behavior, thereby conveniently and quickly giving consumers just the coupons they will actually use right on their smart phone. This personalization could drastically change how consumers actually decide on buying a product and will require companies to transform how they market and advertise.

A new study by researchers at Cleveland State University and Kent State University, is one of the first to examine the impact of mobile coupon technology on actual purchases and provides useful guidance to businesses on how to best utilize online discounting. The results were published in the fall issue of the Journal of the Academy of Marketing Science.

“Research on the impact of retail discounting on sales has typically focused on single-coupon redemption,” notes Paul Mills, assistant professor of marketing at CSU and co-author of the study. “This model no longer fits our digital world, where multiple coupons for similar products can be compared simultaneously. This study sought to better understand coupon redemption in the face of discount competition.”

The team observed supermarket shoppers who used their smart phones to scan the bar code of products in-store, receiving both coupons for the scanned product and several similar products as a result. They then modeled the determinants of redemption based on several factors including net price range, coupon value, brand loyalty, and number of coupons presented. 

Their analysis of thousands of coupons redeemed over a period of  many months found that 79.9 percent of participants were brand-focused shoppers who used internal reference prices based on previous experiences to make decisions. These shoppers were less likely to switch brands based on a discount. On the other hand, 20.1 percent were deal-prone shoppers who use stimulus-based reference prices. This group was more likely to switch brands based on the best-value coupon provided.

“Our results indicate that mobile coupon deployment should not rely on maximizing coupon value alone,” Mills added. “The vast majority of consumers will still consider various other factors, including brand loyalty, price range, and the number of competing offers when deciding what coupons to utilize. Therefore, firms should look to incorporate competitive marketing intelligence into mobile coupon deployment to maximize redemption even with relatively low-value coupons.”

Moving forward Mills hopes to expand the research by analyzing additional retail products,coupons for complimentary products, and the effect of competing coupons on national versus store brand products. The initial study was funded through a grant from the Marketing Science Institute.