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Framing Effects of Coupon Face Value on CouponRedemption: A Literature Review with PropositionsWen Yin & Alan J. DubinskyPublished online: 01 Feb 2010.
To cite this article: Wen Yin & Alan J. Dubinsky (2004) Framing Effects of Coupon Face Value on Coupon Redemption: ALiterature Review with Propositions, Journal of Marketing Management, 20:7-8, 877-896, DOI: 10.1362/0267257041838764
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Journal of Marketing Management, 2004, 20, 877-896
ISSN1472-1376/2004/7-8/00877 + 19 £8.00/0 ©Westburn Publishers Ltd.
Wen Yina and Alan J. Dubinsky1b
Framing Effects of Coupon Face Value on Coupon Redemption: A Literature Review with Propositions
Adelphi Universitya
Purdue Universityb
This article examines the effects of framing coupon face value and presence/absence of regular price information vis-à-vis coupon redemption. This topic is critical to marketers, yet it has received minimal research attention. How information is presented on a coupon will affect a coupon promotion’s success. Three forms for framing coupon face value (cents-off, percentage-off, and reduced price) are compared, and the importance of including regular price information on coupons is investigated. Propositions are developed regarding the effects of framing coupon face value and inclusion/exclusion of regular price information on coupon redemption. Implications are also provided for marketers, policy makers, and researchers.
Keywords: coupons, pricing, coupon face value, price reductions, framing effects Introduction In recent decades, coupon promotion has been among the most popular kinds of marketing promotions for consumer products (Leone and Srinivasan 1996). Indeed, it has become a major sales promotional tool (Nickels and Wood 1997). For example, consumer packaged goods manufacturers spend approximately 24 percent of their total advertising/promotion budget on consumer promotions—most of it on coupons (Santella and Associates 2000a). Retailers also spend a significant amount of money on coupons, as they issue 400 million retailer coupons every year (Nickels and Wood 1997).
Coupon promotional efforts and consumer usage tend to be particularly significant in the United States (Santella and Associates 2000b). For example, in 1999, U.S. manufacturers distributed 256 billion coupons with an average face value of US$.73 for packaged goods, of which more than 4.7 billion were redeemed. American consumers thereby saved an estimated US$3.6 billion dollars using manufacturers’ coupons for packaged goods (Promotion
1 Correspondence: Alan J. Dubinsky, Purdue University, School of Consumer and Family Sciences, Matthews Hall, West Lafayette, IN 47907, 765/494-8305 (office), 765/494-0869 (fax), [email protected]
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878 Wen Yin and Alan J. Dubinsky Marketing Council 2000). Additionally, U.S. manufacturers spent US$6.98 billion on coupons for packaged goods in 1999, an 8.2 percent increase over 1998 (Promotion Marketing Council 2000). And the popularity of coupons continues to grow. In 1965, one-half of Americans used coupons. By 1999, coupon users comprised 81 percent of the U.S. population. In fact, affluent consumers even utilize coupons: 83 percent of the population with incomes above US$50,000 redeem coupons, whereas 74 percent of the population with incomes below US$15,000 use coupons (Promotion Marketing Council 2000).
Coupon marketing and consumer usage are also popular phenomena in the United Kingdom (see reports by Santella and Associates 2000b). For instance, 4.7 billion coupons were distributed in the U.K. in 1999, the same number as in 1997. Yet, 487 million were redeemed that year, representing an increase of 44 percent over 1997. Also, 76,000 grocery stores in the U.K. utilize coupons as a large part of their marketing mix; this figure is less than half the number of U.S., but almost three times the number of Canadian, food outlets employing coupons. In addition, approximately 43 percent of coupons are distributed in the U.K. via print media (e.g., newspapers, magazines), 19.2 percent by direct mail, and 15.1 percent in the store; redemption rates of these distribution methods are 1.8, 20.2, and 16.8 percent, respectively. Furthermore, 19.9 coupons are redeemed per household in the U.K., having an average face value of US$.57
What seems to drive marketers to employ coupons so extensively in their sales promotion programs? Several rationales can be proffered. Coupons can boost brand sales without incurring the cost of offering a price discount through the retailer, while simultaneously avoiding possible consumers' misperception about a change in the brand's value (Mouland 1999). Coupons are an effective way to attract new, existing, loyal, and competitors’ customers, as well as to build a brand by delivering messages that increase consumer awareness of the brand (Santella and Associates 2000). When coupons contain the company logo, picture of the product, and regular price information, they can enhance brand familiarity and maintain consumers' perception of the brand's value and/or price (Mouland 1999; Moraga-Gonzalez and Petrakis 1999). Further, coupons can also attract consumers to a particular retail outlet, lead customers to purchase additional products there, and strengthen the relationship between consumers and the retailer (Santella and Associates 2000). And coupons offer utilitarian value for consumers in that they provide both monetary savings and convenience from reduced information search (Chandon, Wansink, and Laurent 2000).
Prior work has also found that (1) the probability of coupon redemption is crucial for determining increases in sales (Dickson and Sawyer 1990); (2) coupon promotions can speed category purchases (Blattberg, Eppen and Lieberman 1981; Shoemaker 1979) in that consumers may expedite their
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Framing Effects of Coupon Face Value on Coupon Redemption 879 decision to purchase a given brand (Neslin and Shoemaker 1983); and (3) coupon redemption can have significant effects on repeat purchases (Jones and Zufryden 1981; Kuehn and Rohloff 1967), as coupons can attract new consumers and influence their subsequent purchase patterns (Ben-Zion, Hibshoosh and Spiegel 1999; Neslin and Shoemaker 1983).
The foregoing discussion clearly suggests that coupons can have a dramatic impact on consumers and the ultimate success of a product. Therefore, marketers need to know what factors affect coupon redemption so that they can design successful coupon promotions. Indeed, some researchers have investigated factors that influence coupon redemption. These factors have been grouped primarily into coupon, consumer, brand, and product category characteristics (Wang 1998).
Of those coupon characteristics that influence coupon redemption, coupon face value is particularly important to marketers because it affects consumers’ behaviour (e.g., whether they redeem or not redeem a coupon) and the cost of the coupon promotion. There are three major types of coupon face value: cents-off (e.g., 50 cents off, US$1 off), percentage-off (e.g., 10% off, 70% off), and reduced price (e.g., reduced price of US$19.95 with coupon).2 Despite the import that coupon face value holds for marketers, virtually no prior work has explored which of the three means of stating a coupon’s face value is more effective. Therefore, marketers are likely using coupons without a clear idea about how the coupon’s value should be expressed. To partially address this oversight in the extant literature, this article develops propositions concerning how (1) the statement of a coupon’s face value and (2) the presence/absence of regular price information on a coupon affect coupon redemption. The underlying framework employed in this article is predicated on research on framing effects (Kahneman and Tversky 1979; Taversky and Kahneman 1981; 1991). This article will hopefully be an impetus for researchers to explore empirically the framing effects of coupon face value. Literature Review Coupons are a kind of consumer sales promotion that impels consumers to take action. Coupons require clipping, saving, and redemption (Blattberg and Neslin 1990). In essence, consumers receive price discount privileges on
2 For exposition simplicity, coupon monetary values will be stated in U.S. dollars and cents. Palpably, alternate currency units (e.g., U.K. pound, euro) could be substituted for U.S. monetary units. In the U.K., for example, a “cents-off” coupon would be a “pound(s)-off” coupon (e.g., “Save Ł.55,” “Save Ł1.45”); a “reduced price” coupon would be stated in pounds (e.g., “Reduced price of Ł20.00 with coupon”). A “percentage-off” coupon is devoid of monetary unit notation.
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880 Wen Yin and Alan J. Dubinsky certain goods after handling coupons and redeeming them. The Net Benefit for Consumers using Coupons can be Stated as Follows:
Net benefits = economic and psychic benefits - (substitution costs + effort costs) Economic and psychic benefits accrue, respectively, from the face value savings of coupons and from such nonfinancial benefits as perceiving oneself to be a shrewd shopper. Substitution costs are the disutility the possible otherwise-not-bought brands incur for the consumer. For the most preferred brand, substitution cost is zero. Effort costs arise from consumers' effort in searching for coupons and processing and redeeming them (Blattberg and Neslin 1990).
There has been a plethora of research on coupon redemption as a consumer response to sales promotions. For example, Leone and Srinivasan (1996) and Bawa (1996) summarize past work on coupon promotions vis-à-vis redemption rates and redemption patterns (Inman and McAlister 1994; Neslin 1990; Reibstein and Traver 1982), consumers’ response to coupons (Bawa 1996), profiles of coupon redeemers (Neslin and Clarke 1987), number of coupons redeemed (Ward and Davis 1978), impact of coupons on market share (Neslin 1990), and profitability of coupon promotions as determined by incremental sales (Bawa and Shoemaker 1989; Klein1981; Neslin and Shoemaker 1983). Prediction of coupon redemption is essential for assessing the effectiveness of coupon promotions and target segmentation of coupon recipients (Bawa and Srinivasan 1997).
Previous work (Nickels and Wood 1997; Reibstein and Traver 1982; Wang 1998) has summarized factors that influence coupon redemption. These factors encompass (1) coupon characteristics, including face value (but not with respect to face value statement types), expiration date, design of coupons (e.g., colour, photo, size), and purchase requirement (e.g., restrictions of product type, size); (2) consumer characteristics, including attitude toward coupons, consumption rate, brand loyalty, prior purchase history, and cultural differences; (3) brand characteristics, including brand market share, price, image, and distribution; (4) product category characteristics, including category penetration and category inter-purchase time; (5) distribution characteristics, including use of free standing inserts (i.e., leaflets of coupons for various products that can be inserted into newspapers), in store, in- or on-pack, direct mail, magazines, newspapers, electronic printouts, and selectivity; and (6) other factors, including advertising and promotion support for coupons, stage in product life cycle, competitive activity, seasonality, region, and size of coupon drop.
Although minimal work has explored the impact of coupon face value statement types (framing), extensive empirical research has investigated effects of price statement types. Independent variables in these studies have
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Framing Effects of Coupon Face Value on Coupon Redemption 881 been descriptions of prices (e.g., sale price, offer price, regular price, manufacturer’s suggested list price), various semantic cues (e.g., % off, $ off, save 10%, compare at), price variation, and the size of perceived discounts. Dependent variables generally have been of two types: (1) price statement impact on consumer responses (such as believability or credibility), and (2) the effect of the price statement types on implied savings, perceived price reduction, or motivation to buy (Liefeld and Heslop 1985). The framing of coupon face value is similar to communicating a price promotion and the framing of price statements (Monroe 1979). Therefore, using prior work on price statements to develop propositions regarding framing effects of coupon face value appears logical and warranted. Regular Price Information
Marketing professionals have argued that regular price information should be included on coupons. For example, Oskin (1993) avers that regular price information should be placed on coupons to alert consumers to the savings they will realize through purchasing new or existing products with a coupon. Thus, some coupons, especially retailers’ coupons, contain regular price information (e.g., “Regularly US$34.99”). The regular price information is informative and may affect coupon redemption because consumers may not have information about the regular price of new products or products that they have not previously purchased or researched.
Moraga-Gonzalez and Petrakis (1999) categorize coupons into ordinary coupons and coupon advertising, the latter of which offers regular price information (and other information). Investigating the impact of coupons with regular price information has been neglected by researchers. Consequently, Moraga-Gonzalez and Petrakis (1999) established an economic model for imperfect price information in coupon advertising. Their model applies when coupons contain regular price information. Such coupons decrease informational asymmetries between existing consumers and new consumers of the product. As such, this promotes competition among retailers, which is eventually beneficial for consumers.
Raghubir (1998) proposes that in the absence of regular price information on the coupon, consumers may infer the regular price of a product from the face value of the coupon. She found that larger coupon face value can lead to consumers’ perceiving a higher regular price. Thus, high face value may have an adverse effect on coupon redemption if regular price information is absent from coupons for new brands or if consumers are new and lack information about the product. Therefore, Raghubir (1998) suggests that marketers of new brands or of existing brands for which consumers do not know the product's actual price should include regular price information as a reference point, especially with high face value coupons. The inclusion of the
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882 Wen Yin and Alan J. Dubinsky regular price is particularly advantageous for high face value coupons because otherwise, the high face value on the coupon could be interpreted by some consumers that the product has a high price (Low and Moody 1996). For percentage-off coupons, regular price information on a coupon is especially important: A high percentage-off coupon may lead consumers to conclude that the price of the product is high if regular price information is not included on the coupon (Raghubir 1998). Percentage-off coupons tend to be efficient chiefly when the percentage-off is large and consumers know the value of the product or service (e.g., Reece 1999).
For ease of explication, this article assumes that regular price information is the sole source of external price for the consumer. As such, our analysis excludes the possible influence of a consumer’s internal reference price by restricting our investigation to coupons that are for new products or directed at new consumers. Therefore, omitted from our examination are consumers (1) who have purchased the product (and thus have knowledge of the price), or (2) who have researched the price of the product. Essentially, our examination is limited to consumers having no prior knowledge of the price of the product or the price of similar products. So, consumers of interest here have no internal reference price for the product and use regular price information on the coupons as the only source of an external reference price.
Petty and Cacioppo (1981) suggest that consumers tend to compare an external reference price (e.g., regular price information on a coupon) to an internal reference price. Consumers then adjust their internal reference price accordingly. Adaptation level theory and assimilation-contrast theory (Sherif, Sherif, and Hovland 1961) can be used to explain this adjustment. Based on assimilation-contrast theory, an external reference price may influence consumers' internal reference price; that is, consumers will ultimately use regular price information as their internal reference price. Assimilation-contrast theory suggests that an external reference price can be either assimilated into or contrasted against a consumer's internal reference price range. A consumer’s internal price, and consequently the range of acceptable prices, is likely to shift in accordance with information acquired through external sources, such as reference price advertisements (Lichtenstein, Burton, and Karson 1991).
The source of reference price has been found to be crucial to consumers' perceived validity of the reference price (Gotlieb and Dubinsky 1991). For instance, consumers perceive that discounts offered via coupons are less likely to have resulted from regular price inflation by retailers prior to their issuing the coupon (Chen and Monroe 1998). Specifically, regular price information on coupons seemingly has more credibility than that offered through other promotions, such as a price discount.
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Framing Effects of Coupon Face Value on Coupon Redemption 883 Face Value
Face value is the amount of discount offered on a coupon (Blattberg and Neslin 1990). Previous research has found that larger face value coupons tend to have higher redemption rates (Bawa and Shoemaker 1987; Bawa and Srinivasan 1997; Krishna and Shoemaker 1992; Leone and Srinivasan 1996; Neslin and Clarke 1987; Reibstein and Traver 1982; Shoemaker and Tibrewala1985; Ward and Davis 1978). Also, larger face value has been found to have a positive effect on information value (Bawa and Shoemaker 1989; Chakraborty and Cole 1999). Chakraborty and Cole (1991) suggest that coupon redeemers regard large face value as providing more information about the brand than low face value; therefore, high face value has a positive impact on coupon redemption. Propositions Framing of Coupon Face Value
When the same face value of a coupon is described equivalently in terms of cents-off, percentage-off, and reduced price, a framing effect occurs. For example, a US$10 face value coupon for a US$40 product can be framed (stated) in cents-off form (US$10 off), percentage-off form (25%), or reduced price form (US$30). A framing effect refers to the phenomenon that individuals respond differently to different descriptions of the same decision problem (Frisch 1993). Framing is the use of decision-related information by a buyer to evaluate a product or service relative to a reference point (Kahneman and Tversky 1979; Puto 1987). Strictly speaking, a framing effect means to pair alternatives through re-describing the exact same situation (e.g., cents-off coupon vs. percentage-off coupon).
The framing of decision problems can influence individuals’ judgments and preferences (Kahneman and Tversky 1979; Taversky and Kahneman 1981; 1991). Framing has been determined to affect subjects’ response to varying versions of the same decision question (Frisch 1993). Individuals prefer positively framed decision questions to negatively framed ones. For example, Levin and Gaeth (1988) observed that subjects viewed ground beef labeled 75 percent more positively than that labeled 25 percent fat. Indeed, framing effects have been demonstrated to be an important factor influencing consumer responses (Heath, Chatterjee, and France 1995; Levin and Gaeth 1988; Puto 1987).
The propositions presented subsequently focus on framing effects. As noted earlier, consumers are assumed to be informed of the regular price of the product solely with the regular price information on the coupon. The face value of the coupon in each of the comparisons between the three different means of framing (stating) the face value is exactly the same.
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884 Wen Yin and Alan J. Dubinsky Table 1. Summary Table of Empirical Work Supporting Research Propositions
Pertinent Empirical Work Proposition When the same face value of a coupon is described equivalently in terms of cents-off, percentage-off, and reduced price, a framing effect occurs. A framing effect refers to the phenomenon that individuals respond differently to different descriptions of the same decision problem (Frisch 1993). Framing has been determined to affect subjects’ response to varying versions of the same decision question (Frisch 1993). Cents-off or percentage-off coupons with the same face value are likely to result in different coupon redemption rates, as research has found that the framing of a discount in an absolute or relative term affects consumers’ perceptions of the discount (Grewal and Marmorstein 1994; Heath, Chatterjee, and France 1995).
Consumers are likely to have difficulty evaluating the actual face value of percentage-off coupons for new products or for products for which they have sought no price information.
Proposition 1: When regular price information is absent from a coupon, consumers are more likely to redeem a coupon with the same face value framed in cents-off form than in percentage-off form.
Chen and Monroe (1998) argue that the relative attractiveness of a discount promotion is determined not only by the absolute dollar amount of the savings, but also by the price of the product. As a relative indicator of a discount, the percentage-off a regular price is perceived more positively when it is larger. When regular price information is posted on a coupon, the framing of a coupon’s face value is likely to interact with the price of the product and influence coupon redemption.
Proposition 2: When regular price information is presented on a coupon, for high-priced (low-priced) products, consumers are more likely (less likely) to redeem a coupon with the same face value framed in cents-off form than in percentage-off form.
Heath, Chatterjee, and France (1995) suggest that advertising the price of a product in percentage-off format (e.g., 40% off) better attracts consumers than simply stating its reduced price. Bitta, Monroe, and McGinnis (1981) found that differences exist in the perceived savings between cents-off and percentage-off framing of a price discount
Cont/….
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Framing Effects of Coupon Face Value on Coupon Redemption 885
Pertinent Empirical Work Proposition vis-à-vis reduced price format when the regular price is stated/not stated. Namely, cents-off and percentage-off framing was better than reduced price framing when the regular price was unknown. Although reduced price coupons indicate the cost of purchasing the product, they do not indicate the actual savings realized if the consumer chooses to redeem the coupon. Only if the regular price is noted on the coupon can the consumer discern the savings generated from using the coupon.
Proposition 3: When regular price information is absent from a coupon, consumers are less likely to redeem a coupon with the same face value framed in reduced price form than in cents-off or percentage-off form.
When a reduced price coupon instead of a cents-off or percentage-off coupon is presented without the regular price noted, the coupon’s face value is implicit. The reduction from the product’s actual price, as perceived by consumers, becomes crucial. For reduced price coupons, the presence of regular price information becomes especially important, as it helps consumers do a mental accounting of how much they would save if they redeem the coupon (Thaler 1985). Consumers compare the reduced price with their internal reference price (i.e., the listed actual price) rather than calculate the face value of the coupon. Monroe (1979) promulgates that the perception of the reduced price-regular price offer may be conceptualized within the framework of the assimilation-contrast theory. Bitta, Monroe, and McGinnis 1981 hypothesized that (1) the perceived savings of a discount in the form of cents-off, percentage-off, and reduced price should be the same, but (2) consumer interest in purchasing the product/brand should be different since a reduced price would garner interest from consumers. Although they found no support for the hypothesis on perceived savings, the hypothesis regarding interest to purchase was supported. Also, they observed that the average response for perceived savings and interest to purchase when the regular price was provided was—from lowest to highest—percentage-off, reduced price, and cents-off.
Proposition 4: When regular price information is presented on a coupon, for high-priced (low-priced) products, consumers’ likelihood of redeeming the coupon is—from highest to lowest (from lowest to highest)—when it is framed in cents-off, reduced price, and percentage-off format, respectively.
For example, assume that three coupons involve a US$50 product. Each coupon would have the same face value (US$10), but each would be framed
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886 Wen Yin and Alan J. Dubinsky differently. The cents-off coupon would be issued at “US$10 off.” The percentage-off coupon would be “20% off.” The reduced price coupon would be denoted by “reduced price at US$40.”
These three coupon face value alternatives are portrayed in Figure 1. In the propositions that follow, pairings will be made (1) between cents-off and percentage-off coupons and (2) between reduced price (implicit face value) and cents-off and percentage-off (explicit face value) coupons. Depicted in Table 1 are the posited propositions, as well as a summary of literature used in developing each proposition.
Propositions Concerning Cents-Off vs. Percentage-Off Coupons Previous research on coupon face value has focused on the monetary
value of cents-off coupons. Although there is some research on percentage-off coupons, researchers have basically failed to recognize that the underlying monetary value for percentage-off coupons can vary significantly between low-priced and high-priced products. Consumers have difficulty evaluating the actual face value of percentage-off coupons for new products or products for which they have no prior price knowledge. No prior work has been conducted comparing redemption of cents-off and percentage-off coupons having the same face value. Previous work on price discounts, though, can shed light in on this issue.
In a study on the effects of framing price discounts, Chen and Monroe (1998) found that cents-off and percentage-off framing of discounts interacts with the product’s price to influence consumers’ evaluations of a discount. It did not, however, significantly affect subjects' purchase intentions. The reason may be that a person's positive (negative) attitude toward a product does not necessarily lead to a stronger (weaker) intention to purchase the product (Fishbein and Ajzen 1975; Sheppard, Hartwick, and Warsaw 1988). Cents-off or percentage-off coupons with the same face value are likely to result in different coupon redemption rates, as research has found that the framing of a discount in an absolute or relative term affects consumers’ perceptions of the discount (Grewal and Marmorstein 1994; Heath, Chatterjee, and France 1995).
Cents-off coupons provide consumers with the explicit savings realized from the coupon (e.g., US$5 off = a US$5 savings). Percentage-off coupons, though, require consumers to calculate the savings realized from the coupon (i.e., coupon percentage-off X product price = savings). Such mental accounting entails consumers’ expending cognitive effort. When regular price information is not placed on the coupon, consumers will lack a reference price (given that the product is new or one in which consumers have no prior price knowledge). As such, deriving the actual savings from a percentage-off coupon may be too “labour intensive” for consumers. Consequently, consumers may interpret the value of a cents-off coupon (e.g.,
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Framing Effects of Coupon Face Value on Coupon Redemption 887 Figure 1a) differently from a percentage-off coupon (e.g., Figure 1b) and thus prefer the former to the latter. Essentially, consumers are likely to have difficulty evaluating the actual face value of percentage-off coupons for new products or for products for which they have sought no price information.
The foregoing discussion leads to the following proposition:
Proposition 1: When regular price information is absent from a coupon, consumers are more likely to redeem a coupon with the same face value framed in cents-off form than in percentage-off form.
Chen and Monroe (1998) argue that the relative attractiveness of a discount promotion is determined not only by the absolute dollar amount of the savings, but also by the price of the product. As a relative indicator of a discount, the percentage-off a regular price is perceived more positively when it is larger. Chen and Monroe (1998) illustrated this phenomenon with the finding that a US$1,000 discount on a US$20,000 automobile (high-priced product) appeared to be substantial to consumers in terms of the dollar amount of the savings. The equivalent 5%-off discount appeared to be less substantial to them. For a low-priced product (chewing gum), however, a 50%-off discount seemed attractive to consumers, but the equivalent US$0.25-off discount seemed trivial. In Chen and Monroe’s study (1998), the presence of regular price information was assumed (a US$20,000 automobile and a US$0.50 pack of chewing gum) when testing the interaction effect of framing the discount and the price of the product on consumer perceptions of the discount. Therefore, when regular price information is posted on a coupon, the framing of a coupon’s face value is postulated to interact with the price of the product and influence coupon redemption.
The preceding analysis leads to the following proposition:
Proposition 2: When regular price information is presented on a coupon, for high-priced (low-priced) products, consumers are more likely (less likely) to redeem a coupon with the same face value framed in cents-off form than in percentage-off form.
Propositions Concerning Reduced Price Coupons Heath, Chatterjee, and France (1995) suggest that advertising the price of a
product in percentage-off format (e.g., 40% off) better attracts consumers than simply stating its reduced price (e.g., “Now US$.60”). Bitta, Monroe, and McGinnis (1981) found that differences exist in the perceived savings between cents-off and percentage-off framing of a price discount vis-à-vis reduced price format when the regular price is stated/not stated. Namely, cents-off and percentage-off framing was better than reduced price framing when the regular price was unknown.
Although reduced price coupons (e.g., Figure 1c) indicate the cost of purchasing the product, they do not indicate the actual savings realized if the
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888 Wen Yin and Alan J. Dubinsky consumer chooses to redeem the coupon. Only if the regular price is noted on the coupon can the consumer discern the savings generated from using the coupon. (Recall that in this article consumers are assumed to have no knowledge of the product’s price or prices of similar products.) The absence of such vital information is likely to dissuade consumers from redeeming the coupon and buying the product.
The preceding dialectic leads to the following proposition:
Proposition 3: When regular price information is absent from a coupon, consumers are less likely to redeem a coupon with the same face value framed in reduced price form than in cents-off or percentage-off form.
When a reduced price coupon instead of a cents-off or percentage-off coupon is presented without the regular price noted, the coupon’s face value is implicit. The reduction from the product’s actual price, as perceived by consumers, becomes crucial. For reduced price coupons (e.g., Figure 1c), the presence of regular price information becomes especially important, as it helps consumers do a mental accounting of how much they would save if they redeem the coupon (Thaler 1985). Consumers compare the reduced price with their internal reference price (i.e., the listed actual price) rather than calculate the face value of the coupon. Monroe (1979) promulgates that the perception of the reduced price-regular price offer may be conceptualised within the framework of the assimilation-contrast theory. That is, if the reduced price is a reasonable substitute for the regular price, consumers may perceive a bargain (the assimilation effect). If consumers view the reduced price as belonging to another product category, though, they may not believe that the reduced price is a reduction from the stated regular price on the coupon (the contrast effect). Therefore, consumers may perceive that the reduced price coupon possesses regular price information, thus providing a new reference price. Some consumers may not even calculate the savings from the regular price. This will decrease the effectiveness of the reduced price coupon relative to cents-off coupons in terms of conveying the savings consumers can realize through redeeming the coupon.
Bitta, Monroe, and McGinnis 1981 hypothesized that (1) the perceived savings of a discount in the form of cents-off, percentage-off, and reduced price should be the same, but (2) consumer interest in purchasing the product/brand should be different since a reduced price would garner interest from consumers. They found no support for the hypothesis on perceived savings, but the hypothesis regarding interest to purchase was supported. Also, they observed that the average response for perceived savings and interest to purchase when the regular price was provided was—from lowest to highest—percentage-off, reduced price, and cents-off. In view of Bitta, Monroe, and McGinnis’s (1981) and Chen and Monroe’s (1998)
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Framing Effects of Coupon Face Value on Coupon Redemption 889 studies, consumers will likely perceive reduced price coupons (e.g., Figure 1c) to be less attractive than cents-off coupons (e.g., Figure 1a) but more attractive than percentage-off coupons (e.g., Figure 1b) with high face value for high-priced products.
The foregoing arguments allows the following proposition to be proffered:
Proposition 4: When regular price information is presented on a coupon, for high-priced (low-priced) products, consumers’ likelihood of redeeming the coupon is—from highest to lowest (from lowest to highest)—when it is framed in cents-off, reduced price, and percentage-off format, respectively.
Figure 1. Alternatives to Framing Coupon Face Value for a $50 Item
Figure 1a: Regular price information absent and face value framed in cents-off form
Figure 1b: Regular price information absent and face value framed in percentage-off form
Figure 1c: Regular price information absent and face value framed in reduced price form
Note: These three examples omit Product A’s regular price information. Had it been provided, the coupons would have included the phrase “Regularly $50.00.”
Vendor Coupon: Expires 12/15/04
SAVE $10.00
Off the regular price of Product A
Vendor Coupon: Expires 12/15/04
SAVE 20%
Off the regular price of Product A
Vendor Coupon: Expires 12/15/04
REDUCED PRICE AT $40.00
From the regular price of Product A
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890 Wen Yin and Alan J. Dubinsky Discussion How should a coupon’s savings be stated? Should the coupon include regular price information? This article has sought to address these issues. More specifically, through an examination of extant literature, we have posited propositions regarding the framing effect of coupon face value and presence/absence of regular price information on coupon redemption. Previous research has given scant attention to the impact of framing effects of a coupon’s face value. Hopefully, this article will serve as an impetus for further work in the area. Implications
Admittedly, the propositions offered in this article have not been tested and thus have not received empirical support. Nonetheless, this article does provide tentative managerial implications regarding how best to frame the face value of coupons in order to increase coupon redemptions. These recommendations are described below.
• For high-priced products, marketers should use a cents-off coupon rather than a percentage-off or reduced price coupon. The dollar/cents savings is explicit and will appear to be more substantial to consumers than will the percentage off or the implicit savings from the reduced price coupon. Some large furniture and electronics retailers place free standing inserts (FSI’s) with attached cents-off coupons in weekend tabloids that offer consumers substantial savings if they make a major purchase (e.g., “Save US$100 on any purchase over US$499 this weekend only”). Similarly, automobile dealerships are known to send potential customers a “dealership check” (in essence, a cents-off coupon) that allows them to reduce the cost of their automobile purchase by the amount reflected on the check. • For a low-priced product, marketers should use a percentage-off coupon rather than a cents-off coupon. The percentage savings will appear to provide greater value to consumers than will the cents-off savings. Health and nutrition outlets frequently offer percentage-off coupons distributed via FSI’s or direct mail packs (e.g., “Save 10% on your next purchase”). And some retail discounters regularly provide coupons in daily newspapers that afford consumers opportunity to realize a percentage reduction on their purchases (e.g., “Take 15% off our already low prices”).
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Framing Effects of Coupon Face Value on Coupon Redemption 891
• For high-priced products, marketers should use a reduced price coupon rather than a percentage-off coupon. Consumers are likely to perceive the savings from the percentage-off coupon to be relatively insignificant; alternatively, the implicit savings from a reduced price coupon conceivably will seem substantial. Airlines offer reduced fare coupons on their websites and in mailings to their frequent flier members (e.g., “Fly New York to London for US$299”). And using FSI’s in suburban weeklies and direct mail packets, hair salons provide reduced price coupons on selected services (e.g., “US$15.99 for a haircut”; “US$35 for a permanent”). • Marketers should provide regular price information on a coupon, irrespective of how the coupon’s face value is framed. Provision of the regular price gives consumers a basis for comparison vis-à-vis the value of the coupon. Automobile repair shops often utilize circulars and in-store FSI’s containing coupons for services; printed on the coupons is the regular price of the service along with the reduced price or cents-off savings (e.g., “Oil change—regularly US34.99; now only US$21.99”; “Save US$10 off our regular price of US$39.99 for air conditioner recharging”). Cell phone companies have offered coupons in newspaper advertisements that present both a phone’s regular price and its reduced price (e.g., “US$159 Hi-Tech Phone now for US$99.99”).
The article also has implications for public policy makers. Specifically, they could request that marketers provide truthful regular price information on coupons. Concerns exist about false regular prices being employed as semantic cues in advertisements (e.g., “Was US$49.95. Now only US$29.95”; “Regular price US$49.95. You now pay US$29.95”) (Lichtenstein, Burton, and Karson 1991). Therefore, consumers may well be vulnerable to inaccurate regular price information. Regular price information on coupons may be perceived to be more credible by consumers than alternate venues. Limitations and Future Research One limitation of this article is its assumptions. Attention was restricted to situations where consumers are purchasing a new product or where consumers have no internal reference price or prior information about the product’s price. Consequently, regular price information on the coupon is their sole source of price information (i.e., their external reference price). Future research can attend to these restrictions.
This article proposes how important the framing effects of coupon face value and presence/absence of regular price information can have on coupon
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892 Wen Yin and Alan J. Dubinsky redemption. Most reports on coupon usage are prepared by coupon redemption agents or clearinghouses. Coupon promotion information generally is not available in these data sets, as this kind of information is not collected by these agents (Moraga-Gonzalez and Petrakis 1999). Therefore, empirically testing this article’s propositions will be difficult unless data on the redemption of coupons having regular price information are available. However, experiments could be utilized to test the propositions.
This article points out the importance of including regular price information on a coupon to enhance the likelihood of coupon promotion success. When coupons include regular price information and other brand information (e.g., product characteristics, location, quality, guarantees), the coupons represent “coupon marketing”. Moraga-Gonzalez and Petrakis (1999) consider coupon marketing to be a hybrid sales promotion that integrates features of the ordinary coupon and advertising. Owing to the amount of information coupon advertising brings to consumers, Moraga-Gonzalez and Petrakis (1999) propose that the effects of coupon advertising on consumers’ behaviour, manufacturers' strategies, and market equilibrium will be different from those of ordinary coupons. Therefore, investigating the effects of a mix of brand information on coupon redemption, manufacturers' strategies, and market equilibrium in the coupon marketing context appears warranted.
Very little research has been conducted comparing coupons and rebates. Rebates require consumers to adhere to specific rebate requirements or otherwise be rejected for rebate eligibility. Usually, consumers have to complete a rebate form; provide the receipt, UPC code, and the rebate form; photocopy these materials for their own records; and pay the postage. Then, they wait several weeks for the rebate check, which usually has an expiration date. An interesting issue is whether coupons are more effective than rebates using the same framing, level of face value, and presence/absence of regular price information.
Studies may also be conducted on whether coupons are more readily redeemed by consumers who have purchased the product or a similar product before and therefore have formed an internal reference price for the product. Moreover, the effectiveness of “buy one, get one free” coupons can be compared with that of “buy one, get one free” price packs. These suggested studies could also be combined with other variables such as the price of the products (high vs. low), brand image, and store image.
Acknowledgments
The authors gratefully acknowledge the reviewers and editor for their valuable input.
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About the Authors
Wen Yin obtained her B. A. in economics from Peking University in 1997. Two years later, she received her M. S. from the Department of Consumer Sciences and Retailing at Purdue University. In 2003, she earned her Ph.D. in consumer behaviour from the same department at Purdue University. In that same year, she also acquired an M. S. degree in applied statistics from the Department of Statistics at Purdue University. Currently, she is an Assistant Professor of Marketing at Adelphi University New York. She has taught marketing research, quantitative methods, distribution management, and software applications. She is a member of the American Marketing Association and Association for Consumer Research. Her research has appeared in various academic conference proceedings. Her current research interests include e-commerce, pricing research, market response models, and financial services marketing.
Alan J. Dubinsky (B.S.B., M.B.A., Ph.D. - all from the University of Minnesota) is Professor of Consumer Sciences and Retailing at Purdue University. Prior to pursuing graduate work, he was a territory manager for Burroughs Corporation. His research has appeared in the Journal of Marketing, Journal of Marketing Research, Journal of Retailing, Journal of the Academy of Marketing Science, Psychology & Marketing, Academy of Management Journal, Personnel Psychology, Journal of Applied Psychology, Leadership Quarterly, Sloan Management Review, and Journal of Business Research, among others. In addition, he has co-authored three books in the areas of selling, sales management, and motivation. He also is a former editor of the Journal of Personal Selling and Sales Management.
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