A key challenge facing business marketers surrounds developing a deeper understanding of customer needs. We conceptualize that challenge as having three dimensions: calculating, creating and claiming value. We discuss key problems, new developments and research challenges in each of these three domains and note the desirability for a deeper collaboration between academics and practitioners to address the research challenges.

Coupons account for over two-thirds of all consumer promotional efforts initiated by the manufacturers of consumer goods. In this study, the impact of coupons on brand sales is investigated and how that impact decays over the life of the coupon is demonstrated. Specifically, we present an econometric model that can capture coupon effects in terms of equivalent price reduction, account for coupon effects over time, allow inference of coupon effects when retailers decide to double or triple the coupon value, and provide both self-coupon and cross-coupon elasticities at different levels of aggregation. A widely used sales response model is adapted, and an analytical model is proposed to estimate both the self-coupon and cross-coupon (face value) elasticities of sales at the store level. From the store-level elasticity estimates for a given week, the authors analytically derive the coupon elasticities for the chain level by aggregating across stores, and over the life of the coupon by aggregating over time. The proposed sales response model is estimated with the data obtained from three markets for various product categories, and the coupon elasticities are computed. The proposed framework allows one to demonstrate the hypothetical equivalence of a shelf-price reduction for a given coupon face value in each week. Also, the effect of doubling the face value of a coupon results in more than a proportionate increase in elasticity. The authors find that both self and cross-coupon elasticities are much smaller in magnitude than the average self and cross-price elasticity measures reported in the literature.

This article shows that in a model of exogenously given sales expansion target with a dominant manufacturer, the relative profitability of coupon and price-reduction schemes depends on the values of coupon redemption rates and the equivalence ratio of price reduction to coupon face value. It is also shown that retailer’s margin has an uncertain impact on the compensation constraint on the manufacturer’s choice between the two schemes. However, higher retailer’s margin increases the likelihood that the chosen sales expansion scheme (SES) is the one that generates higher consumer welfare. A sales response model is used to estimate the equivalence ratio and critical coupon redemption rate below which the manufacturer will prefer a coupon promotion. A sensitivity analysis of the manufacturer’s decision reveals that changes in the magnitude of the retailer’s margin have little impact on the manufacturer’s choice between alternative SESs.