Why do companies issue coupons?
Each company has it’s own internal marketing strategy to do with coupons (which I found out by trying to get quotes from big brand companies about the reasons they issue coupons – top secret information, apparently). Although complicated and company specific, here are some basic ideas of why coupons are issued:
- A new product launch
- A “pull strategy” – customers pull the product off the shelves and ask the stores for more because they have a coupon
- To increase sales to hit a target
- To gather information about consumers, ie. when you get a coupon online and they ask you for your info
- To get rid of a product’s inventory to bring in a new size, package or product.
- To attract new customers, in hopes they continue to buy the product
- To bring back previous customers that were lured away by competitors
- To increase awareness of a product
- To soften price increases
- To develop the support of retail stores
A study published in the RAND Journal of Economics in the Summer of 2002 (“Why Do Manufacturers Issue Coupons? An Empirical Analysis of Breakfast Cereals”) concluded that:
coupons are driven by some combination of (1) strategic interactions between manufacturers, (2) incentives given to the people within firms who make decisions about coupons, and (3) the effects of coupons on repeat purchases. We are less convinced that explanations based on the vertical relationship between cereal manufacturers and retailers are important.
They also state that many manufacturers tend to dislike coupons and although there was a period of time in the mid-1990s when a number of manufacturers tried to stop coupons, the revolt from the public was so severe that they all started issuing them again. In 1996, there were even boycotts on Procter & Gamble products after their attempt to stop issuing coupons, which led to local politicians becoming involved and P&G paying out $4.2 million to settle charges. The crazy couponers have been around for awhile!
Most of my information came from a few people who are experts in marketing or work in marketing who would rather not have their names online – so I won’t be citing them, but trust that they are trustworthy sources.
Some other sources I used:
Nevo, Aviv and Catherine Wolfram. “Why Do Manufacturers Issue Coupons? An Empirical Analysis of Breakfast Cereals.” The RAND Journal of Economics, Vol. 33, No. 2, (Summer, 2002), pp. 319-339
“Couponing as a Marketing Strategy.” <http://www.santella.com/coupon.htm#COUPONING%20AS%20A%20MARKETING%20STRATEGY>
Reece, Thom. “How To Put The Profit-Producing Power of Couponing To Work For You.” Business Know-How, 2005. < http://www.businessknowhow.com/marketing/couponing.htm >