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Coupon value : a signal for price?

Authors Raghubir, Priya
Issue Date 1996-01-16
Summary In this paper we argue that consumers use the value of a coupon as a source of information to estimate the regular price level. Study 1 demonstrates that the higher the percentage discount on a coupon (20% vs. 10%), the higher the estimated regular price. Study 2 demonstrates the same effect for cents off coupons using a cross-section of 152 coupons with values ranging from 15c̸ to $2. Brands offering higher value coupons are estimated to be higher priced. Both studies also show that the mere presence of a price promotion leads to higher price expectations. We then demonstrate that the use of coupon value as a source of information in making judgments of regular price is contingent on whether consumers have alternate sources of information available to them while making price judgments. Studies 3-5 examine how the presence of alternate brand or context-related price cues moderates this effects. Study 3 demonstrates that when consumers know past prices, the higher the coupon value, the lower the price expectation; but this is not so when consumers are not aware of past prices. Study 4 shows the same pattern of results using different operationalizations of alternate price information: prices of non-promoted lines of the same brand, and brand name. Finally, Study 5 demonstrates that the use of coupon value as a signal for price is inversely related to the availability and diagnosticity of competitive prices for making a price decision. The results are discussed in terms of the informational effects of price promotions. Managerial implications for the communication of coupon related promotions for new product introductions are discussed.
Language English
Format Working paper
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