Which Categories and Brands to Promote with Targeted Coupons to Reward and to Develop Customers in Supermarkets

Abstract

This study explores the role of category and brand characteristics in the effectiveness of two types of targeted coupons aimed at achieving a retailer's specific goals. In one case, the retailer issues the coupon to reward customers offering discounts in brands they already buy. In the other case, the retailer seeks to develop customers by issuing coupons in categories where they do not buy branded alternatives at the retail chain._x000D_ _x000D_ A multi-brand and multi-category quasi-experiment consisting of 893 targeted checkout coupons of consumer packaged goods (CPG) issued at a supermarket chain reveals that (1) the brands and categories with higher redemption rates vary depending on the retailer goal and (2) for reward coupons extended to current brand buyers, some of the brand and category characteristics driving higher redemption rates are not the same as those driving incremental sales. To explain these results, we propose that customers evaluate costs and benefits when redeeming a brand's coupon in a different way depending on whether they are current buyers of the brand. Additionally, we identify that some brands with higher redemption rates are not necessarily the same ones that lead to purchase acceleration and therefore drive incremental sales.