One of the common forms of consumer promotion is couponing, and this accounts 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. 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. The proposed model is further modified to measure the impact of double couponing on brand sales and coupon elasticity. Moreover, both the self-coupon elasticity and cross coupon elasticity are shown to decrease over the life of the coupon within a store. 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, 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.

The ideas presented in this research help both the manufacturers and retailers in several ways:

1. The findings help retailers to effectively manage their inventory based on the relative effectiveness of a coupon drop over time.
2. The manufacturers typically issue coupons at the national level/market level and this study allows them to evaluate the effect of coupons at different levels of aggregation (at the store level, at the chain level, at the market level, on a weekly basis from the time the coupon is dropped and over the entire life of the coupon). Further, the retailer also can assess the effectiveness of a coupon at the chain level/store level and decide whether to double or triple the face value of the coupon or not.
3. The framework offered in this study will help retailers and manufacturers link elasticity to optimal couponing strategy (deciding on the optimal face value and duration), by integrating with profit data.

Finally, suggestions for further research and the limitations of the framework are provided.