Among the various forms of consumer promotions used by consumer packaged goods manufacturers, coupons continue to play a dominant role. NCH marketing services reports that coupon distribution by manufacturers is on the rise. In the year 2002 manufacturers of grocery products issued more than 248 billion coupons, of which 3.8 billion were redeemed by consumers. As manufacturers and researchers have sought to enhance the effectiveness of coupon promotions, they have focused considerably on the identification of “coupon prone” consumers. The objective of this study is to propose a new approach for estimating consumers’ coupon proneness that allows marketers to predict response to coupons with considerable accuracy, and to analyze the correlates of coupon proneness in order to better understand why some individuals and some categories are more responsive to coupons than others.

Traditionally, researchers have treated coupon proneness, or desire to use coupons, as a consumer characteristic that is invariant across product categories. That is, it has been assumed that households who are coupon prone in one product class are coupon prone in other product classes as well. Observation of coupon redemption rates, however, indicates that there is wide variation in consumers’ use of coupons from one category to another. There is now a growing recognition that consumers vary in their coupon usage across product categories and that it is important to study coupon proneness or usage at the category level. Thus the focus of this study is on the measurement of coupon proneness at the category level, a construct that is termed “category-specific propensity to redeem coupons”.

To measure this propensity to redeem coupons, the authors use an approach based on item response theory (IRT). This approach allows the propensity to redeem coupons to be measured independently of coupon attractiveness. This is necessary because an individual’s coupon usage behavior depends both on his or her inherent coupon proneness (i.e., the desire to use coupons) and on the attractiveness of the coupons encountered. Consequently, ignoring coupon attractiveness could yield an inaccurate measure of coupon proneness. For example, a consumer might have the desire to use coupons but fails to find coupons for his favorite brand. This would lead to his being incorrectly classified as non-coupon prone. A principal advantage of the proposed IRT-based approach is that it allows the effect of coupon attractiveness to be factored in explicitly in the measurement of coupon proneness.

The authors apply the IRT-based approach to data obtained from a survey of 345 consumers. The survey measures redemption intentions for a set of coupons in each of two product categories (coffee and detergent) and two service categories (beauty salon and oil change for the car). Estimates of the propensity to redeem coupons are obtained for each consumer in each of these four categories. These estimates are analyzed to investigate how propensity to redeem coupons is related to various individual and category-related factors.

The results of the empirical analysis point to the advantages of studying coupon proneness at the category level as compared to using a more traditional, generalized measure of coupon proneness. These advantages are demonstrated in several ways. First, category-specific measures of propensity to redeem coupons are shown to achieve an accuracy of 89% in predicting redemption intentions. This implies that by using the proposed approach marketers can better forecast the impact coupons are likely to have in their particular category rather than relying on a general coupon proneness measure to predict coupon redemption rates at the category level.

Second, the propensity to redeem coupons is shown to be correlated across categories. Interestingly, the extent of the correlation depends on the nature of the categories, with correlation being higher within products and within services, and lower between products and services. This finding has important implications for managers planning joint couponing  trategies. For example, the cross-category correlation in propensity to redeem coupons in this study was found to be higher between the coffee and detergent categories than between either product and a service. This implies, other things being equal, that promoting detergent and coffee together in a joint couponing strategy would be more effective than promoting either product jointly with a service. By conducting similar analyses of consumers’ propensity to redeem coupons in additional categories, managers can identify sets of products and services that would be most effective in joint couponing strategies.

Third, variables such as brand loyalty and perceived coupon availability in a category are shown to be systematically related to propensity to redeem coupons in the category. Individuals are more likely to redeem coupons in a category if they are more brand loyal in that category or perceive coupon availability to be higher in that category. Individual traits such as value consciousness and price consciousness are also found to be positively related to category-specific coupon proneness. These findings can be used to identify categories and consumer segments where coupon promotions are likely to have a larger impact.

In general, this research suggests that focusing on category-level coupon proneness can yield important new insights into consumer response to promotion as well as better forecasts of redemption behavior. The IRT-based approach used in this study has considerable promise as a methodology for studying coupon usage. As more data is gathered in future and estimates of propensity to redeem coupons obtained for additional categories, marketers will be able to further increase the effectiveness of their coupon promotions by targeting consumers who are most likely to respond and promoting in categories where this response will be maximized.