A market response model for coupon promotions

An econometric market response model for measuring the effect of coupon promotions upon market share is developed and estimated. In addition to the brand’s own couponing efforts, the model takes into account retailer promotions for the brand as well as competitive couponing activity. The model is multi-equation, simultaneous, and is estimated using scanner panel data. Results indicate that coupons have a pronounced effect upon market share, although the effect varies from brand to brand and may not be strong enough for some brands for couponing to be profitable in the short term.