Analyzing Incremental Sales from a Direct Mail Coupon Promotion

Several authors have noted that the profitability of a coupon promotion depends on the incremental sales generated by the coupon. However, most prior research on coupon promotions has focused on redemption rates and little is known about the characteristics of households that make incremental purchases. The authors develop and test several hypotheses about the characteristics of households that make incremental purchases in response to a direct mail coupon promotion. For the product tested, coupons produced greater incremental sales among households that were larger, more educated, and were homeowners. The findings suggest that directing coupons to the most responsive market segments can increase profits significantly.