Marginal Redemntfon
(1,000 coupons)
Distribution
(million coupons)
FIGURE 1. Marginal Rate of Redemption of
Price by Media
— Magazine coupons
Newspaper coupons
"Γ....... I' ' I I I I 1I '"Price (%∕24 oz.)
20 25 30 35 40 45 50
FIGURE 2. Relationship Between Coupon Ef-
fort and Juice Price
Figure 1 illustrates the marginal rate of re-
demption (equation (8)) assuming a distribution
of 14.8 million 12-cent7 coupons and with re-
demption levels computed at price levels and at
the end of the fourth year (T=48).
As shown in Figure 1, price has the most sig-
nificant effect on the redemption of newspaper
coupons. For example, a one-cent increase in
juice price from 33 cents per 24 ounces of orange
juice to 34 cents would reduce newspaper cou-
pon redemption by 28,325 coupons (based on a
distribution of 14.8 million 12-cent coupons),
while the same price change would reduce maga-
zine coupon redemption by only 6,029 coupons
and direct mail coupon redemption by 20,695
coupons. This negative marginal effect of price
on the level of redemption decreases as price
rises.
Figure 2 shows the couponing efforts required
to have 400,000 coupons redeemed within 12
months at different price levels. The results indi-
cate that (1) in order to have the same level
(400,000 coupons) of redemption within a given
time period, 10-cent coupons require larger dis-
tribution than 15-cent coupons. (2) At Iowerjuice
price levels, newspaper coupons have a higher
redemption rate than magazine coupons. How-
ever, with higher juice prices, magazine coupons
are more effective than newspaper coupons. (3)
Juice price has little effect on the level of re-
demption of direct mail coupons but has a signifi-
cant effect on the redemption of newspaper cou-
pons.8 Figure 2 also shows that at a juice price of
35 cents per 24 ounces using newspaper as the
method of distribution, 24.6 million 10-cent
coupons or 12.7 million 15-cent coupons are re-
quired to have 400,000 coupons redeemed in 12
months.
Figure 3 illustrates the time required to have
400,000 coupons redeemed with a distribution of
20 million coupons at different price levels. The
results are similar to those shown in Figure 2,
i.e., (1) at lower price levels, newspaper coupons
require less time to have 400,000 coupons re-
deemed than magazine coupons, however, at
higher prices, magazine coupons require less
time to reach 2 percent redemption (400,000
coupons) than newspaper coupons; (2) 10-cent
coupons were redeemed at a slower pace than
15-cent coupons, and this difference is especially
evident for newspaper coupons; and (3) juice
price has little effect on the redemption speed of
direct mail coupons.9
CONCLUDING REMARKS
The empirical section verifies what this study
postulates—that parameter estimates are difl⅛r-
FIGURE 3. Relationship Between Juice Price
and the Age of Program
7 The overall average face value of FDOC coupons.
8 Because of the high redemption rate of direct mail coupons and the low redemption used in this example, the price effect is not evident for direct mail coupons.
9 Because of the high redemption rate of direct mail coupons and the low redemption level used in this example, the time orage effect is not evident for direct mail coupons.
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