Coupon Redemption and the Demand for Frozen Concentrated Orange Juice: A Switching Regression Analysis

A switching regression model was estimated and used to study the impact of Florida Department ofCitrus coupon promotionai programs on the demand for frozen concentrated orange juice. The empirical results how that discounts and information provided by coupons were effective in increasing the demand for FCOJ, and that the FDOC's coupon programs had positive impacts on the probability of using coupons for purchasing FCOJ. Moreover, different types of coupon promotions had different impacts, and coupon users and nonusers demonstrated different degrees ofresponse to price changes. Key words: coupon redemption, demand, orangejuice, switching regression. In recent years, product promotion and adver-tising related to cents-off coupons has grown dramatically. Coupons distributed by man-ufacturers rose from 16 billion in 1970 to a level of slightly over 100 billion in 1981, with the most rapid growth occurring after 1974 when the number of coupons rose at an annual rate of 20%. Coupons have become more popular not only with manufacturers but with consumers also. In 1973, 58 % of households used coupons, while in 1975 and 1980, 65% and 76%, respectively, used coupons (A. C. Nielsen Co. 1983). Coupons offer a price reduction directly to the consumer. There is no need to rely on an intermediary to pass the savings along. Fur-thermore, since coupons can be directed to specific areas, the manufacturer can reduce the price where a problem exists. In addition, the manufacturer does not have to change the basic price, since the concession is for a tem-porary period