Coupon value : a signal for price?

In this paper we argue that consumers use the value of a coupon as a source of information to estimate the regular price level. Study 1 demonstrates that the higher the percentage discount on a coupon (20% vs. 10%), the higher the estimated regular price. Study 2 demonstrates the same effect for cents off coupons using a cross-section of 152 coupons with values ranging from 15c̸ to $2. Brands offering higher value coupons are estimated to be higher priced. Both studies also show that the mere presence of a price promotion leads to higher price expectations. We then demonstrate that the use of coupon value as a source of information in making judgments of regular price is contingent on whether consumers have alternate sources of information available to them while making price judgments. Studies 3-5 examine how the presence of alternate brand or context-related price cues moderates this effects. Study 3 demonstrates that when consumers know past prices, the higher the coupon value, the lower the price expectation; but this is not so when consumers are not aware of past prices. Study 4 shows the same pattern of results using different operationalizations of alternate price information: prices of non-promoted lines of the same brand, and brand name. Finally, Study 5 demonstrates that the use of coupon value as a signal for price is inversely related to the availability and diagnosticity of competitive prices for making a price decision. The results are discussed in terms of the informational effects of price promotions. Managerial implications for the communication of coupon related promotions for new product introductions are discussed