Solving The Mystery Of Coupon CodesContact: Michele Snipe
Contact: Michele Snipe
Solving The Mystery Of Coupon Codes
NEW YORK — Richard L. Oliver, Ph.D., admits to being a dinosaur when it comes to computers. That’s why he became frustrated when prompted for a coupon code during an online purchase. Without the code, he couldn’t get the discounted price. So, he decided to investigate the “mystery” of coupon codes.
He shared his findings in a paper titled “Digital Redemption of Coupons: Consumer Perceptions of Satisfying and Dissatisfying Price Discrimination,” which he presented at the fifth annual Fordham Business Pricing Conference on Sept. 27 and 28.
Oliver, a professor at Vanderbilt University, was one of more than 30 pricing researchers from around the country who presented papers about Internet pricing, price differentials and perceived fairness, and pricing strategies. Fordham Business also presented awards for the best dissertation proposals on behavioral pricing to Sucharita Chandran of New York University and M. Omar Shehryar of the University of Missouri-Columbia.
“Pricing is the most important facet to profitability,” said Sarah Maxwell, Ph.D., assistant marketing professor and co-director of Fordham’s Pricing Center. “This is the only conference that explores the behavioral aspects of pricing—how people look at price, interpret price and interpret fairness.”
Oliver told the 75-plus audience convened in the 12th-floor lounge of the Leon Lowenstein Building that internet shoppers who cannot find a coupon code, also referred to as a promotional or offer code, are likely to abandon their virtual shopping carts and buy elsewhere. The probability of making a purchase was 76 percent when shoppers had a coupon and only 19 percent when they did not.
“A lot of online stores are unwittingly turning away customers by using [coupon] codes when the idea of the code is to draw customers,” he said.
Another researcher, Kent B. Monroe of the University of Illinois examined how consumers respond to different price promotions such as in-store discounts, coupons and rebates. His research found that people do not view rebates as positively as they do coupons and in-store discounts.
“People see rebates as being associated with low quality,” he said. “They perceive rebates with products that are not selling well.”
Monroe, who co-authored his paper with Lan Xia, a doctoral student at the University of Illinois, also found that consumers who do not intend to buy a particular product but find it on sale respond more positively to products advertised as “20 percent off” rather than “one dollar off.”
Maxwell’s study, “Power Tempered by Social Concern in Price Negotiations,” offered a more theoretical approach to pricing. She and her co-authors, Pete Nye, Ph.D., of the University of Washington and Nicholas Maxwell, Ph.D., of Maxwell Statistics in Washington, found that collectivists—those who exercise more social concern in price negotiations—are more likely to make concessions when striking a deal than individualists—those who intentions are more self-serving.
Price negotiations are generally considered a win-lose situation—where one person strives to maximize his gain at the other’s expense.
However, Maxwell found that collectivists make more generous offers than individualists and will therefore negotiate a fairer price even if they have more power over the purchase, she said. For instance, a collectivist with the option of buying a car from among several sellers would offer a higher price than an individualist and would not exercise his power by threatening to take his business elsewhere if his demands are not met.
The conference was sponsored by the Fordham Pricing Center, under the direction of Maxwell and co-director Hooman Estelami. The Fordham University Pricing Center is a research institution dedicated to developing a better understanding of prices and pricing, from both academic and managerial perspectives. The Pricing Center conducts academic research and sponsors research and practitioner seminars, and also acts as an advocate for pricing education in business school curricula.
Founded in 1841, Fordham is New York City’s Jesuit University. It has residential campuses in the north Bronx, Manhattan and Tarrytown, and the Louis Calder Center Biological Field Station in Armonk, N.Y.