Short- or long-duration coupons: The effect of the expiration date on the profitability of coupon promotions

United States firms collectively spend over $6.5 billion annually on coupon promotions and are becoming increasingly concerned with their profitabilit y. FSI (free-standing-insert) data show that coupon duration varies across brands. In this paper, we show how coupon duration can affect coupon profit ability. We also provide answers for some empirical observations on coupon duration. We explain, for example, why (i) coupon duration will vary across firms, such that large market share firms will give short-duration coupons and small market share firms will give long-duration coupons; (ii) longer coupon duration for one brand will increase redemption for coupons of that brand and of a competing brand; (iii) coupon duration will affect coupon pr ofitability.