Is couponing an effective promotional strategy? An examination of the Procter & Gamble zero-coupon test

Coupons have been a promotional strategy for more than 100 years. Today, it is estimated that 3000 manufacturers print 310 billion coupons. While coupons are believed to be effective in enticing consumers to try and to continue to buy a product, fewer than 2% of distributed coupons are redeemed, leading manufacturers and retailers to question how effective couponing really is in today's market-place. In response to this decline in redemption, packaged goods giant Procter & Gamble experimented with eliminating coupons in test markets during 1996. Are coupons still an effective promotional device? That is what this paper will discuss, while attempting to explain the strategy behind the zero-coupon test and examining the lessons learned.