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Given that coupons are one of the most popular promotional tools, this paper aims to investigate how intention to redeem the coupon is affected by the face value of the coupon for most common grocery items.

Data were collected using a self‐administered questionnaire from a convenience sample of students and non‐students (total sample size 425) at a south‐western metropolitan university campus town.

The results suggest that, for low face values of coupon, intention to redeem is positively associated with face value, whereas, for the higher face values of the coupon, the intention remains more or less unchanged. The correlation between intention to redeem the coupon and the perceived sticker price of the product is positive at the lower levels of coupon face value, but becomes negative for higher face values.

One major limitation is the narrow choice of grocery products. Moreover, this study explored intention to redeem a coupon but does not consider the actual purchase behavior. Future studies might test whether the results extrapolate to other products.

The findings are critical for the manager who may be cautioned against indiscriminate issuance of coupons. Specifically, keeping in mind the possible negative effects of a coupon, the manager might contemplate introducing customer segment‐specific coupons. The findings also suggest that coupons may be used for repositioning.

This research partially fills a void about lack of research on coupons from a price perspective. Negative effects of a coupon explained in terms of both marketing and economic theory may be appealing across different disciplines.