Price-Reducing Coupons Have a Dual Effect on Fruit and Vegetable Purchases
Americans’ consumption of fruit and vegetables remains below levels recommended by the Dietary Guidelines for Americans. High relative prices are often cited as a deterrent to increased consumption, particularly among low-income Americans, and policies to decrease prices have been proposed as a solution. A recent ERS study examined the use of price-reducing coupons to encourage produce consumption. The study found that coupon effectiveness depends on the amount of the discount and the percent of households that redeem the coupons.
Existing studies show that coupons influence consumer behavior in two ways—through a price discount effect and an informational, or advertising, effect. Because of this dual effect, using coupons to increase fruit and vegetable purchases may be more effective than a general price discount or a noncoupon promotion.
ERS researchers used Nielsen Homescan data on household purchases and coupon use to estimate the effect of a coupon that reduces fruit and vegetable prices by 10 percent at three possible use rates: 10, 30, and 50 percent. A coupon use rate is defined as the share of fruit and vegetable purchases made by households using a coupon in a given time period. Assuming that 10 percent of produce purchases are made with a coupon, the study shows that lowering prices by 10 percent with a coupon would increase average weekly quantities purchased by 2 percent for fruit and 2.1 percent for vegetables.
A 30-percent use rate simulation shows a larger effect—6.1 percent for fruit and 6.7 percent for vegetables, while at a 50-percent use rate, fruit purchases would rise 10.3 percent and vegetables, 11.2 percent. However, even a 10-percent increase in fruit and vegetable purchases would boost consumption to only about 65 percent of the recommended five or more servings a day, up from the current 59 percent.
In all three use scenarios, the majority of increased purchases due to the coupons came from the informational effect—people purchased more fruit and vegetables because the coupon increases awareness of the price discount being offered. For example, of the 6.1-percent increase in purchases of fruit at the 30-percent use rate, 5.2 percentage points are due to the informational effect.
The ERS study also shows that a general 10-percent reduction in fruit and vegetable prices for all consumers, without a coupon advertising the lower prices, likely would increase fruit purchases by 6.2 percent and vegetable purchases by 5.7 percent. The effect of a general price reduction is therefore smaller than the coupon effect when the coupon use rate is above 30 percent.
The success of any policy introducing price-reducing coupons to raise fruit and vegetable consumption by low-income Americans would depend on how much of a discount is offered, how the coupons are distributed, and how easy they are to use. For example, a paper coupon given to Supplemental Nutrition Assistance Program (formerly the Food Stamp Program) participants may have a larger informational effect, but a lower use rate, than if the coupon were delivered electronically as part of program benefits.
|When coupon use is above 30 percent, the total effect is higher than a general price reduction|
||Effect on fruit
|Effect on vegetable
|10% price reduction
||10% price-reducing coupon
||10% price reduction
||10% price- reducing coupon
|10% use rate
||30% use rate
||50% use rate
||10% use rate
||30% use rate
||50% use rate
|Source: USDA, Economic Research Service, using 2004 Nielsen Homescan data.
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