The effects of coupon redemption on customer lifetime value and spillovers

With the growing availability of customer data, manufacturers and retailers increasingly collaborate on targeted promotions. Although such promotions are typically designed to boost short-term sales, they may also affect customer lifetime value (CLV), a forward-looking metric of customer profitability that balances the costs and benefits from acquisition through retention. However, the question remains whether such promotions can deter churn and increase post-promotion CLV in noncontractual settings, where cannibalization and switching behaviors are more prevalent than in contractual contexts. Thus, we conducted a randomized field experiment involving nearly 130,000 customers in Japan to investigate the heterogeneous effects of coupon redemption. Using the interacted two-stage least squares model, we find that coupon redemption decreases the probability of churn by approximately 10 percentage points and increases the promoted product's CLV by more than 30%. While such uplift effects attenuate as pre-intervention CLV (pre-CLV) rises, our marginal treatment effects suggest that customers with high pre-CLV still generate positive gains in CLV outcomes. Additionally, our estimates show that manufacturer-level CLV is more likely to increase, whereas retailer-level CLV exhibits smaller or no gains. These findings indicate that coupon programs, which typically involve collaborations between manufacturers and retailers, may not necessarily benefit both parties equally in terms of CLV. • Coupons increase customer lifetime value as a long-term profitability measure. • The uplift effects of coupon redemption attenuate among customers with intense pre-intervention transaction history. • Randomized coupon assignment was employed as an IV to address selection bias from low coupon redemption rates. • Manufacturers are more likely to enjoy uplift in their brand-level CLV than retailers in their category-level CLV.