Discount Coupons and Transaction Utility in Behavioral Economics

Why Are We Enthralled by Coupons, and How Do Companies Open Our Wallets?

1. Basic Concepts of Behavioral Economics

Bounded Rationality Traditional economics assumes consumers perfectly understand all information and make optimal decisions. However, in reality, we have limitations in information and cognitive ability. Nobel laureate Herbert Simon explained this human limitation with the concept of ‘bounded rationality.’ Instead of analyzing every option perfectly, we tend to make ‘satisfactory’ choices within the constraints of time and cognitive capacity.

Our tendency to rely on experience or intuition and settle for “this is good enough” rather than finding the optimal solution in complex shopping situations is clear evidence of this.

Framing Effect Even the same fact can lead to completely different choices depending on how it is presented. This is called the ‘framing effect.’ When information is presented in a positive frame, people are more likely to reach positive conclusions; when framed negatively, negative conclusions are more likely. This cognitive bias affects our decisions.

For example, if a doctor says a surgery has a “90% survival rate,” patients feel reassured, but if the same is expressed as a “10% mortality rate,” anxiety increases. In marketing, consumer reactions vary greatly depending on how offers are presented, such as “free shipping” versus “shipping fee added,” or “10% discount” versus “5,000 won discount.” We are influenced more by the way information is expressed than by objective analysis.

Loss Aversion One of the core concepts in behavioral economics is that people feel the pain of losses much more intensely than the pleasure of gains of the same size. In other words, the psychological pain of “losing 10,000 won” is about twice as strong as the joy of “gaining 10,000 won.”

Because of this ’loss aversion,’ we are extremely reluctant to risk losses and tend to maintain the current state. This is why if we receive a discount coupon but do not use it, it feels like missing out on an immediate gain. The thought “If I don’t use this, it’s a loss…” leads us to buy things we don’t really need. This psychology stems directly from loss aversion.

2. Psychological Effects of Discount Coupons on Purchase Decisions

Discount coupons are more than just a price reduction tool; they have a powerful influence that moves our minds to decide to buy.

First, coupons change our perception of price. When we get a discount, not only does the actual spending decrease, but we also gain psychological satisfaction from “saving money.” For example, if you use a 2,000 won coupon on a 10,000 won product, you pay 8,000 won but focus more on the pleasure of “saving 2,000 won” than the fact you spent 8,000 won. Coupons raise the reference price (original price) and lower the actual payment, making us feel like very smart consumers.

Second, coupons evoke positive emotions. Studies show that people who receive coupons have increased oxytocin levels (the happiness hormone) and decreased stress indicators. Their heart rates stabilize, and they experience physical comfort and happiness. The saying “discount coupons make people happy” has scientific backing.

Third, coupons disturb our judgment criteria. When we see “Regular price 50,000 won → Discount price 30,000 won” at a supermarket, we focus more on the discount amount “Wow, 20,000 won off!” than the absolute price of 30,000 won. The original price acts as an anchor that pulls our judgment toward it. Adding an expiration date creates pressure of “If I don’t buy now, I lose out.” Loss aversion triggers the feeling that not using the coupon is like losing 50,000 won, pushing us to hit the purchase button.

3. The Concept of Transaction Utility and Its Application in Actual Consumption

‘Transaction Utility’ is a concept introduced by behavioral economist Richard Thaler. Simply put, it is the psychological satisfaction of “how much I feel I gained from this transaction.” Separate from the value derived from the product itself (acquisition utility), transaction utility is the feeling of “I got a good deal” or “I was overcharged.”

For example, if you buy a 20,000 won chicken at a baseball stadium for 30,000 won, regardless of the taste, you feel displeased thinking “I paid 10,000 won more.” This is negative transaction utility. Conversely, if you buy the same chicken at a supermarket sale for 15,000 won, you feel proud thinking “I saved 5,000 won!” This is positive transaction utility. Transaction utility is like a psychological bonus or penalty attached to the price you paid.

Companies exploit this. By showing a high original price like “Regular price 100,000 won → Discount price 49,900 won,” they raise our reference price and maximize transaction utility through a large discount. We are more attracted to the fact “I got over 50% off” than the price itself and open our wallets. Discount coupons are the most effective catalysts for increasing transaction utility.

4. Summary of Experimental Cases and Research Findings

Differences in Coupon Provision: The ‘Rule of 100’ Looking at platforms like Coupang that operate both instant discounts and downloadable coupons, instant discounts effectively increase purchase conversion rates for all customers, while downloadable coupons provide satisfaction from directly receiving benefits, increasing loyalty.

Also, according to the marketing ‘Rule of 100,’ for products under 100,000 won, consumers perceive discounts better when expressed as a percentage (%), while for products over 100,000 won, expressing discounts as an amount (won) feels more beneficial. For example, a 20,000 won T-shirt feels more discounted as ‘20% off’ than ‘4,000 won off,’ whereas a 1,000,000 won TV feels more discounted as ‘200,000 won off’ than ‘20% off.’

The Magic of ‘Free’ There is a famous experiment by Professor Dan Ariely. When premium chocolates were sold for 15 cents and regular chocolates for 1 cent, most chose premium chocolates. But when prices were lowered by 1 cent each, making premium chocolates 14 cents and regular chocolates free, the result reversed: most chose the free regular chocolates.

This experiment shows the irrational and powerful attraction of the word ‘free.’ This explains why we are especially drawn to ‘Buy One Get One’ or ‘free shipping’ offers. Missing out on free benefits is perceived as a major loss.

Coupons and Impulse Buying Coupons also encourage unplanned purchases. According to a survey, two out of three consumers reported making impulse purchases because of coupons. Many have experienced buying unnecessary items to get free shipping or filling their cart just to use a coupon. This happens because people rationalize that money saved with coupons can be spent on other products or buy more to meet discount conditions. Paradoxically, coupons can increase total spending.

5. Coupon Strategy Cases of Starbucks and E-commerce Platforms

Starbucks Starbucks, maintaining a premium image, actively uses coupon strategies. The ‘My Starbucks Rewards’ program, which awards free drink coupons for stars earned, is a prime example. Recently, they introduced coupon packs offering discounts during specific hours for a monthly subscription fee and held ‘Happy Monday’ events with half-price discounts on certain weekday afternoons. These strategies encourage visits during slow hours, improve store efficiency, and provide customers with transaction utility by offering “a chance to drink cheaply,” boosting sales.

Coupang Coupang, the top domestic e-commerce platform, is famous for its constant discount coupons. It operates both ‘instant discount coupons’ applied directly to product prices and ‘downloadable coupons’ customers can claim. Especially for paid membership ‘Wow Members,’ additional exclusive coupons are offered to provide special benefits. Coupang also uses data-driven personalized coupon strategies, such as showing discount coupons to customers who hesitate to check out items in their cart to encourage purchases.

Gmarket/Auction & Naver Shopping Gmarket and Auction, familiarizing us with terms like ‘15% discount coupon’ and ‘20% overlapping coupon,’ use aggressive coupon campaigns during large sales events to generate explosive short-term sales. Meanwhile, Naver Shopping provides indirect discounts through Naver Pay point accumulation but encourages sellers to issue ‘store favorite coupons’ or ‘Naver traffic exclusive coupons,’ fostering coupon competition.

6. Interaction Between Consumer Behavior Changes and Corporate Strategies

Consumers Conditioned by Coupons Repeated coupon experiences make us addicted to ‘discounts.’ We hesitate to buy at full price thinking, “There will be a sale someday.” In 2012, the US department store JC Penney eliminated coupons and adopted an ’everyday low price’ policy but suffered a major failure. Customers abandoned the store when the joy of discounts disappeared, forcing JC Penney to reinstate coupons quickly. This case shows how hard it is to reverse consumers conditioned by coupons.

Strategic Corporate Responses and Consumer Learning Companies know this risk but cannot give up coupons. Instead, they refine strategies by segmenting customers and offering customized coupons—‘welcome coupons’ for new customers and ‘return coupons’ for those at risk of leaving. Consumers also learn: they become immune to ‘bait coupons,’ find ways to stack multiple coupons, or wait for big sales, becoming increasingly savvy.

In conclusion, the relationship between consumers and companies around discount coupons and transaction utility is a continuous push and pull. Companies use behavioral economics to exploit our irrational tendencies and induce purchases, while consumers become familiar with these strategies and sometimes follow them without resistance.

The important point is that consumers need the wisdom to understand these psychological mechanisms and use coupons wisely. Companies also require balanced strategies that consider long-term brand value and customer trust over short-term sales boosts. Ultimately, coupons produce the most sustainable effects when used in a healthy relationship where both consumers and companies benefit.