The “Dollar Off” Dilemma: Maximizing The Value Of A Coupon

A reader wrote in with this quite interesting situation:

Last week I had a good shopping experience when buying cat food, but I’m still a little uncertain as to whether or not I maximized the possibilities. I got a coupon in the mail for $5 off a bag of a particular high-end brand of cat food. (I prefer to good brands that the vet recommends because I adore my cats and want them to be healthy, so I shell out for the more expensive stuff.) When I got to the store, I saw that there was a range of bag sizes. Normally, I always buy the biggest bag because that gives me the best unit price. But my choices were these:

4# for 7.99 ($2.00/#)
8# for 14.99 ($1.87/#)
20# for 26.99 ($1.35/#)

I suddenly wasn’t sure what the best thing to do was. If I applied the $5 coupon to the smallest bag, the unit price went down to 75 cents per pound, but I’d only go home with 4 pounds of kibble. If I got the biggest bag, I’d pay a higher unit price ($1.10/#), but I’d be applying my discount to a larger amount of catfood. I ended up getting the big bag, just because I figured it was a good savings and I could make it longer without running to the petfood store again.

But the question nags at me. Would buying the smaller bag and getting the best unit price have been the more frugal option? What do you think?

Any time you think of using a coupon, ask yourself would I be buying this item without the coupon? That is the key question in any purchasing decision.

If the answer is no, then the decision is easy – use the coupon on whichever version of the item becomes cheapest per unit. In this case, you would buy the smallest bag because, after the coupon, it’s the cheapest per unit. Then, with future purchases, you should go back to buying your regular brand.

However, if the answer is yes and you do buy the item regularly, the answer can completely change.

First of all, is this coupon one you can acquire with some regularity? Usually it isn’t, but for some items (Pampers diapers, for example), it’s trivially easy to get a never-ending series of $2 coupons. In that event, you should always use that coupon on whichever version is the cheapest per unit after the coupon because you can just keep repeating that purchase over and over again with your supply of coupons. For our diapers, we wound up finding that most of the time, we were actually better off applying the coupon to the medium-sized package of diapers, so we kept buying that package.

If this is a special one-time coupon, though, you need to step back and look at the wider picture. I recommend estimating how much of the item you’d buy over a long period – say, six months. Let’s say you would buy 40 pounds of this food over the next six months. That would come in some combination of 4 pound bags ($7.99), 8 pound bags ($14.99), and 20 pound bags ($26.99).

If you use it on the four pound bag, you reduce the price of four pounds of the food to $0.75 a pound, but then the rest of the food costs $1.35 a pound, giving you an average cost of $1.29 a pound or a total cost of $51.60 for six months of food. Not bad.

If you use it on the eight pound bag, you reduce the price of eight pounds of the food to $1.24 a pound, but then the rest of the food costs $1.35 a pound, giving you an average cost of $1.33 a pound or a total cost of $53.20 for six months of food. This is an atrociously bad deal.

If you use it on the twenty pound bag, you reduce the price of twenty pounds of the food to $1.10 a pound, but then the rest of the food costs $1.35 a pound, giving you an average cost of $1.22 a pound or a total cost of $49.00 for six months of food. This is the best deal.

If you’re bothered by the math, here’s a rule of thumb: if you use an item regularly and the coupon is a one-time deal, then use the coupon on the item that’s the best deal normally – usually the bulk one. If you don’t use it regularly or you can keep getting coupons, use the coupon on the item that’s the cheapest after the coupon – usually the tiniest package, but not always.

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22 thoughts on “The “Dollar Off” Dilemma: Maximizing The Value Of A Coupon

  1. Jon says:

    I think if the answer is “no” then the decision is even easier….don’t buy

    It makes me laugh to think of people buying something they wouldn’t ordinarily get simply because it was on sale and they couldn’t pass up a good deal

  2. Trent says:

    Jon, that’s not necessarily true. For example, I got a $3 coupon on Luvs diapers a while back. I wouldn’t normally buy them, but because of the coupon, I paid about $0.03 a diaper for the smallest bag of Luvs. I sent these diapers to daycare and then immediately went back to the Pampers.

  3. Amanda B. says:

    Trent,
    I really like your site, but this post hurt my head. I imagine it is very busy in your mind.

  4. Ben@Debthackers says:

    You also have to consider more than just the unit price.

    If you buy the smaller bag with that coupon, for the best unit price, you have to add up what it cost you to get the 20lb bag amount.

    You got a good deal on the 4lb bag, but buying 4 more of those at the regular price to get 20lbs that you could have originally used the coupon for wouldn’t be that good of a deal.

  5. Jay says:

    I found this to be a very useful article. Probably because it is short, simple and something I have not previously thought about.

  6. s says:

    Re: Jon’s comment/Trent’s response.

    The key point here is that it’s an ITEM you would normally buy, just not the brand. If a pair of shoes is a “really good deal” but you don’t need them, it’s a bad move to buy them. If an off brand of your favorite cereal (or diaper) is on sale, then buying it INSTEAD of your normal brand would be a very reasonable decision.

    Re: The post in general.

    I completely agree with the sentiment here. I’ve always been bothered with the posts that talk about coupons, because of the focus on maximizing your dollar on that particular trip. This is a much more practical way to look at things. In addition to the money spent, buying smaller packages can result in more frequent trips to the store (which cost extra in time/gas/etc).

  7. L says:

    Spending an extra 2% by picking the wrong bag is an “atrociously bad deal”? Isn’t that a horrendous overstatement? ;)

    Saving 5 dollars but losing 1.60 is not great, but it’s not the worst thing in the world either.

  8. MikeVx says:

    Much of what I buy is store brands of stuff, not much in the way of coupons there. One thing I will do with coupons is experimental purchases to see if I like an item or not. I’ll occasionally get a coupon for so much off of foodstuff X or Y or whatever. If the item is something I think I might like, I’ll use the coupon to buy an item as a test case. If I don’t like it, I’ve paid less for the testing and won’t buy any more. If I do like it, I watch for more coupons to get better deals on it when possible, but will buy it even without coupons if I like it enough.

    Most of my shopping is done on the way home from work, I’m driving within 1/4 mile or less of several major store chains just in my neighborhood anyway, so a small diversion to stock up has almost no travel cost as I’m on the road anyway.

  9. Jamie says:

    You save $5 regardless of which bag you buy. If you buy the 4 lb bag you save 1.25 per pound on 4lb of cat food. 4 x 1.25 = $5. If you would have bought the big bag you would save .25 on 20 lb.
    .25 x 20 = $5. Same savings either way!!

  10. thefrugalplace says:

    I have received the $5 cat food coupons as well. While I don’t usually buy the brand, it is great food at a really low price when you can get it free or nearly free with the coupon. Our local WalHell sells the small bag for about $7. So, I can easily get a small bag of food for only $2.

    What I do is use the excellent coupon on the smallest bag and then go back to buying my usual (cheaper) brand the next time. I mix the two together as to not hurt the kitty’s systems.

    I also disagree with the “would you buy it anyway?” because you can easily get FREE items with coupons that you might not ordinarily buy. For example the latest WalHell magazine “All You” has a coupon for free Adidas Deodorant. While I wouldn’t choose that brand, if it’s free I will! :) I will either use it or give it to one of my kids to use.

    Part of saving money with coupons is being VERY flexible on brands. IMHO

  11. Erin says:

    One caveat to the biggest bag being the best deal: if your pets won’t eat all the food before it goes stale, then you waste money on the uneaten food you have to throw out.

    We have two cats and stick to the 8 lb. bags because we worry that anything larger will be 1. hard to store, and 2. go stale before they eat it all. (Our cats also get wet food, so they don’t eat as much dry food.)

  12. Stan says:

    You would be much better off spending your money on vegetables. Think of all the spinach you’ve thrown into this cat money pit for just one meal’s worth of meat (and maybe leftovers). It takes almost a year of them eating everyday to reach ideal cooking weight. Besides, properly seasoned veggies taste better imho.

    More cost effective to eliminate the weakest links in the food chain.

  13. thefrugalplace says:

    Geez Stan, you are a cat lover we see!

  14. DrBdan says:

    Stan, you are a twisted individual :)

  15. !wanda says:

    Cats are obligatory carnivores and thus probably not as tasty. If you want to raise a pet for food (in a suburban zone that doesn’t allow farm animals), you’re better off with dog (1 billion Asians can’t be wrong) or guinea pig (that’s what they were domesticated for).

    I don’t think anyone raises a cat to save money.

  16. JvW says:

    I had the same coupon and used it on the 4lb bag of food. Unfortunately, this coupon was a one-time deal. I can find $3 off coupons pretty regularly, though and my store didn’t have any 20lb bags. I love the breakdown, I’ll have to use that next time!

  17. story says:

    There are some great tips here! One thing I want to add is to look for things that are free or almost free, even if you wouldn’t buy it.

    For example, I don’t buy packaged pasta salad or flavored rice, although I like them, because I can make them cheaper from scratch.

    Sometimes, however, there is a coupon that makes one of those items free, or less than 10 cents or so. I can’t make it cheaper than that.

    So, “would you buy it without the coupon” is really a very complicated question.

  18. Vicky says:

    If you’re spending that much time on calculating the worth of a coupon — unless you’re a math whiz — it’s probably not worth the meager pennies you save. Focus on the big stuff for accumulating wealth. I agree with Amanda that this post hurt my head.

    I’m a new reader – love your newsletter.

  19. Eric says:

    You have to have money to save money. My father-in-law has a storage building for all of his bulk items. The stuff inside of it cost $5,000 to fill up. However, with the exception of milk, bread, fruit/veggies, if he were to buy it all at small volume market prices, it would have easily cost him over $8-10,000.

  20. elizabeth says:

    I love coupons. The numbers are really cool and for the most part not too hard to figure out. We have a store near us that prints brand name competitor’s coupons. So I will buy a brand if I have a coupon, and then buy the competitions the next time.

    I buy Juicy Juice (with the veggies since I won’t eat them) with a $1.50/bottle off on-line coupon, the clerk then gives me a $2/bottle off coupon for V-8 Splash. While the name brand is usually more expensive, it isn’t usually $2 different. I will have to keep an eye on the quantity now though.

  21. Trent says:

    Hi, Trent — I am also Trent. I recently found your blog and enjoy it. I know this is an old post but there are really two problems (not the bad kind) at hand here. The second problem is relatively minor but it is a good exercise for larger purchases.

    Problem 1. The reduction in cost on any of these three bags is a flat $5.00, so no matter what you are saving $5.00 at a minimum. The simplest way to find the cheapest product is to find the unit cost relative to the *largest* unit, so the biggest bag. How many little bags make a big bag? Five. Ok, so we know the little bag is $8.00 or $40.00 for “one big bag worth out of 5 little bags”. The medium bag is $15.00 per or $37.50, and would be “one big bag worth out of 2.5 medium bags. And finally the big bag is $27.00. Subtract five dollars from each of these values as a function of the biggest bag to get your net cost, $35.00 (4 lb bags), $32.50(8#), or $22.00(20#).

    It is great to use unit costs, but sometimes its best to think about the units relative to what you normally buy rather than an arbitary amount of pounds. The reason for this is illustrated below:

    If I need a 20 pound supply of cat food for my cat, should I save a bit by buying 20 pounds up front in bulk or is my money more useful elsewhere? Twenty pounds up-front costs me $22.00 with my coupon, but I could go with the cheapest amount as a hold-over, and I found out that would cost me only $3.00 with the coupon. That means I have $19.00 left over until my four pounds of cat food runs out. Now, if you can take 19 dollars and utilize it how much do you have to make on that 19 dollars to break even (before you run out of cat food) on buying the 4 lb bag of cat food?

    The answer is pretty simple, and you find it by comparing the other way: how much would four pounds of the twenty-pound cat food cost? The answer is 27/5=$5.40. Now just subtract $5.40 from the standard cost for just 4 lbs of $8. You are losing $2.60 every time you purchase 4 lbs instead of 20 lbs, but you are gaining the opportunity to have 19 dollars available to you for the amount of time that 4 lbs lasts (This follows exactly the same financial mechanics as a loan, but backwards).

    The simplest way to put this for cat food and most supplies is that the bigger you buy, the cheaper it gets. The savings will hold no matter what the coupon is for. If you don’t have a good emergency fund in place, you might have to buy the 4 lbs of cat food to pay your phone bill some month.

    But know that it costs you $2.60 *per 4 lb bag you buy* regardless of your coupon savings, no matter what.

  22. Terry says:

    I have to disagree with the would you buy it anyway. Recently on of the stores in my area doubled coupons up to and including $1 just for one week. Using some coupons for brands I normally don’t buy because of the price I was able to get it for free or less than 25 cents making it cheaper than the generics or store brands

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