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.