Donut Holes: Dollars Off vs. Percent Off

Donut Holes

Welcome back!  Today we’ll cover how to make sure you get the most out of “pick your sale item” (20% off one item) and “dollars off with minimum purchase required” coupons.

Bed Bath and Beyond seems is always sending something to our family. It seems that on alternating weeks they drop a bunch of “20% off one item” coupons into the mail, and about once a month they route a nice seasonal ad with a “$5 off” coupon on the back. The fine print on both of them isn’t too bad either…

The 20% off one item coupons typically only exclude name-brand candles (such as Yankee Hill) and other fixed-markup MAP (Minimum Advertised Price) items.  The $5 off coupon requires that you basket adds up to $15 or more (pre-tax) at checkout to activate.

Unfortunately, whichever one you used last time you checked out may not have been the one that netted you the best possible deal.  So which is better?  Well, the other one.  No I’m not jerking your chain – it depends on how much your checkout total comes to.  Each coupon has a different sweet spot.

The good news is that, at least with Bed, Bath, and Beyond, the sweet spots happen to overlap.  If we enter the store with a plan, our Dealicacy lies in this “donut hole.”

First things first, you are best off (in most cases with % off and $ off) if you can get by purchasing only one item.  Unless you happen to find a handful of 99-cent items to complement your purchase, every item additional to the one you are initially after will likely take you past the ideal price range of your coupon.

For example, Dick’s Sporting Goods frequently sends out percent/dollars off coupons with a minimum purchase of $50 (“take $10 of $50 purchase”). Once you get there, you quickly notice that all of the shirts you are after are $35 each. To be able to use the coupon, many will grab the extra item and unwittingly take a 20% discount down to a shadow of its former self.  In this case, a $10 off of $50 moves to $10 off of $70 purchase (buying two $35 shirts), knocking the actual discount down to 15%… and its a slippery slope from there the more you add to your basket.  In essence, the further past the minimum price needed to activate the coupon, the less of a deal you get.

With this in mind, let’s look at the optimal price ranges of the following Bed, Bath, and Beyond coupons mentioned:

$5 off $15 purchase:  Since this one activates at $15, the low price point is $15. This equates to 33% if you can find something priced between $14.99 and $15.01.  Not too easy, but doable.

The upper end of utility for this coupon is approximately a 5% discount.  Here’s why it doesn’t go all the way to 0%: Would you be tripping over yourself to save less than $5 to get a $100 interior design accessory and/or kitchen gadget? Looking at the graph below helps us to visualize that the higher the spend on this coupon, the less of a deal you receive:

$5 off $15

Value of a $5 off $15 Coupon As You Spend More

20% off one item:  This one’s entry point is effectively 4 cents, but I doubt you will find anything priced that low (not to mention that retailers aren’t interested in rounding pennies or stocking items for free).  20% off is 20% off no matter what the price, so the sky is the upper limit here.  Here’s the visual:

20% Off Coupon

Value of a 20% Coupon As You Spend More

What is notable about Bed, Bath, and Beyond’s coupon cycle is the “donut hole” created by issuing both the $5 off $15 and 20% off one item coupons at the same time. Many people don’t realize this and leave money on the table.  The 20% off coupons are bigger, arrive in the mail more frequently, are easier to spot in a stack of coupons, and easier to access (you don’t have to cut them out from a catalog).  The $5 off $15 coupons arrive “hidden” in the back page of a seasonal catalogs, are smaller, and require the extra effort of cutting them out.

Would you knowingly forego extra savings?  Would you feel good getting home knowing you could have saved up to 13% more than your 20% off coupon?   Look at the overlap of the two graphs and see how to maximize our shopping dollars:

Donut Hole Between $15 and $25

A "Donut Hole" Exists Between $15 and $25

So again, which is the better coupon?  Both. Either. It simply depends on which one item you are looking to buy, and knowing where the sweet spots exist.  In the case of Bed, Bath, and Beyond, use your $5 off $15 purchase only on items falling in the $15-$25 range. Otherwise, use the 20% off one item coupon. Just be sure to read the fine print so you don’t walk out empty handed!

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15 Responses to “Donut Holes: Dollars Off vs. Percent Off”

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