I bought some art supplies for $65 and found that a portion of them are defective. I was given a credit of $20. Later, I found that the remaining part of them are also defective. The retailer is offering me a 10% off coupon on a future purchase. Should I accept the coupon or should I try for another credit?
Answer
In all likelihood, unless there is a very large purchase you'd like to make, the credit will be better than the coupon.
Analysis
There are a couple of things going on here, but the most relevant question is: Which is better? A 10% coupon or a credit of some amount?
So let's talk about the results from each possibility.
The 10% coupon will offer some money back on a future purchase. For this to be worthwhile, we first need to assume that there will be a future purchase! If you are so disgusted by the quality of the product and the retailer isn't trusted, then the coupon would be absolutely worthless.
Let's assume there is an intention to order again. To get the most out of the coupon, you'll want to order as much as you can in order to get the maximum benefit (keeping in mind that you don't want to buy more than you reasonably need!)
The credit is an unknown quantity, but we can assume that the company will offer, at most, the remaining $45 of the original purchase price.
So how much do you need to buy using the coupon in order to have it equal the potential credit?
For this, we can set up an equation.
On one side, we'll have C, the credit. On the other, we'll have B, the amount you'll buy. Since we'll pay 10% less than usual, the amount of benefit we get from the coupon is 10% X B:
C = 10% X B
We can multiply both sides by 10 to get:
10 X C = B
So what does this say? Let's throw in a number - if the expected coupon is $20, we'd have to buy $200 worth of goods for the coupon to worth just as much. If we expect to buy more than that, then the coupon is better. If we expect to buy less, then the credit is better.
ANSWER KEY (alternate variables)
At 10% coupon:
C = $10, B = $100
C = $30, B = $300
C = $45, B = $450
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