Optimize tiered discounts for the biggest savings

You've probably seen offers that look something like this:

• 20% off $25 in merchandise OR
• 30% off $40 in merchandise OR
• 40% off $60 in merchandise

The industry term for this is a "tiered offer" since you have different tiers you can climb to get to each next savings level.

Generally speaking it is very worthwhile to try to get to the top tier of these promotions, because your savings rate effectively multiplies on the extra items you add to your bag to hit the tier.

Here is an illustration based on the promotion listed above:

• Tier 1: 20% off $25. Thus $25 in your basket costs $20 after discount (20% * $25 = $5 discount)
• Tier 2: 30% off $40. Thus $40 in your basket costs $28 after discount (30% * $40 = $12 discount)
  -->You are getting an extra $15 of items (compared to Tier 1) for an extra $8 in cost. 
  That's like getting 47% off the extra items!
• Tier 3: 40% off $60. Thus $60 in your basket costs $36 after discount (40% * $60 = $24 discount)
  -->You are getting an extra $20 of items for an extra $8 in cost. 
  That's like getting 60% off the extra items!

Now it's generally not a good idea to buy something just because you have a coupon or other type of discount. But it helps to do the math so you at least know what the real cost will be for the extra items. In cases like this the extra 60% savings might be too good to pass up. It can be a good opportunity to add an item to your basket that you were going to buy at some point anyway, or one that you know you might have to return.

Typically if you return an item in an offer like this, you won't fall back into the lower tier.  So if you bought $60 in items and got the 40% off, then decide to return half of the order, you still end up with 40% off the items you hold on to.  Check with your store as to whether this violates their policy but traditionally this has been an allowable practice.

So how much can you save by maximizing the tiered offers?

Suppose you shop three times in Tier 1 (20% off), each time with $75 in your basket. You'll end up paying $60 for those items over the three trips. If you instead buy all $75 at once making you eligible for Tier 3 (40% off) you'll pay just $45 for the same items. That's a 25% extra savings! If you spend $300 annually for you and your family with offers like this, that extra savings adds up to $75 per year!

A LOZO expert posted this tip.