Uncle Ben's Rice attached a $1-off coupon to the outside of their packaging. They distributed 1,000,000 promotional packages, at a cost of $20,000 for design and production. They predict that the redemption rate will be 5%. They pay retailer handling and processing costs of 10¢ per coupon redeemed. What is the cost per coupon redeemed to Uncle Ben's?

Question

Quizplus · Accepted Answer

The total cost of the promotion includes the cost of design and production ($20,000) plus the cost of handling and processing for the expected redemptions (0.10 x 50,000 = $5,000).

The total cost of the promotion is therefore $25,000.

The number of coupons expected to be redeemed is 5% of 1,000,000, or 50,000.

The cost per coupon redeemed is the total cost of the promotion divided by the number of coupons redeemed:

$25,000 ÷ 50,000 = $0.50

Adding the face value of the coupon to the cost per coupon redeemed:

$0.50 + $1.00 = $1.50

Therefore, the cost per coupon redeemed to Uncle Ben's is $1.50.

Uncle Ben's Rice Attached a $1-Off Coupon to the Outside