The Coffee Bean card discount calculation

I’m a loyal customer of Coffee Bean, despite a small grudge in the past. They have this cool Coffee Bean prepaid card, which I have. It doesn’t give discounts though.

What it does give me are 2 benefits (note that this is in Singapore, and still true as of this writing). The first benefit is that, for every $20 topped up, you get an additional $2. And for every dollar spent using the card, you get 5 points. Which brings us to the second benefit, that for every 100 points obtained, you get to redeem an equivalent of $1. There are other conditions, and I’ll explain them later.

It isn’t obvious, but there is a discount. It just kicks in after the purchase. I wonder what that discount could be? So I set out to calculate it.

Let’s assume we top up with $1000. It’s a nice round number, though I wouldn’t suggest dumping that much money into a card… The first benefit simply translates to an additional 10% on top of the top up amount. So we get an additional $100.

Next, let’s assume we completely spent the $1100 stored in the card. So we get 5500 points, according to the second benefit. And we translate 5500 points back to a dollar value, and we get $55.

So we pumped $1000 in, and we have $1000 + $100 + $55 in stored value. What’s the discount?
(1 – 1000/1155) * 100
which comes up to about 13.4%. Ok fine, it’s not exactly a discount. More like tacking on free stuff, but let’s overlook that, shall we?

The only reason I could come up with for not giving 13.4% discount outright to customers, is to keep them buying. Note that both benefits encourage future purchases.

For the hardcore readers who stayed this far, and really want to know more about this amazing card, here are the details. The minimum top up amount is $20. I favour the $10 denominations, and I usually top up in $20, $30 or $50. There are some rounding calculations with cents (I think they round up), so the calculation of points isn’t exact. And there’s a minimum redemption of 500 points, though you can mix point redemption and cash value. For example, you can redeem 500 points (to get $5 worth) and pay $1.50 with the stored value to purchase a $6.50 drink. Oh, and all points expire every 1st of April. No, it’s not a joke, and it might be something to simplify financial year calculations.

Update: As of 1 June 2009, the 10% additional topped up value will be stopped.