I'm working with a client that uses punch cards as a customer loyalty program. Buy 12, get 1 free. Can any cost be recouped via expense? Could the cost of the free product fall under promotional expense? Or is it just a hit that's taken in exchange for the (presumeably) increased sales created by a customer loyalty program?
USA Customer loyalty program expense?
- Thread starter annibe11e
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Steve-LevelUp
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That's definitely an interesting quest. I believe that the costs need to remain with your cost of goods sold. It would probably be best to create a second type of account, perhaps a "promotion COGS" so that you can still track these costs separately.
Another way to look at this from a loyalty perspective, is that they are getting a small discount. An equivalent to by a $10 unit price under 12 get 1 free would be the same as just reducing your price to $9.23. The price decrease would decrease your margins, so the implementation of the promotion should be booked similar to a pricing reduction.
Does that make sense?
Another way to look at this from a loyalty perspective, is that they are getting a small discount. An equivalent to by a $10 unit price under 12 get 1 free would be the same as just reducing your price to $9.23. The price decrease would decrease your margins, so the implementation of the promotion should be booked similar to a pricing reduction.
Does that make sense?