Customer Loyalty Program
Allocation for a customer loyalty program is pro-rate. Moreover, the formula will be Points Value/(Sales + Points Value) x Sales =Unearned Revenue and Sales/(Sales + Points Value) x Sales = Sales Value.
Customer Loyalty Program is an incentive or reward for loyal customers or repeat buyers. It is an obligation to the seller in the future once the buyer claimed the equivalent of the incentives. The incentives can be represented by points that later on the points will be of value. The points value can be used to purchase goods or services to the same store where the loyalty program is given.
The purpose of the customer loyalty program is to encourage buyers to keep buying more stuff from the same store. The equivalent of the points value is accounted as deferred revenue of the seller and recognized as revenue when the points value is redeemed.
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