Point and Loyalty Programs

Awarding points for purchases of the company’s products is an attempt by the company to build customer loyalty to their branded products and services. There are a myriad of these types of programs available to the consumer, especially credit card companies and airlines. We will take a fundamental approach to these programs and the subsequent impact on revenue recognition.

The most easily understood programs are those in which the company grants points that are redeemable for the company’s products. In this transaction, the company is essentially selling two deliverables, one is the product purchased, the other being the right to future products by redeeming the points earned from purchasing the product. For example, ...

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