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Finance & Accounting
Pages 3 (753 words)
Facts of the Case Study The Runway Discount is a private firm sale of high-end fashion items. The company wants to increase their online as well as the customer base.
The twenty five dollar ($ 25) would be transferred to the existing customer account if and only if the referred new customer purchase item from the company’s website. Moreover, after transferring of twenty five dollars ($ 25) to the account of the existing customer, the money can only be utilized by the customer on the purchasing of new items from the company’s website. The case study pertains to referral credit, in this regard; the document presents a thorough discussion on the said topic. It is pertinent to state that the referral credit should be recorded in the income statement as a marketing expense and this money is spent in an effort to bring in more clients for the company. The company is spending additional money to attain more customers and is expanding its scope. As a marketing strategy, the company is using its existing customer base to bring in more customers by offering them incentives on referring the site to other people. In the long run this additional money spent in the form of referral credits will be beneficial for the company as it will result in an increase in the sales and revenues. It cannot be recorded as a reduction in revenues as this will not provide a clear picture and future increase in customers and revenues cannot be attributed to this money spent. ...
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