I was talking to a friend that works with a direct marketing
brokerage firm. Her employer helps firms place direct mail advertisement via
USPS to areas covering most of the U.S. Recently, a Canadian-based pharmacy
contacted the firm. The drug store is interested in implementing an $80,000 campaign
in the U.S. The direct mail advertisement
provides new customers a free, three-month membership in the pharmacy’s
frequent pill-popper club. (retail price, $28/month).
The main pecuniary
benefit to club members is a 15% discount “off already low-priced” prescription
medications. If the customers choose to
continue in the club after the initial 3 months, the pharmacy is offering a
“money-back guarantee”. If, at any time within the fisrt 6 months, the customer
wishes to discontinue their membership, the pharmacy will refund the customer
all previously-paid monthly club fees.
U.S. accounting guidance has a lot to say about these types
of transactions.
However, since the pharmacy is located in Canada, they would
need to use Canadian GAAP. http://www.frascanada.ca/index.aspx
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