Best Practices for Configuring Memberships with Companion Products
This topic contains examples of best practices for configuring membership products with companion products. These examples cover the options necessary to configure the products, the order process, and the effects from a marketing, pricing, and accounting standpoint. The general ledger (GL) entries reflect those created by the product configuration and result from an order being placed on January 1, 2008.
When membership products are sold, they frequently come packaged along with companion products. This topic contains best practices that provide examples as to how to configure membership products that are packaged with additional supporting products. For purposes of this discussion, these additional products are referred to as companion products. Companion products may consist of any type of product but are frequently publications, such as books, newsletters, magazines, or other collateral products, such as coffee cups, baseball caps, or t-shirts.
When configuring memberships with companion products, there are three ways to package the group of products: individually, as a product group, or in a kit. The features of Aptify provide even more flexibility when configuring product packages. For instance, with Aptify, an organization could choose to:
- Sell the products individually (using a Product Group to add all three products in one operation or specify the options as related products).
- Sell the products as a kit and generate order detail and GL entries at the sub-product level.
To illustrate these options, we will look at Company X. This organization includes a monthly newsletter and a coffee cup with its logo with each membership sold. This package has been chosen to demonstrate how to set up products with deferred revenue (the membership and the newsletter) and simple products with no deferred revenue (the coffee cup).
The individual costs of the products are as follows:
- Annual membership - $120
- Monthly newsletter subscription - $24 annually
- Coffee cup - $8
The annual membership product is configured as a Subscription Item with a Monthly Subscription Type and twelve (12) Issues. In addition, it is defined as a Dues Product with a Member Type of Member. The monthly newsletter is set up as a Subscription Item with a Monthly Subscription Type and twelve (12) Issues.
In addition, two GL accounts for deferred income have been set up to handle the transactions for the kit and the products that make up the kit, as described in the table below.
Name | Description |
Deferred Income (Memberships) | Contains the entries for the revenue generated by the sale of the membership. The GL Accounts tab for the annual membership product lists this account. |
Deferred Income (Publications) | Contains the entries for the revenue generated by the sale of the monthly newsletter. The GL Accounts tab for the monthly newsletter product lists this account. |
Example 1 - Individual Products
Product Configuration
In this scenario, all three products (the annual membership, the monthly newsletter subscription, and the coffee cup) are sold separately.
However, an organization can create a Product Grouping of the three products to automatically add all three as separate order lines when the product group is specified on the Orders record.
Another alternative is to configure the newsletter and coffee cup as related products for the annual membership. Then, when an order entry clerk adds the membership to an order, he or she will be prompted to add the related products.
Order Process
When the customer calls to place a membership order, the order taker places an order that consists of an order line for each product (or specifies a product group that contains these three products).
Effects
- Individual GL entries are created for each product sold resulting in a detailed accounting of the transaction.
- The customer placing the order has the option to choose or reject specific items resulting in possible enhanced customer satisfaction.
- Inventory is tracked at the individual product level.
- Three separate order lines are created to sell the membership and both companion -products.
Possible oversights due to the order taker forgetting to include a product in the order may occur, resulting in reduced customer satisfaction when the customer does not receive all the products to which they are entitled. However, this can be eliminated by creating a Product Grouping or using Related Products.
Date | Account | Debit | Credit |
1/1/2008 | Accounts Receivable | $152.00 |
|
1/1/2008 | Deferred Income (Memberships) |
| $120.00 |
1/1/2008 | Deferred Income (Publications) |
| $24.00 |
1/1/2008 | Sales |
| $8.00 |
When the Scheduled Transaction Group is expanded, twelve Scheduled Transaction records are created which reflect GL entries. The entries below are the GL entries for the first month.
Date | Account | Debit | Credit |
1/1/2008 | Deferred Income (Memberships) | $10.00 |
|
1/1/2008 | Deferred Income (Publications) | $2.00 |
|
1/1/2008 | Sales |
| $12.00 |
Example 2 - Assembled Kit Products With Assembled Inventory
Product Configuration
In this scenario, the annual membership, the monthly newsletter subscription, and the coffee cup are bundled into a membership kit. The price of the kit is the sum of the individual products ($152). However, inventory is tracked at the individual sub-product level, which results in the Deferred Income (Memberships) and Deferred Income (Publications) accounts (see Table - General Ledger Deferred Income Accounts) being used when generating GL entries.
Order Process
When the customer calls to place a membership order, the order taker places an order for the membership kit product. The order taker creates one entry that causes the distribution of all three sub-products.
Effects
- Reduces order entry time because the order taker creates only one order line instead of multiple order lines.
- Oversights due to the order taker forgetting to include a product in the order are limited and possibly eliminated because the sub-products are included in the kit.
- The sub-products of the kit are listed as order detail lines.
- Individual GL entries are created for each sub-product sold. This allocation is dependent upon the entry in the % of Revenue field on the Products form.
- Inventory is tracked at the sub-product level.
- The customer placing the order does not have the option to choose or reject specific items resulting in possible reduced customer satisfaction.
GL Entries
When the order is marked as shipped, the following GL entries are created.
Date | Account | Debit | Credit |
1/1/2008 | Accounts Receivable | $152.00 |
|
1/1/2008 | Deferred Income (Memberships) |
| $120.00 |
1/1/2008 | Deferred Income (Publications) |
| $24.00 |
1/1/2008 | Sales |
| $8.00 |
When the Scheduled Transaction Group is expanded, twelve Scheduled Transaction records are created which reflect GL entries. The entries below are the GL entries for the first month.
Date | Account | Debit | Credit |
1/1/2008 | Deferred Income (Memberships) | $10.00 |
|
1/1/2008 | Deferred Income (Publications) | $2.00 |
|
1/1/2008 | Sales |
| $12.00 |
The amounts reflected in the deferred accounts for the sub-products are calculated based on the % of Revenue value in the sub-product Parts record. If the % of Revenue field is not set appropriately, undesired deferral amounts could be posted.
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