BUAD100 Lecture Notes - Lecture 2: Nordstrom, Variable Cost, Sunk Costs

• School: University of Delaware
• Department: Business Administration
• Course: BUAD100
• Professor: Julia Bayuk

Document Summary

Dependent on: cost to acquire customer, annual profits customer generates for firm, contribution margin (revenue variable cost, number of years customer is likely to buy from the firm. Clv = m*l ac: m = contribution margin generated from customer in a year, l = expected purchasing life of a customer (years, ac = up-front cost of acquiring a customer. Example: macy spent to attract mary; mary will bring in revenue: the products mary buys will cost the store , mary will be a customer for 5 years. Considers the psychology of prices and not simply economics. Consumers usually perceive higher-priced products as having higher quality. Consumers use price less during product evaluation when they can judge the quality of a product by examining it or recalling experiences. Reference prices: prices buyers carry in their minds and refer to when evaluating a product: example: dakota" metallic camo slipper (women) (nordstrom exclusive, hayneedle, walmart.