Soft selling occurs when a buyer is skeptical of the usefulness of a product and

Question

Soft selling occurs when a buyer is skeptical of the usefulness of a product and the seller orders to set a price that depends on realized value. For example a sales representative is trying to sell a company a new accounting system that will certainly reduce costs by 20%, however the customer has heard this claim before and believes there is only a 50% chance of realizing the cost reduction and 50% chance of realizing no cost reduction Assume the customer has an initial cost of $700.00 According to the customers belief, the expected value of the accounting system or the expected reduction in cost is $

Explanation / Answer

Cost after reduction with probability of 0.5= 700 - 700*0.2= 560.

Cost with no reduxredu wih probability of 0.5= 700.

Expected cost reduction= 0.5*560 + 0.5*700= 630

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