ieor project page 24

ieor project page 24 - explaining some sort of...

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We see that you would reduce costs if you were able to send the salesman to Program 10 with a price of $400 (which is $100 less than the original price). As for the administrative assistant, if prices were lowered for programs 5, 8, 10, 14, and 15, then your company would potentially send him there. However, if we look individually at these programs, we see that companies offering programs 5, 8, 14, and 15 would rather keep their original high prices because they are aware that you will still come to them to enroll many of your other employees in the program. To them, the additional revenue gained from enrolling the administrative assistant wouldn't be worth the additional revenue lost from decreasing the price of their programs. Therefore, the chance that companies (that offer these programs) will lower their prices for this reason is low. If you negotiate a price by
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Unformatted text preview: explaining some sort of "sales by volume" deal, they may be more prone to lower their prices, however. One program that should absolutely be negotiated is program 10. If the price of program 10 was brought down from $500 to $400, then you could send your salesman to this program and reduce your costs. Meanwhile, the company that offers program 10 would get additional revenue of $400, which is greater than the price loss of $100. This trend could continue, moving price down until new revenue gained from new employee is equivalent to revenue lost from the price change. This happens to be at a price of $250, in which the 3rd party would gain $250 for the new employee but lose $250 for the original employee. These are the reasonable bounds for negotiation....
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