Marketing “Value” to Price-Sensitive Customers during the Tendering Process

Abstract

Given the importance of tendering for procurement in B2B markets in India, this paper explores how value may be showcased in tendering situations. It analyses the various perceptions surrounding the tendering process and recommends possible mechanisms to capture customer value from two perspectives — marketing techniques to be employed by suppliers to ensure commensurate and fair return for value delivered and potential design changes in the price-discovery mechanism in tendering. This paper discusses the tendering process from structural, supplier, and buyer perspectives. It explores mechanisms through which superior value delivered by the supplier firm can be captured in the tendering process. For this, 26 supplier and customer firm managers from 10 government and private organizations were interviewed to understand the current practices for value capture in tendering. Several case studies drawn from these discussions are presented to illustrate the ideas developed in the paper. The study finds that suppliers can extract returns for the value of their offerings in a tendering situation by early engagement with buyers before the specifications are frozen by leveraging relationships with the buyer organization and at pre-bid meetings, and by exploiting opportunities provided through technical loading after the specifications are decided. Additionally, it is suggested that the buyer organization should leverage the opportunities inherently available to further improve price-discovery via structural changes to the tendering process by using a tiered adjusted-price bid mechanism. The alternate pricing method discussed in the paper could be used to aid the decisionmaking process in tendering and enable a robust value capturing mechanism.