To bid or not to bid

Abstract

This paper discusses the importance of permanent customer relations for firms in an environment where bidding takes place. The analysis is first directed toward the bidding resources per order with special reference to the differences in order rate between permanent and non-permanent customers. The importance for bidding firms to keep close track of order rates for different customer groups is stressed here. In the succeeding analysis the bidding on requests from non-permanent customers is treated as investments in future orders. Here we note the dilemma of firms with low or zero profit margins, which are likely to bid on too many bids, thus incurring higher bidding costs than their more profitable competitors.