Question

What is competitive bidding and how is it used for B2B pricing?

Answer 1

Some service contracts can be awarded on the basis of competitive bidding or tenders, especially in organisational markets. A bid is the price of an deal. It is based on assumptions of how their offerings will be priced by rivals. In order to assess the minimum pricing level at which it can bid, if a contracting firm wishes to win a deal, it would therefore need to weigh the costs. In bidding, a variety of models are currently used to take into account the possible bids of rivals and aim to predict potential earnings at different bid rates. In deriving bid values, more advanced models take advantage of previous bidding results.

A research investigating the issues of fair pricing from the point of view of a buyer and seller discusses a variety of drawbacks in service markets for both sides.

The risk of proposals being borrowed and passed to rivals from the point of view of the seller, the time, commitment and expense involved, and the difficulty of understanding how bids are judged are seen as reasons against their use.

Although issues with the timing of proposals and considerations about whether the specification is tight or flexible for the purchaser, the time involved may mean that alternatives might be more satisfactory

It sounds cliché, but without completely knowing the explanation why this bid / RFP was given, organisations also go into bids / requests for proposals (RFPs). You need to recognise that your client is trying to purchase a satisfactory product / service at the highest possible price in order to attract B2B bids. Simple, yes, but complicated as well. A understanding of the motivation of the client for the deal is important to the solution and the realisation of the intended performance.