The overall bidding process is competitive and entails companies bidding for contracts and pricing their proposals to reflect their best price. Having an appropriate pricing strategy is critical in determining the winnability of a bid and the profitability of winning a contract once awarded. Companies have to consider numerous factors, including market realities and conditions, cost structure, competitors’ pricing practices, and perceptions of the customer value received. As it stands, bidding and securing contracts is much more competitive than it once was and is more about finding the balance with respect to competitiveness and profitability than just submitting a bid submission at the lowest bid price. Bid modelling is a systematic, data-driven approach to enable businesses to be able to credibly develop bids and proposals in a manner that factors in aspects such as a cost structure that is integrated with the workings of the market and the costs and pricing practices of competitors while being cognizant of the market, stakeholders, and contracted obligations in regard to customer value. Thus, companies can make better decisions using these strategies to win contracts with an understanding of profit potential.
Developing a Robust Pricing Strategy in Competitive Bidding
Understanding Competitive Pricing Dynamics
• Market share is heavily influenced by competitor pricing strategies.
• Businesses must adjust their bids to maintain a balance between competitiveness and profitability.
Leveraging Cost Analysis for Strategic Bidding
• Comprehensive cost analysis, including material and production costs, is crucial for strategic bidding.
• Profit margin and markup should be determined using cost-plus pricing methods.
Integrating Value-Based Considerations
• Unique value proposition that differentiates product quality and brand image can validate higher bids and foster customer loyalty.
Adopting Dynamic and Innovative Pricing Models
• Dynamic pricing strategies, supported by AI technologies, allow real-time bid adjustments based on demand and market changes.
Aligning with Procurement and Tendering Best Practices
• Understanding tender specifications and evaluation criteria is crucial for tailored and competitive bids.
Maximizing Profitability through Effective Bid Management
• Bids should reflect the value provided while maximizing profitability.
Building Brand and Customer Relations
• Strong brand image and positive customer feedback can elevate a company's bid.
• Gaining Competitive Advantage through Market Expertise
What is MAT & MEAT
The Most Economically Advantageous Tender (MAT) is a concept for assessing public sector procurement frameworks and tenders. MEAT is (essentially) a compromise of tender pricing and quality submissions, with the arguably best ratio of price to quality being 40% price and 60% quality. So, a supplier who has a suitable solution and bids well could achieve first in quality and therefore doesn't have to have the lowest-priced tender in order to win.
Price remains important, not least because of rising standards of bid writing and often as a way for smaller, new, and regional public sector suppliers to pick up important additional scores. However, with the Public Procurement Bill, reforms, and the imminent Procurement Act commencing next year, and the next deadlines for compliance being 98 days after the Procurement Act is introduced in October 2024, MEAT will transition into MAT, or Most Advantageous Tender. The intention is to enhance description and therefore allow local public sector procurement managers the flexibility to tailor the order of words and meanings.
Public sector procurement teams have been incorporating and weighing sustainability, social value, and other areas for several years, and so there is no real change around this. However, it makes the point that thinking about value for money can be done in different ways, and it does not have to equate to price.
The Bid Writing Ultimate Guide has more examples of public sector procurement evaluation criteria and how understanding this can assist with bid writing and help with tender pricing. MEAT to MAT is one example of the government's effort to provide more flexibility in public sector procurement. Negotiations will still be formal and managed openly, fairly, and transparently as they have been previously, allowing bidders time and opportunity to agree on joint clarity and to resubmit proposals, including modifications to their quality bid submission and tender pricing.
Conclusion
Understanding competitors' pricing is important to those businesses that seek to maximize profitability and remain relevant in the marketplace. Developing a pricing strategy in a competitive environment is easy since you tend to discover what you're winning on and what you're not by competing. In the public sector, careful feedback reporting from successful bidders can assist your pricing strategy. It can help you realize if you must be cheaper in order to win; pretend you achieve a higher quality tender score so that you might counter balance your higher price; or understand how competitor X manages to bid that much lower than you despite their size, infrastructure, and on costs, etc.
You can develop or even test a pricing strategy for winning tenders, whether you do so organically or not, and along the lines of the approach noted above. For businesses wishing to take a more strategic approach and systematize what they did to develop a pricing strategy, there are many factors that need to be taken into consideration. A successful pricing strategy is the difference between winning tenders and not winning tenders, and for businesses wishing to maximize profitability and remain relevant in the marketplace, it is critically important. A structured framework will allow a business to be able to define, develop, and implement strategic pricing that will help it achieve its overall strategic directions and outcomes, considering the external marketplace and customers.
