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innomen
Posts: 10,052
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9/2/2010 7:57:11 AM
Posted: 6 years ago
After a discussion on monopolies and competition i thought i would post this real life situation. As said we lost our largest customer in my region, and it happened to be my largest customer representing 17 million dollars annually, and they've been a long term customer for 19 years. Fine, move on lick our wounds.

Tuesday i received an email for an opportunity to bid on this same customer's business that they apparently are pulling out of the agreement that we lost. They made it clear that we would again be competing against the same company that beat us before. This would be a very low margin product (toner) and would represent about $1.3 million.

Now this is an unusual situation that really means little in the way of profit because of the level that we would need to go in order to win.

Which of these options would you go:

1. No bid - tell the client that you are not going to respond, and make them deal with the higher prices that a non-competitive situation would provide. Perhaps teaching them a lesson. The customer is clearly playing off the two suppliers and calling the shots.

2. Bid high - stay in the game but make sure you make a profit if you do win the business as unlikely as that might be.

3. Bid low - probably not low enough to win, but low enough to hurt your competition by forcing them to keep their prices low.

4. Bid incredibly low with virtually no profit - Keeps you in the game and takes business from the competition - annoys the competition a lot.

How would you respond to a bid like this? Also, it might be helpful to know that i personally would not make enough from this deal to recover from the overall loss, so it's more about the game than anything. Also because of the dollar amount and this particular client the decision is being made by a team including the VP of Sales of the North East. I only include that because there is a difference in decision making if done strictly from a local point of view, or a corporate point of view. Also, none of this would happen if monopolies were allowed to exist.

I'll let you know our response in a bit.
Danielle
Posts: 21,330
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9/2/2010 10:53:43 AM
Posted: 6 years ago
Ignoring the specifics of the business, companies and product, I'd bid high.

Not bidding results in nothing positive for you (no profit) and helps your competitor make an unnecessarily large profit. You said bidding low would probably not make you win anyway, meaning your competitor makes a smaller profit but that's still larger than your zero profit. It also shows your client that they were right to take business from you and get the cheaper price. Bidding very low with no profit doesn't really help you -- may even hurt -- and again shows your client that taking away their business from you paid off. Bidding high gets you the best chance at making a profit, forces your competitors to be reasonable and just espouses the whole concept of competition in the first place IMO.
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Danielle
Posts: 21,330
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9/2/2010 11:00:00 AM
Posted: 6 years ago
Note: Even if you bid high and lose (no profit), it's no different than you not bidding or bidding low and losing anyway. The only other option, bidding VERY low, doesn't really seem worth it -- you may as well not profit, amirite? It only benefits the client, it seems.
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innomen
Posts: 10,052
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9/2/2010 11:08:02 AM
Posted: 6 years ago
At 9/2/2010 11:00:00 AM, theLwerd wrote:
Note: Even if you bid high and lose (no profit), it's no different than you not bidding or bidding low and losing anyway. The only other option, bidding VERY low, doesn't really seem worth it -- you may as well not profit, amirite? It only benefits the client, it seems.

when i first started working on it i didn't know how much it was worth, and my first response was no bid, but i knew i would be alone with that, my second was to bid high. My reasoning was with yours. When the dollars came to over a mill I knew i would have to get some higher ups alerted - they (or he) did not like my strategy.

My intention was to really show the power of competition and why a monopoly is bad.

The VP to me to stick it to our competition, virtually no profit. It will (in his eyes) provide more opportunities, and we are going to approach them for more. His main reason though was to toss a grenade their way. Meanwhile the client eats it up. Not sure i would have done this if the decision was completely mine to make.
badger
Posts: 11,793
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9/2/2010 11:29:24 AM
Posted: 6 years ago
where was the discussion on monopolies and competition? i didn't really understand much of what you wrote there.
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Danielle
Posts: 21,330
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9/2/2010 11:36:01 AM
Posted: 6 years ago
At 9/2/2010 11:08:02 AM, innomen wrote:
Not sure i would have done this if the decision was completely mine to make.

That's why I want to be a business owner if the law career doesn't pan out ;)
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brian_eggleston
Posts: 3,347
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9/5/2010 2:50:18 AM
Posted: 6 years ago
Bid as low as you possibly can afford to.

If you win it will damage your competitor and will increase your turnover (which will improve your buying power) - and if you lose you know that your competitor will not be making much money out of the deal.
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Cerebral_Narcissist
Posts: 10,806
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9/5/2010 2:51:56 AM
Posted: 6 years ago
Kill them, kill everyone last one of them, leave none standing.

And salt the earth afterwards.
I am voting for Innomen because of his intelligence, common sense, humility and the fact that Juggle appears to listen to him. Any other Presidential style would have a large sub-section of the site up in arms. If I was President I would destroy the site though elitism, others would let it run riot. Innomen represents a middle way that works, neither draconian nor anarchic and that is the only way things can work. Plus he does it all without ego trips.
innomen
Posts: 10,052
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9/5/2010 2:52:42 AM
Posted: 6 years ago
At 9/5/2010 2:50:18 AM, brian_eggleston wrote:
Bid as low as you possibly can afford to.

If you win it will damage your competitor and will increase your turnover (which will improve your buying power) - and if you lose you know that your competitor will not be making much money out of the deal.

- That was the decision made. I didn't care for playing the game that the client was running, and is running for us.