How to Strategically Price Tender Bids?
Setting the right bid price on a tender could be the difference between winning or losing the contract. Your strategy should be carefully crafted, depending on the tender’s procedure type, award criteria, and specifics about your company. To boost your chances further, make sure to incorporate an analysis of market insights into your strategy. To help you choose the best price for your bid, we have compiled a few tips:
- Understand Tender Procedure Types
Depending on your company’s experience, size, and goals, certain tender procedure types might suit you better. For example, companies with extensive tendering experience often opt for Open Procedure tenders, which have detailed requirements but do not include a negotiation phase. This means that your initial proposal and price must be comprehensive and highly competitive, as there will be no opportunity to revise them later. Hence, the final price you choose for your bid should be backed by extensive research.
On the other hand, younger companies with fresh ideas may opt for tenders that have more flexible procedure types, such as Innovation Partnership or Competitive Procedure with Negotiation. In the case of Innovation Partnership, the requirements are not as concrete as they are in open procedures. These tenders allow applicants to freely draft an innovative solution, giving them more control over the bid prices. Similarly, Competitive Procedure with Negotiation allows for more flexibility in both the proposed solution and price, especially because there is a negotiation phase.
- Choosing the Right Pricing Strategy
There are several pricing strategies you can adopt based on your company’s goals, size, and market position:
Cost-Plus Pricing
Your company may choose the classic Cost-Plus Pricing strategy, where you conduct a thorough calculation of the costs of the services outlined in your proposal and add a markup, which would be your actual profit. This strategy works well for a large generalist company with enough experience to estimate the perfect bid price, balancing cost and profit. It is an even better strategy for smaller, specialized companies with low overhead costs, allowing them to offer competitive prices while maintaining high profit margins.
If you use the Cost-Plus Pricing strategy, having access to IT tender’s personalized insights about your competitive standing will help you strategically price your bids to cover your desired profit margins while boosting your competitive position. If you find your competitive standing favorable, you could bid slightly higher, reflecting your market value without risking your chances of winning.
Competitive Pricing
Competitive Pricing can be a great breakthrough strategy for any service provider. In the case of generalist companies, applying this strategy could bring fruitful results if you are looking to establish a connection with a new buyer. For smaller, specialized companies, this strategy is ideal if you are looking to expand your current skill portfolio and establish yourself in a new market segment adjacent to yours. After acquiring enough experience or successfully establishing connections, you can switch to other pricing strategies as your company grows and evolves.
Having access to IT tenders' Price Benchmarking is especially valuable for companies applying a Competitive Pricing strategy. As the name suggests, having knowledge of current market pricing gives you a significant advantage. Our Benchmarking insights are designed to provide a clearer picture of how other companies with similar specialized skills set their daily rates, allowing you to make a more informed and competitive bid.
Value-Based Pricing
Alternatively, if you are a specialized company offering unique, high-value services, you could consider a Value-Based Pricing strategy, which sets prices based on the perceived value your services bring to the client. This approach works best when you can clearly differentiate your services and justify a higher price based on the benefits the client will receive.
However, the Value-Based approach is riskier. You can lower this risk by conducting thorough research. IT tenders presents publicly available information about past tender projects in a concise, comprehensive, and digestible manner. Through our Tender Details, we show tendencies of a buyer, allowing you to easily see the companies they have awarded in the past and their respective areas of expertise. Additionally, we provide insights into past similar tenders from a buyer, giving you a clearer picture of what to expect when applying to their open tender. We even tell you how many companies have applied to these past tenders. All of these insights combined can reveal much about a buyer's willingness to collaborate with companies like yours.
- Pay Attention to Award Criteria
Most tenders prioritize two main factors in the Award Criteria: quality, which is usually weighted between 30% and 70%, and price, which can range from 30% to 100%. Given that price often carries significant weight, conducting thorough research is essential to ensure your bid is both competitive and profitable. Having access to our Price Benchmarks can be especially valuable, particularly if price holds a higher priority than quality, which is often the case. Knowing the current prices in your sector can help you choose the best price for your bid.
Regardless of the pricing strategy you choose or the procedure type and award criteria of a tender, IT tenders allows you to take your bid pricing strategy further by providing valuable insights into past tenders, current market prices, your competitive standing, and more. The more information you have at your disposal, the better equipped you will be to make a winning bid.