Competitive Bidding: Deciding the Best Combination of Non-Price Features

A procedure is outlined for deciding the mix of price and variable non-price features, such as quality, delivery, service or financing, to be included in a bid. The level of each non-price feature is set independently by comparing incremental spending against the alternative price reduction and basing the choice on value to the faction in the customer organization expected to dominate in the choice of the successful bid. Divergence from competition on all non-price features, both fixed and variable, is then taken into account in setting price by calculating a net price equivalent of feature differences as against each competitor. For any given markup the probability of success against a competitor over whom there is a net advantage is the same as that for an equivalently lower markup were price to be the sole basis for allocating the order.