NOT ALL RIGHT TO TRUST: Many companies, especially medium-sized ones, are active in markets where tenders are commonly tendered. Despite being constantly involved in tenders, there is often a high level of uncertainty as soon as the price requirement is set. What remains is the impression that the selection of the “right” offers an opaque gamble. As we shall see, this impression is not entirely unfair. In order to successfully compete in such a game, it is therefore necessary to know the rules and laws of the game and to know as much as possible about the players involved. With this information, a sound strategy can then be developed to realize one’s own goals.
First of all, it has to be shown how one can come to rich estimates of the competitor behavior. A suitable possibility is to conclude from competitors’ observations in earlier tenders the expected behavior of competitors in forthcoming tenders. Then it is necessary to consider how a bid is to be measured, so that it meets the objective of providing the greatest possible contribution to the operating result. It should be noted that a bid can not be regarded as successful simply because it beats all other offers. In addition, one must strive to enforce the highest possible price claim. The highest price, which can be achieved without endangering the surcharge, is just below the lowest of all competing offers. Any deviation from this optimal price represents a loss of coverage – either because of the excess proceeds lost if the bid is too low or because of the lost bid if the bid is too high. Approaches to estimating such optimal bidding for tenders have been developed in the United States under the term “competitive bidding” as early as the mid-fifties and have already been successfully incorporated into business practice. Since then, there have been a large number of further developments of the competitive bidding concept, but so far they have received little attention in Germany.
about the bidding behavior
When participating in tenders, the individual companies usually meet again and again with the same competitors, who come from a manageable circle of industry-specific and local competitors. Although the group of competitors competing for a contract is not always identical, the circle from which this group is recruited is almost closed. In this sense, there is usually a high degree of continuity in the composition of the (bid) bidder side. The depth of knowledge about the bidding behavior of these competitors depends on which information is passed on to the bidder by the bidder. For example, the widespread “Building Regulations for Construction Work” stipulates that all bids entered into the bid invitation must be read to all parties involved in the bidding process. Another practice is limiting it to announcing the successful bid. Such information on competitive bidding for previous calls for tenders constitutes the external part of the information used to determine their own bid in a future call for bids. However, before it comes to the formulation of a bid, a cost estimate of the tendered job must be carried out regularly. The variable costs of orders determined in previous tenders form the internal part of the required data. Most of the time, these will only be estimates, because the actual costs incurred can only be determined from won tenders.
WHY MARKETERS FAIL
Unclear roles, wrong responsibilities, unrealistic expectations: Most problems of marketing bosses can be avoided. What companies need to change.
A few years ago, a leading retailer began looking for a new Chief Marketing Officer (CMO). The job description sounded great: The marketing chief should play a big and important role, leading the company to higher sales and higher profits. The whole thing sounded like a chance that any future CMO would like.
It was no big surprise when the company hired an experienced and talented marketing executive from the consumer goods industry. He decided to leave a mark on the company. But after a year, the new CMO was deeply frustrated. Given the job description, his experience, and the impressions he gained from conversations with the headhunter and chief executive of the retail chain, he expected his authority to extend to developing a growth strategy for the company. To his surprise, his job was largely limited to marketing communications, including advertising and social media activities. He was neither responsible for product launches, pricing or branch foundations, nor did he have much influence on it. The problem – he told us – was not his possibly lacking ability, but the lack of design of his job, coupled with a high discrepancy between the powers of the CMO and the expectations of its CEO. Both would have made the success of any other candidate difficult. Shortly after our conversation he left the company.
In the course of our research on the success factors of CMOs, we have heard such stories too often. They show, in our opinion, that something is going wrong in the relationship between CMO and CEO. In 2012, a survey by the Fournaise Marketing Group highlighted the tensions between the two: 80 percent of CEOs mistrust their marketing bosses or are unimpressed by their performance. (By comparison, only 10 percent of them have similar feelings towards their CFOs or CIOs). The marketing bosses also recognize a big problem. In our own polls, 74 percent said that their job does not give them enough influence over the business.
This difficult relationship already indicates why marketing managers in the group of executive board members show the highest fluctuation. According to an analysis by the recruitment consultancy Korn Ferry, they remain in office for an average of 4.1 years, while CFOs stay at 5.1 years, HR boards at 5 years and CIOs at 4.3 years. Our own research suggests an even higher churn rate: 57 percent of the CMOs we surveyed had been in office for three years or less (see chart “How long do CMOs last” and table “The riskiest job”).