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Sunday, November 22, 2009

Reassuringly Expensive.

I caught up with a few good mates of mine for a few beers recently who all run their own businesses in diverse industries. I consider these blokes very business enlightened and I really enjoy drawing on their collective knowledge and experience.

We were talking about the large number of requests for tender we are getting across our desks lately, particularly since the GFC kicked it, and the pros and cons of tendering for new business versus the business that comes to you through marketing efforts or exisiting customer referrals.

While we agreed we all generally have won more tenders than we have probably lost, the time and effort invested in them is absolutely massive and sometimes makes you question the commercial sensibility of participating in the exhaustive processes that some companies want to run.

My experience suggests that decisions are driven nearly always by three factors. Namely: PRICE, PRICE and PRICE.

Sure the tender always says that quality of service, expertise, safety record blah blah blah will be prime considerations in the decision making process however when we win tenders and sit down with our new client we are usually told "Congratulations. You had the cheapest price".

It's the classic business paradox of price versus service. It is pysically impossible in most industry's to be the cheapest and also the best. The two are diametrically opposed to each other and to delivering your business it's imperative. A profit!

After about the fourth or maybe fifth beer, one of the guys said in his own business he always looks for the "Reassuringly Expensive" option ahead of the cheapest option and he would usually go with this as this is where the reliability and professionalism is usually found. I have to agree. You really do get what you pay for.

So for me even in tighter times, like my mate, I will usually go with the "Reassuringly Expensive" supplier who will be there for me in the long run with a consistently good quality product or service. Hence the reassurance I feel in making this decision.

Whether you are a builder, a lawyer or a candlestick maker....nearly all industries have become commoditised in someway so there will always be someone promising to do it cheaper and better and more willing to lose money than you to land the deal. Now with the internet and the plethora of companies trying to get noticed, "FREE" is the catch cry of the net. Where to from there? Well you don't go broke on the deals you miss out on so "Let them go" I say. These companies just won't be there at the finish line.

Do you remember the scene from the movie "Armageddon" with Bruce Willis and Steve Buscemi about the lowest bidder? If you are in the process of sending out a tender for new suppliers then I'll let the boys have the final word.
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All for now.
Brad Skelton
The Shipping Bloke

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