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ServPrice

ServPrice. Presented by Paul Bussey. The Decision Technologies Group (DTG). World Leading Research Centre in Decision Technologies since the mid-eighties Many International Awards 50 or so major research and consultancy projects worth several million pounds with blue chip companies

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ServPrice

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  1. ServPrice Presented by Paul Bussey

  2. The Decision Technologies Group (DTG) • World Leading Research Centre in Decision Technologies since the mid-eighties • Many International Awards • 50 or so major research and consultancy projects worth several million pounds with blue chip companies • KSS Group plc: DTG spin-off company

  3. ServPrice: Decision Technologies for Bid Pricing • Examining existing processes and practices for the pricing of bids in service industries • Re-designing existing processes to produce more successful bids • Developing Decision Support Systems (DSS) to assist the processes developed • Case studies within Telecommunications and Distribution industries

  4. Why Bid Pricing? • Trillions of dollars of business goes out to tender each year! • Virtually all business-to-business trading is performed through bids! • If your firm was the bidder: How can you increase the number of bids you win and have higher profit margins? • Intelligent Bid Pricing: Through better use of information and knowledge.

  5. Current Bid Pricing Practice • Most Companies use Cost + Margin Pricing • No Consideration For: • Client preferences • Strengths and weaknesses of likely competitor bids • Value of own products and services • These weaknesses limit the possibility of doing value pricing i.e. What the market would bear!

  6. Client Preferences Optimum Bidder Price Bidder Value Competitor Value The Bid Pricing Problem How to optimise your bid price given the relative value of your bid to the client against the bids of your competitors. What does the client really want? What can you offer the client? What is its value? Who are your Competitors? What can they offer?

  7. Suggested Solutions: Statistical Models • Weaknesses • Ignores non-price factors • Ignores Client Preferences • Fails to truly capture the probability of winning • Strengths • Probability models of Competitor Prices • Lowest Price Wins • Trade-off Profit vs. Poss. to Win

  8. Suggested SolutionsMultivariable Models • Strengths • Combines price and non-price performance • Weaknesses • Doesn’t capture the Poss. to Win • No Profit vs. Poss. to Win trade-off • Difficult to calibrate wi is the weight of importance of variable Xi Xi is a factor influencing the outcome of the bid

  9. ServPrice Bid Pricing Process

  10. The Generic Bid Pricing System Fixed Costs Attributes of competitors bid & price Clients bid selection preferences Variable Costs Total Costs Costs Attributes of own bid Information from Accounting Systems Bid Model Price Optimiser Profits Own Prices Prices/Possibility of Success Information & Knowledge from Sales Managers, Marketers Long Term Goals from Top Management Decision Variables Legend: Exogenous Variables & Constraints Origin of information or knowledge

  11. Pricing Process with ServPrice Marketing Department Market knowledge Market share aims Profit targets ServPrice Over time Top Management Costs & Performance monitoring Finance / Accounting

  12. Knowledge only More profit through better pricing • Intelligent Tactical Decision Support Systems More profit through efficiency gains • Simulators, Spreadsheets • Expert Systems, Decision Support Systems • Statistical Analysis Tools • Data Mining • Datawarehouse, • Data Mart Hard Data only • Transaction Processing Systems Internal Information only External Information only Intelligent Tactical Decision Support Systems

  13. Case Study: B&M Warehousing

  14. B&M Bid Characteristics • Each bid contains 50 different prices • Only 1 or 2 competitors in a bid • Similar service being offered by all • Non-price factors such as reliability, quality and experience considered very important • A new bid every week

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