Marketing the value paradigm to price sensitive customers

Abstract

It could be fairly argued that the methodology used in the tendering process by the Price sensitive buyers creates a scenario wherein the suppliers offerings are relegated to being a commodity - with price as the only parameter to identify the Customers Incentive to Purchase. To further exacerbate things-in the Indian context-most large projects are handled on a turnkey basis by Public Sector Undertaking (PSU s) and government organizations, who in-turn use the tendering process to select their suppliers. Needless to say product offerings are relegated to being just a commodity with the competitive business scenario posing a challenge for the suppliers towards communicate value. But then, would such a dynamic business scenario as can be seen through the phenomenal growth (See Section 5 for Indian Capital Expenditure Scenario in the last decade) have been sustainable with value drains as suggested earlier existing? Would it be that with increasing share of the private sector in the capital expenditure in the country, the government reforms are bereft and isolated as regards the concept of value? With these intriguing thoughts in mind, we have attempted to either accept or reject hypothesis set forth with regard to the Value in tendering process within the Indian context. The best methodology to achieve the above was through interactions with the people involved in the process. Towards that end, government personnel involved in the tendering process in various government departments, secretariats viz. railways, department of commerce (Finance ministry) and senior level officers in government owned enterprises involved in the procurement and marketing initiatives were interviewed. Also private participants in the tendering process suppliers, consultants were interviewed in order to gain a broader perspective of the issues concerned. Through our documented Interviews (see Appendix) and the points discussed in Sections 5, 6 and 7 in order to explain our learnings, we have made observations to arrive at conclusions regarding the value management process. Needless to say, the methodology followed and the agenda of the discussions have provided us with varied points of difference as well as consensual view points about the tendering process followed. Through our discussions with the Industry experts involved in the process, we could see that there was a need to look at the broader democratic constraints within which governmental business transactions are driven. Some of the salient features towards Government s role -discussed in detail in section 8 - as seen from our discussions were:? Government as a citizen s representative to act in best interests of the public;? Government as a catalyst towards promoting best Industry practices;? Change Initiatives actively undertaken by the government towards capturing value;? Private sector to be equally price sensitive. Further, through our arguments on the concept of value (Section 9), counter arguments on the value drain being a myth, and on the basis of the existing value elements in the tendering process, we have validated our hypotheses in Section 11 as set out earlier. Moreover, our postulations have been augmented through insightful cases (Section 10) culled out during our discussions with the Industry experts. The cases aim towards a synthesis of our insight through an industry practice approach towards various value elements some of which include:? Negotiated contracts;? Adjusted Price Bid;? Relationship building;? Consultative Selling etc. Finally the crystallization of our efforts have been articulated through a value framework as intercepted through our learning and is discussed in Section 12.