22 May 2008

Never be lowest bidder

By Jim Pinto

When business is slow, some people feel price-cutting may be the best way to win purchase orders. However, that is a loser’s game, especially in the industrial automation business, which demands a high level of applications knowledge and specialization.

When identical products are available from several sources they are “commodities.” For some commonly used products in industrial controls, it sometimes seems like discounting becomes a way of life. And the lowest bidder wins. Or loses? Does the customer win? Or lose?

Products and services are “differentiated” by FABS (features, advantages, and benefits) that competitors cannot offer. When a product becomes a commodity (no special FABS) the differentiation that remains is quality, delivery, and price. And losers, or inexperienced salespeople, fall back all too quickly on low price as the determining factor that wins a purchase order. Or they revert to FUDS (fear, uncertainty, and doubt), which is negative selling and should be avoided.

Quality is a tough-sell, after all everyone says they have it. The savvy customer will review whether or not prospective suppliers operate an ISO 9000 program, or have a good track record from past shipments. A demonstrable reputation for good quality is indeed a differentiator, and that value should be reflected in pricing.

Delivery implies availability within a specified time to satisfy the customer’s need. Commodities tend to be offered “from stock.” It finally comes down to price.

The industrial automation business is extremely broad-based, with a tremendous range of products, applications, environments, and special requirements. Product applications knowledge has significant value and should not be discounted. Above all, sales people should strive never to be the lowest bidder. Often, low bidding raises doubts, rather than success.

Always remember, you are selling value—your knowledge, your experience in the business, your understanding and ability to solve the problems that will inevitably come up, your availability to help the customer when needed.

When you have quoted your best price, if the customer says it is expensive, do not make excuses. Your immediate response should be, “Yes, but it is the best. And you get my involvement when you buy my product.”

As an automation professional, always strive to provide the most value, the best specifications, the best performance, the best quality and reliability, the best delivery, the best applications assistance, the best after-sales support, the best product literature, and the most helpful documentation. And, do that at a price that is the best value for the customer and for your company and yourself.

Never, never be the lowest bidder.

Related links:

• Never, never be the lowest bidder
  http://www.isa.org/intechnews.cfm?id=4033
• Why we don't want to be the lowest bidder
  http://www.htservices.com/editorials/2004/030104.htm
• Low-bidding is no way to lower cost:
  http://www.halfcostproducts.com/low-bidding.htm

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.