A chi‐square‐based heuristic statistical procedure for approximating bid price in a competitive marketplace: a case study

Abstract

Purpose

The purpose of this paper is to propose a chi‐square‐based heuristic statistical procedure that considers the most recent bid prices of self and competitors in proposing an optimum winning bid price. The use of simple regression method to predict the adjusted optimum bid price is also considered.

Design/methodology/approach

In order to achieve this objective, the proposed approach uses past bid prices of the case company and its competitors. A heuristic chi‐square statistical procedure is then developed to obtain the expected bid prices. The absolute difference between the prices is obtained and the same is adjusted to get the optimal bid price for the forthcoming bid.

Findings

It is demonstrated that the proposed heuristic chi‐square‐based approach is superior to that of the regression method, which is otherwise in practice in the case company, since the latter still gets support from the former. Further, the paper throws light on how a familiar statistical method could be conveniently but effectively applied as a tactic of marketing management.

Research limitations/implications

The method is developed based on the experience of the case company in bid participation. Therefore, the study on the performance of the application of the proposed method from the perspective of different types of companies can be taken up as a future work. Also, if appropriate, the time and other factors may be considered as other independent factors along with the tender quantity in predicting the tender price.

Practical implications

The proposed heuristic chi‐square procedure is simple to implement as the required data on bid prices are usually available once the bids are open. The case study reveals how the method can be successfully implemented to win bids in a competitive market place. Also, the procedure is more generic so that it can be adapted as it is or with slight modification as desired by companies of any nature participating in bids.

Originality/value

The proposed approach would have a high value among manufacturing firms and marketing managers who participate in tenders with an aim to increase sales turnover which in turn will increase profit. The paper is unique of its kind and will help researchers to think of either extending or proposing such new approaches as they need.

Citation

Ravichandran, J. (2012), "A chi‐square‐based heuristic statistical procedure for approximating bid price in a competitive marketplace: a case study", Journal of Business & Industrial Marketing, Vol. 27 No. 1, pp. 69-76. https://doi.org/10.1108/08858621211188975