Ready to Pitch? : How Salespeople Engagement In Tenders Affects Vendors' Relational and Transactional Attractiveness

Over the last decade, organizational customers have increasingly employed tenders as part of their purchasing strategies. The United States Army, as a single institution, purchased goods and services worth 200 billion USD via tenders during the last fiscal year. In February 2011, Boeing announced that it had won a 40 billion USD deal in a historical tender of the United States Air Force. Their competitors, including EADS, left the competition empty-handed. Tenders are not a phenomenon exclusive to public procurement; their rise may be observed in many industries of the private economy. Organizational customers intend to enhance transparency among vendors' solutions while reducing non-economic influences on their purchase decisions. By preparing a detailed requirement specification, they avoid unneeded functions and components of the purchased objects, thereby reducing overall procurement costs. This change on the buying side poses major challenges to vendors' salespeople. To successfully participate
in tenders, salespeople need to understand their customers' buying process and signal superior attractiveness in the transaction. Vendors face high failure rates and waste resources on unsuccessful tender participations. If buying companies make decisions based solely on proposals that can be developed in a back office relying on a received specification, do vendors need salespeople in tenders at all? In disregarding the importance of appropriate sales activities, the research has not addressed the changing role of salespeople in a world of aspiring tenders. Based on six interviews with purchasing and sales managers, this study provides a conceptualization of the tender-specific buying process and targets pursued by vendors. We develop a model explaining the effect of salespeople's engagement in the buying process on a) the transactional attractiveness of the submitted proposal, b) the relational attractiveness of the vendor, and c) the achievement of a vendor's tender-related objectives. Using structural equation modeling, we
test the proposed model empirically on a cross-industry dataset of 170 salespeople. The results suggest that the transactional attractiveness of the proposal and the relational attractiveness of the vendor determine a vendor's degree of target achievement. Opportunities to increase a proposal's attractiveness aside from price setting are limited. Only salespeople who are involved when customers specify their requirements in order to collect information about customer preferences to design superior proposals are able to increase transactional attractiveness. This effect is greater when accompanied by a competitive price. However, salespeople's engagement throughout the buying process helps to reduce the perceived transaction risk and produces relational attractiveness regardless of the proposed price. These findings indicate that organizational customers fail in their effort to eliminate the influence of personal relationships on buying decisions. As long as there are interaction opportunities, vendors will produce different relational attractiveness depending on their engagement in the buying process, thereby influencing the buying firm's decision. Vendors' management must be aware of the importance of salespeople assignment in tenders. While the proposed price plays a prominent role, salespeople can affect vendor target achievement by inducing relational and transactional attractiveness through their engagement in the buying process. These results have significant managerial and theoretical implications.