You may think winning a contract is always the avenue to the most profit. Sometimes being a secondary supplier is.
This is a very viable strategy, as it allows you to develop a relationship with the customer during the contract/bidding process. This is an opportunity to find out many of their key needs and how they operate. By not actually winning the contract, you still are able to position yourself as the back-up supplier when the vendor who did win the bid is unable to handle a last minute change, etc.
The beauty of this strategy is if it’s played right, you’ve been able to knock the profit margin down that the vendor who won the bid is able to earn, due to you being part of the bidding (but in the end it protects your margin). Rarely does a project of any type go as planned. There are usually changes, additions, etc., so if you’ve ended the bidding process with a solid reputation in the eyes of the customer, then there is no reason why you can’t be the vendor who helps out in the time of need.
By helping out in the time of need, you are able to provide the customer what they’re looking for at full margin — what they’re looking for is not price but fast service and support. I’ve watched many vendors make more profit off of a large customer by being the secondary supplier than they ever could have made if they had been the one that won the contract. Not only is the profit margin better, but there is also far less working capital tied up when you’re the secondary supplier. Your bottom-line is dramatically improved.
Don’t let your sales motivation slide if you don’t win the contract. Losing the contract could be the best thing that could happen to you.
