Reverse auctions for relationship marketers

An empirical study of electronic reverse auction project outcomes

“…Observed a positive impact of the number of participating suppliers in the ERA, the degree of competition, price visibility, the monetary volume, and the number of lots on price reductions, and consider the consequences of ERAs on productivity and cycle time reduction, buyer-supplier relationship, and ethical improprieties, based on case study visits at 15 providers, 16 buying organizations and 15 suppliers Wagner and Schwab (2004) Identified eight conditions that have to be favorable in order to achieve lower purchasing prices in ERAs: ease of specifying demand, auction volume, expense of switching suppliers, number of suppliers participating, competition among suppliers participating, power of the buyer, complexity of the negotiation package, and time to auction, based on interviews with practitioners and academics Daly and Nath (2005b) Developed guidelines and principles for relationship marketers to help render ERAs more relationship-friendly, including subsidies for investment, price negotiation after the auction, and payments to losing bidders. Emiliani and Stec (2005), however, refute these guidelines and consider them to be misaligned with industry practice Hartley et al (2005) Studied the buyer's satisfaction with ERAs and find that ERA adopting buying organizations were more satisfied with the purchase price, than with the supplier relationship and the ERA process itself, based on a survey with 47 supply chain managers Pearcy et al 2007) Studied the impact of relational (versus discrete) governance structure of ERAs on purchase price, supplier cooperation and time savings across different purchase categories (standardized direct materials and maintenance, repair and operating (MRO) supplies) and find that a relational governance structure has a positive impact on supplier cooperation, but negatively influences purchase price reduction and time savings, based on a cross-industry mail survey of 142 purchasing professionals Carter and Stevens…”

Pricing issues in industrial marketing

“…bA literature review indicates that scholars and practitioners are reaching a consensus around a trade-off between the value and benefits of gaining lower prices versus losing long-term relationships with suppliers. Yet at the same time, a quiet evolution has come about in the economics and management literature, opening the way for new more relationship friendly auction designsQ (Daly & Nath, 2005). In this article, a series of guidelines and principles are developed that describe how managers may collect the economic pricing advantage of reverse auctions-yet retain the long-term benefits of relationship marketing.…”

“…The advent of the Internet totally transformed the auction process. bOnline auctions differ from their physical counterpart in several ways, like reduced transaction costs for both buyers and sellers; accessibility to more participants by reducing restrictions, such as, geographical proximities; ease of setting the durations of the auction process depending on the product and/or service being transacted; no fixed time of entry for the participants; and the ability to dynamically alter the auction lot sizeQ (Daly & Nath, 2005). Internet auctions even have a phenomenon called buy-out pricing that is a declared price at which the auctioneer is ready to forego the auction and sell off the item immediately (Lucking & Reiley, 1999).…”

Toward an Ethical Understanding of the Controversial Technology of Online Reverse Auctions

“…The market makers also argued that the technology would provide suppliers with advantages in the form of new market penetration (Smart and Harrison, 2003;Smeltzer and Carr, 2003), enhanced market transparency Wagner and Schwab, 2004), lower total cost of customer acquisition , and even benchmarking global competition (Daly and Nath, 2005). In practice, however, even when suppliers gain access to new markets, the drawbacks of low margins may outweigh the potential for additional sales contracts (Caniëls et al, 2009), possibly leading to cuts in R&D investment (Atkinson, 2003), bringing their very survival into question, and even threats of eviction from buyers if they fail to take part Stec, 2004, 2005;Richards, 2000).…”