GSA Schedule – 2 Successful Pricing Strategies

This week I would like to go over low cost vs value priced offerings and which is the better strategy. To do an analysis of this I spent considerable time going through the GSA Schedules of 25 firms on GSA Schedule 411-1 Ground Transportation Services. I did this to make a determination as to what information I could derive from these firms pricing strategies. (I remove ambulance and medical related transport for the purpose of this study to get an apples-to-apples comparison.)

The majority of the schedule Holders had the following hourly rate transportation service offerings:

As you can there is a great deal of deviation from the lowest cost provider to the highest. In some cases the lowest price to the highest price can be double. This seems somewhat surprising considering all of these firms are offering a similar product.

Below is the data for the 25 firms:

Strategy 1 – Low Cost Provider

As you can see from the above data that the Number 3 firm on our list in sales did not have any sales in the previous two years. This is because this firm is new to the GSA Schedule System. They clearly have a low priced strategy and matching or beating all other firms on this schedule has led to this leap in sales. The results show that this firm was able to grab a very large piece of the business. This demonstrates being the “low cost provider” can be an effective pricing strategy provide the firm can still make a profit at those rates.

Strategy 2 – Superior Service Provider

*Rankings are based upon the quartile groupings below/over or between and this creates five groupings.

Separating the firms into five groupings based upon pricing we can see the following.

Grouping 1 – Low Cost Provider, has the greatest amount of sales. However Grouping 1 firms sales are only 13% greater than Grouping 4 Sales.

Grouping 2 - Produced the least amount of sales. This is what I refer to as “no man’s land” or “no woman’s land” because the firm isn’t the lowest cost provider however the firm cannot afford to complete with firms that have better or more tailored service offerings. These firms even preformed worse that firms that were in Grouping 5 which in some cases had near double the pricing of Grouping 1.

Grouping 3 & 4 – These firms appear to have a good mixture of Price/Service mix to maintain health profit margins. While reading through the schedule I found one firm in what I perceived as an attempt to combat their lower priced competitors took the additional step to breakdown their pricing by the age of the vehicle being provided.

Grouping 5 – I doubt this group expects to have a great deal of sales from their GSA Schedule however the sales they do have will be profitable.

Note: To obtain a GSA Schedule your pricing must be vetted by the GSA meaning you have to prove you are providing goods and services at a fair and reasonable price. However make sure if you are obtaining a schedule you have thought thru Service/Pricing balance or it could inhibit your overall success.