TESTING MANUFACTURERS ACCEPTANCE OF COMPETING SUBCONTRACTOR PRICE-QUALITY-SERVICE DESIGNS

What are the sensitivities to price, quality, and service levels of su bcontractor work among industrial manufacturing customers? How are the se sensitivities influenced by size of the customers' firms and by the respondents' job functions? Answers to these issues are provided base d on an exploratory field experiment of manufacturers' choices of subc ontractors in the Finnish metal industry. As hypothesized, customers w ere most sensitive to achieving contracted levels of reliability of de livery: avoiding low (90%) delivery standards and meeting 100% deliver y standards. Large-sized customers were particularly sensitive to pric e increases: large negative utilities were found for 20% price increas es. Contrary, to our expectations, offering ISO 9000 quality standards were not highly valued by customers. The findings provide strategic g uidelines for designing subcontractor bid responses to requests for qu otations: stay focused on the meat-and-potato issues, guarantee that d elivery standards will be met, and maintain current prices. (C) Elsevi er Science Inc., 1997.