Wednesday, December 23, 2015

Lesson #223: Ten Things You Need to Know When Responding to RFPs

Posted By: George Deeb - 12/23/2015

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If you are in the B2B space, odds are you will need to respond to Requests for Proposals (RFPs) from prospective customers throughout your normal course of business.  The RFP process is typically filled with potential pitfalls along the way.  This post will hopefully help you learn what those pitfalls are, and more importantly, how to avoid them.

1. Understand the Process

RFPs basically lay out all the specific project needs and questions of the customer in one document, which they send out to numerous competing bidders.  From there, the customer will typically narrow down all the submissions to a handful of finalists.  The finalists will be given the opportunity to ask any questions they have, and the customer may also ask additional questions of the finalists, as they compare and contrast the various proposals.  A final proposal is then submitted by the finalists, and the customer selects their winning bidder to move forward with.  This process can take from weeks to months to complete, depending on the size and complexity of the project.  And, expect enterprise customers to have a much more onerous process than SMBs, as that often means a procurement department will be involved (in addition to the business people needing the solution).

2. Make Sure You Are Aware of RFPs in the First Place

You can’t close sales if you are not aware of the RFPs in the first place.  So, you need to identify all prospective customers in your space, and make sure you are on their radar and ask to be included in any of their RFP requests.  Also, oftentimes, bigger companies will engage third party RFP process management companies to run the process for them.  So, uncover those third party companies that are active in your industry, and make sure you get on their radar, as well.

3. Be Prepared for Last Minute Requests, and Tight Deadlines

RFPs can often come in last minute, with a very tight deadline for submission (e.g., around two weeks).  The more complex the project, the tougher it is to pull together a thoughtful response in a short period of time.  For this reason, you should have a template RFP on the shelf, for when the RFP comes in, you have 80% of the standard materials all ready to go, and you can focus on the 20% that needs to be customized for that particular proposal.   Prepare for RFP responses to be a big distraction while they are happening, and the better prepared you are, the less of a distraction it will be.

4. Have a Well-Written and Thoughtful Response

A good response will typically have the following sections: (i) about your company; (ii) what makes you better than competitors; (iii) your specific thoughts on the RFP project, and how you are uniquely qualified to succeed; (iv) answers to any of the customer’s specific questions; (v) your pricing section; and (vi) your happy client references.  And, the response should be visually appealing, with graphic images carrying more weight than dense paragraphs of copy.  Most importantly, talk in the “customer’s voice” and intersperse their logo and images throughout the presentation, so they know you understand their business, and it looks like you put customized work into your response, tailored just for them.
   
5. Don’t Disclose Your “Secret Sauce”

At the same time you are trying to distinguish yourselves from your competitors, be very careful NOT to give away your “secret sauce” in your response.  There are very high odds that the customer will see your unique advantage in your response, and may ask the other bidders if they can do that too.  Which does two things: (a) educates your competitors on what you do; and (b) gives the competitor the chance to say, “sure we can do that”, whether they were or were not planning to in their initial response.

6. Bundle Price Where You Can

The more details you provide in your pricing proposal, the more specific line items the customer can try to negotiate down.  So, as an example, if you are a platform technology vendor, don’t detail pricing for all the various features and functionality in isolation, line by line.  Instead, aggregate pricing for the platform as a whole.  You want to make it is hard as you can for the customer to “turn the screws”, and truly understand your net margin on the project.  Understand, your customers will do everything they can to try and break out the details.  So, tread carefully and dig in where you need to.

7. Don’t Quote Your Lowest Price

Back in Lesson #39, I wrote about the art of negotiation.  As this post suggests, you need to leave the customer room for a “win”.  And, that win typically means letting the procurement department look smart to their boss, by having them negotiate further price savings from the original quote.  So, let’s say you normally like to price your business with a 50% gross margin.  Quote at 60% in the RFP, knowing procurement will be expecting at least a 10% haircut from there during the process.

8. Strategically Leverage the Q&A Process

There are two parts to consider when asking and answering questions during the Q&A process:  (i) protect yourself; and (ii) make life miserable for your competitors.  As for the former, all questions asked and answers answered will normally be shared with all the competing bidders.  So, be careful not to ask any question, where the questions itself, or the answers therefrom, will help educate your competitor on how exactly you do your work, which may be a unique advantage you want to keep secret.  And, on the flipside, if you know you are materially better than your competitors in certain areas desired by the customer, ask questions will that you know your answers will far outshine your competitors.  This is really a fine line to walk; you want to show off your strengths, but not all of your strengths that will give your competitors intelligence.

9. Beware the Procurement Department

There are typically two departments involved in the purchase decision: (i) the business people needing the solution; and (ii) the procurement department negotiating the contract.  The procurement department’s job is to save the company money, and often times, their personal bonuses are tied to the quantity of those savings.  Which means, even if you are the 100% ideal solution for the business people, the procurement department might start “lobbying and biasing” a different solution, if it makes them look smarter to their bosses.  Typically, the business people win out on small price differences, but the procurement department gains a lot more leverage the higher your prices are versus others, even if the business people selected you.  So, make sure you make friends with the procurement team, at the same time you are working the business team, and keep a close eye on your competitors’ pricing.

10. Leverage Back Channels

During the RFP processes, you are typically disqualified if you reach out to the customer during the process, trying to push or promote yourself.  They don’t want to be distracted by numerous bidders while they are trying to do their work.  But, you need intelligence during the process, so you can act on that information before it is too late.  Make sure you have “friendly” people in your back pocket, that are aware of the process and the discussions thereto, but are not directly involved in the process.   For example, let’s say you are pitching a social media technology solution to a brand.  Maybe you are friendly with someone at their social media agency or in their digital marketing team, that are colleagues with the decision makers, and can sniff around for “inside information” on your behalf.  But, be careful, these have to be VERY close friends of yours, where you are sure your intelligence gathering will not make it way back to the customer and disqualify you.


I bet you never realized how many moving pieces are wrapped up in a successful RFP response.   Hopefully, you are better educated on the process, to help you win the next one.

For future posts, please follow me on Twitter at:  @georgedeeb.


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