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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