I recently gave a presentation on strategic pricing. Afterwards, an audience member who leads a marketing firm asked for advice on how to handle RFPs (requests for proposal). Her question: “How can we sell value when we can’t even talk to decision-makers?”
Procurement Over Value
RFPs function as an entry point into an organization through the procurement department and frequently offer no ability to interact with the operational stakeholders who might delight in a selling company’s value proposition. My audience member’s concern is a solid one.
RFPs and other bidding environments are buying tactics often specifically designed to separate value from price. They are devices used by many companies to erect an impenetrable wall between those in your customer’s organization who care about the value of what you do and the procurement department that “only cares about price.”
Let’s consider two different cases…
Case #1: The Wall Really is Impenetrable.
Here there really is no way to communicate value beyond what you can submit online. You can’t interact with a human being.
This environment favors the bottom feeders in the marketplace. It favors the worst providers in the industry – the ones who don’t have great quality or service – but who are willing and able to provide it for dirt cheap pricing. The customer loses over the long term because this game is rigged towards bottom feeders. Their procurement strategy attracts lower quality and drives the best vendors away.
My advice for you: Never let a customer’s or a competitor’s bad strategy cause you to engage in a bad strategy yourself. Or as my brother says, “You can’t beat stupid.”
Especially if you operate in an industry with differentiated products or services, you should recognize how poorly matched you are in this situation. There is no ability to communicate value, have a conversation about deeper customer needs, or uncover the problem and dive into a solution in a consultative way. If you are a best-in-class or better-in-class provider, it is unlikely that you will win these sorts of RFPs unless you’re willing to buy them. There is no silver bullet that will make a customer choose value when they are committed to the lowest price at any cost.
You will have to decide if you can live with that low price. And then consider there’s another cost to swimming in these shark-infested waters. How much time, effort, people, headaches, dollars, and other resources do you spend developing, designing, writing, and submitting RFPs against nearly unwinnable odds? Should you?
The Solution: Qualify
Qualify. Always qualify. Like you mean it. Disqualify bad opportunities. Quickly. Fail fast. Don’t spend 6 days or 6 weeks or 6 months chasing a terrible project and then not be selected.
Do you have rigorous qualification criteria to determine a go/no-go for RFPs? Since the RFP process is specifically designed to create price pressure, strip you from value, and favors bottom-feeding competitors, ensure your sales team follows a repeatable sales process including rigorous qualification criteria. Because of the terrible odds of winning, it is in your best interest to submit “impenetrable wall” RFPs as little as possible and only under very specific criteria.
Case #2: The Wall Between Procurement and Those Who Care About Value is Not Truly Impenetrable.
Now let’s consider that procurement may not say so, but there’s some ability to exert influence and sell value. Perhaps you have an existing relationship. Perhaps you did work with this customer before, and there’s an internal champion that loves you. Perhaps it’s possible to secure a meeting with the marketing lead or plant manager or (insert person’s name who cares about value here). Perhaps there’s some mechanism by which you can crack the door open just an inch to communicate value.
It is absolutely possible to win business at higher prices than competitors in RFPs and bidding environments.
- In 20+ years of working in the pricing arena, I have seen hundreds of bidding environments and RFPs in which the lowest price didn’t win. A premium-priced provider came away with the contract because they offered better value.
- I can name a dozen examples where the customer set up the bidding environment and sent out an RFP when they already knew which vendor they would choose. They did this with the intention of creating fear in the mind of their intended vendor. Then, when that vendor didn’t submit the lowest price, the customer chose them from the middle of the pack at a lower price than they could have directly negotiated.
The Solution: Qualify + Sell Value
Once again: Qualify rigorously. Disqualify bad opportunities quickly.
Then sell value relentlessly to anyone you can reach in the decision-making process. Stay close to your internal champions. Ask questions, uncover needs, and solve problems at any meetings or customer presentations during the RFP process (however limited). The degree to which you demonstrate value throughout the RFP process gives the client a preview into your value post-sale and can reduce the focus on price.
You can win business at higher prices than competitors in RFPs and bidding environments through rigorous qualification and relentless value selling. If you don’t have a qualifying process, we have a qualifying checklist to get you started. Email me if you want this checklist or would like to talk about how to help your sales team handle RFPs better.