WHY SALES PEOPLE LOVE RFP’S ?
Sales people are elated when they receive the RFP (request for proposal) from the prospect’s firm; after all it has been secured after rotating on the head of the pin for 3 to 4 months. Large deals in the market place are not put up without concomitant due diligence by the buyer hence even to get qualified and receive an RFP is perceived as a milestone. The prevailing rationale is; at least some kind of opening and ingress is being made with the prospect. For many selling firms this could be a desperate need. In spite of knowing that they can’t win the bid, they participate with the intention of getting their foot in the door in order to know who the key buyer’s are, get introduced to buying firm’s technical teams, management etc. The RFP gives the sales personnel something to keep surfing upon for a few months. RFP brings effervescence to the office, everyone is upbeat, multi-location conference calls begin, senior management is invigorated, there is documentation galore, CRM entries are upgraded forthwith and different departments of the organization seem to crank into cohesion.
To quote a cliché ‘Hope springs eternal’, there is a spike in motivation levels and unhesitatingly the sales person converts the RFP into a number equivalent that populates the forecasting sheets for the next quarter. Sales managers too are enthusiastic and in cahoots with the sales person to uphold the RFP and seek the firm’s participation and this inclusive behaviour cascades upwards. Why, because statistics such as ‘how many large deals has the firm participated in’ is an important metric hence the firm’s sales head endorses the very first criteria of an RFP i.e. ‘decision to bid’. Activity based strategy begin to tackle the RFP with the hope that a best- effort approach will end in accomplishment. Faith has a place in the sales process.
WHY DO COMPANIES PUT OUT RFP’S
An optimistic stance is a fair attitude to administer to the RFP but there are concealed truths that lie beyond the RFP. Here are a few reasons as to why companies architect complex RFP’s:
Due to highly competitive business environment, the firm is unable to sustain its profitability and desire for a massive upheaval in operations.
As a matter of keeping up with their status as the pioneering innovators, the firm needs to constantly institute massive changes in functioning.
New technology, IT systems and processes have come to the market place and it is important to be in sync to enhance productivity.
Clients intending to outsourcing certain aspects of their business.
Due to service provider’s product/service becoming a commodity, the firm needs to extort a better pricing from the market.
Buying firm is incensed with the existing supplier/ service provider and want to incapacitate their monopolistic hold over the buyer.
Buying firm loves a particular supplier but presenting a large deal directly to the supplier would raise eyebrows of the auditors hence to adhere to ethical buying practices, they conjure up an RFP process and involve a few outside players.
A genuine need to bring in new players, perhaps encourage smaller suppliers who may provide dedicated service and more attention.
To seek alternate forms of buying such as partnership model with suppliers, GTM (go to market) strategies, deferred payment approach, royalty payment models etc. This minimizes risk for the buying firm if it doesn’t know how a new technology product/service will behave in the market.
Plan to work with 2 or 3 vendors simultaneously to distribute the risk.
Floating an RFP just as a clerical exercise to understand market trends, techniques, competitor positions, prevalent technologies etc.
There are many other reasons to float an RFP however the broad ones are listed above. RFP is a comprehensive process where all aspects of the service delivery is captured and accounted for. The principle driver for an RFP is the assumption that competitive bidding will enable the buyer to procure an effective service at an acceptable price. Eminent consulting firms are roped in to augment this process of organizational transformation incase the buyer is unsure how to orchestrate a drastic change or improve lifeline parameters such as ROI, profitability, market share, export revenue, and other matrices. Many times the firm themselves are in a position to assess their own transformation needs without the facilitation of consultancy firms. Be it own or consulting firm’s recommendation, the action elements are bifurcated and specific RFP’s are floated for product/services procurement.
DECISION TO BID
The seller’s firm, prior to participating in the RFP must determine which amongst the above reasons are pertinent for the buying firm. If the buying firm has already established the RFP specifications by working with a vendor and has preference for that vendor then the RFP floatation could be a mere hygiene aspect. Not deception rather circumvention, after all the buying firm could be clear-sighted to know its best interests. The preferred vendor may have already influenced the outcome of the RFP by including aspects in the RFP that dove tails with their firm’s differentiators that they enjoy in the market place. Why does the buying firm permit such a charade? Because it insulates them from appearing partisan to one seller. Under the RFP altruism that is being doled out, it creates sufficient mask for the buying firm, shielded by which, they can cleverly dispense with other suppliers using some stringent criteria. Under such conditions participating in these huge RFP’s could be a calamitous drain on the selling firm’s resources.
CREATING STRINGENT QUALIFICATION CRITERIA
Whether it is an RFP or no RFP, prior to pursuing any client or any specific lead pursuit as well as prior to directing the selling firm’s resources to the bid, exhaustive prospect qualification has to be carried out. Selling firm must understand the importance of such a process and establish a team for it. Sales manager’s must chaperon this cause and must remain vigilant to guard the selling firm’s time spent. Bid participation is a very costly process. Of course, a single deal can change the sales person’s career as well as the company’s fortune hence a little risk has to be embraced however no risk prior to an inflexible qualification process.
Plucking an RFP at random from the market place is hazardous to the firm’s bandwidth and everyone knows it yet the temptation to follow suit is extreme. Ask any firm, how many RFP’s have they declined? A better question would be ‘What is your firm’s RFP conversion ratio’. Top sales firms have a winning disposition with RFP’s. Until the buying firm understands the selling firm’s value proposition (to a reasonable extent), nothing is progressive for the seller. The bid is still at a rudimentary clerical stage. But then value proposition cannot be presented to the buyer unless the seller understands the needs of the buyer and an RFP process is a very protracted stage to understand the buyer’s needs as it has already been deciphered, synthesized, defined, perhaps done by the competitor in conjunction with the buyer. One is too late in the game.
The optimal strategy is to prepare the RFP with the client but to reach these levels of selling it needs buyer’s unequivocal trust and a consultative constitution within the selling firm, which is one amongst the organizing principles of sales.
THE ROBUSTNESS TO DECLINE
Modern buyers are extremely wary of their time and almost militant when it comes to preserving it. They meet selective sellers hence upon receipt of the RFP from the buying firm, it is important for the seller to have a meeting with the buyer for a preliminary assessment. It is understood that primarily an RFP lands in the firm due to the initial groundwork done by the sales team which explains the Eureka moment for the sales person when the RFP does indeed arrive but there are instances when sales people sometimes wing it and secure an RFP somehow. If the buying firm doesn’t grant this initial meeting then the selling firm is another inconsequential supplier to them. A perception that the buying firm can be educated and apprised about the selling firm’s differentiators and merits through the recently commenced RFP process is a big and costly presupposition. They just may not care for the seller or the seller isn’t strategic enough for them to spend their precious time. This in itself is a strong cue. At this stage, do not sublimate this vital cue with sales optimism and go through the motions of the RFP bid. Overheating is a big price to pay. Bid loss after apportioning considerable time to it is like chewing gum for 3 months and then spitting it. The precious time can be reallocated to pursue other well-qualified leads.
SYSTEMATISING & GEARED UP FOR LARGE DEALS
Not all companies struggle with the RFP process. Most IT and technology firms have a highly systematized process to deal with RFP complexities. They have data in their repository from where they can pick and choose information to make accurate fitment to various RFP questions. They constantly keep their differentiating points well polished as well as keep adding to the reservoir. They have complex qualification process and teams instituted. Unless such an infrastructure is available or developed, selling firms must prevent RFP induced decapitation.