I have the honor of working with hundreds of CEOs each year. Common questions relate to how companies deal with the Request for Proposal or RFP. The RFP is a tool designed to allow the buyer/customer to outline their needs and specifications to get consistent responses from vendors.
Background
RFPs were most commonly used by government and large corporations. Today, companies of all sizes use RFPs. It is not uncommon to see an RFP used when hiring a law firm or procuring cloud services. My friend Jack Quarles, CEO of Buying Excellence, often counsels his clients to use an RFP to ensure they are getting the best value in their purchasing.
Much like the Force in Star Wars, RFPs can also be used for good or evil.
- When used for good, RFPs are designed to ensure that the vendor has sufficient information to provide an informed proposal to the client about meeting their needs.
I have outlined some of the most common problems and how to address them:
What if they ask you for details on your double-top-secret approach?
Often a buyer will not only describe their challenges, but ask you specifically how you are going to solve their problem. Recognize that in order to make effective decisions, buyers fundamentally need to know three things that I have confirmed through research with hundreds of executives:
- Why they need to address their issue;
- What will be their likely outcome/results from your solution; and
- Why they would pick you over another vendor.
When government buyers receive an RFP response, your answers may be available publicly through the Freedom of Information Act. If you are not comfortable sharing your detailed approach, then address the three points above. Specifically, you can demonstrate an understanding of their situation; provide tangible examples of results for similar clients facing the same issue; and explain that you cannot divulge proprietary information that could be made public. You can describe the risks of this type of project and how your approach avoids those risks. Remember that you are the expert in your domain. If they cannot trust that you know what you are doing, then you should not be in the mix.
When Should I Bid Against the Incumbent?
Once the RFP comes out, it is tough to get valuable information. However, prior to its release, a couple of quick questions can give you insight. Ask "From 1-10, how would you rate the current provider?" If the buyer gives you a number that is nine or 10, then you are likely facing an uphill battle. Anything below that signals opportunity. A good follow-up question would be "If you could change one or two things about them, what would those be?" Based on those answers, you can generally get a pretty good sense of where you stand.
It's Not about Price
When I ask CEOs what matters most in selling, they generally say price. Moments later, I ask them" "All things being equal, from whom would you buy if the issue you were facing was very important?" Their options are 1) A friend; 2) Someone who best understands their situation; 3) The lowest price; and 4) The most outgoing. Across more than 800 CEOs, No. 2 has been the answer in all but two cases. Lowest price is never the answer. As sellers you might think it is about price, but buyers rarely give that answer unless buying a true commodity. Clients buy for best value (even in the government). If they don't see that you offer more value per invested dollar, then do a better job of demonstrating value.
Conclusion -- Get there early
Ultimately, to ensure success for you... and to actually best serve your clients, you need to get to the party early. I ask CEOs and executives what percentage of RFPs they win when they get there before the RFP was issued. The answer is almost always over 50 percent, and usually over 80 percent. I then ask what percentage they win when they respond to an RFP they did not already know about. The answer is generally 5 percent or less. The shame is that most companies spend more time responding to RFPs they won't win than they do trying to get into opportunities before the RFP is issued. Don't make the same mistake.
Luke Skywalker used the Force for good. Darth Vader used it for evil (sorry if I gave away the plot). Notice that Luke won when he got to the Death Star early. He even was able to get Darth Vader to ultimately do the right thing. Of course, Luke also lost part of his arm in the process. Hopefully you'll have a less traumatic journey.