By Dr. Roy Whitten and Scott Roy, Whitten & Roy Partnership
The process variously called RFP, RFQ, RFI, etc., was developed in the late 18th century to create a cost-effective methodology for businesses to acquire manufacturing components. Today, when applied to purchases of complex goods and services, it drives a process of buying and selling that is fundamentally flawed.
Anyone involved knows that the playing field is not really level (both businesses and suppliers “game” the system) and the process consumes valuable resources and generates significant frustration. The greatest issue, however, is that it prevents the analysis of the problems to be solved that is required for effective selling and wise buying.
If you want to start pushing back on this crazy system, here are some steps we and our clients have found helpful.
Step 1: Count what it costs you to participate in RFPs.
Perform an honest cost/benefit analysis of participating in RFPs. One of our clients found that, on average, each salesperson responded to two RFP processes per month – through which they landed four contracts per year.
- The annual value to the business: $250K per sale x 4 contracts x 9 percent net margin = $90,000
- The annual cost (staff salaries and benefits for everyone who worked on the RFPs) was $12,500 x 24 RFPs = $300,000, plus opportunity costs!
Yes, there’s pressure to participate: from your own business (we have no choice) and from your customers (if you don’t play, you can’t get to the next round). However, if the cost to participate is great enough, you can convince your business to let you explore options.
Step 2: Repurpose your selling process.
The best selling process is one that leads your customer to make the best possible decisions for their businesses. This requires getting them to do four things, in this order:
- Identify the full extent of the problems they are trying to solve
- Estimate the financial cost of leaving these problems unsolved
- Understand your solution to these problems
- Calculate the value of your solution for their business
Step 3: If you can, offer an analysis instead of an RFP. .
If you can refuse to participate (even as an experiment with a few lesser accounts), take these steps with a prospective customer:
- Share the grave limitation of the RFP process: its prevention of discovering the full extent of the problems to be solved
- Have them estimate the cost of proceeding with an incomplete problem analysis
- Ask with whom you can engage to help them with that analysis
- If they won’t do these things, walk away
Step 4: If you must participate, stand out from the crowd.
Go into an RFP process fully aware of its limitations and the cost to your business.
- Raise questions about the problems to be solved – questions that illustrate the incompleteness of their analysis and the insight you bring
- Suggest they calculate the cost of proceeding with the RFP without a full analysis of the issues to be addressed
- Offer a range of solutions and prices that will be dependent on your eventual problem analysis
- Do only the minimum to get to the next level – don’t run up your costs
Step 5: Either way, get ahead of the game.
Use your contacts within your company and theirs to start exploring the next set of problems to be solved before they develop an RFP. Let your analysis be the foundation of how the next RFP is written, and smile when you see your own words contained in the language of the RFP! Yes, “game” the system.
Step 6: Introduce an alternative process: the RFPI.
With our own clients, we strongly suggest an alternative that might be called an RFPI: a request for problem identification. After taking the steps outlined above, we usually see prospective clients pull the RFP in order to more fully understand the issues they must address before shopping for suppliers. And, nearly always, we win these deals because of the trust our honesty and insight engenders.
We wish you the best. May your boldness and creativity finally help the RFP process rest in peace.
Whitten & Roy Partnership is an international sales consultancy that helps leading businesses and organizations transform their sales results. Founded in 2009 by sales experts Dr. Roy Whitten and Scott Roy, Whitten & Roy Partnership today comprises a network of consultants operating in 34 countries around the world. For more information visit: www.wrpartnership.com.