Tips For Small Companies To Avoid The RFP Sales Trap

Aug 25, 2015 | Sales Blog

“Why are you investing your time and money on this RFP?”

request for proposalThat’s the first question I asked B., a VP of Sales who emailed me last week for advice on a sales opportunity his team was working. His company, B Co, is a bootstrapped SaaS start-up in growing space. The RFP had been released by a very large, very well-known enterprise.

By B’s own admission, B Co’s offering was at a disadvantage from the outset because the two primary competitors had more mature products with a broader set of features. And, he and his team hadn’t worked with the prospect long enough to be in a position to influence the composition of the RFP.

Hence, my question: “Why are you investing your time and money on this RFP?”

The only answer to my question was that the prospect was a household name and the logo would be a good one to capture. Even though B Co. had a minimal chance of winning the business, they were seduced into investing limited company resources by the prospect of working with this large company.

That dream dies hard. And it’s a trap that too many small companies fall into.

Just keep in mind that if you’re a small company, RFPs rarely work to your advantage (unless you’ve had the time and resources to diligently work the account and influence the writing of RFP with your product spec in mind).

Before you invest in responding to an RFP answer the question why you’re investing your time and money to bid at all. And, remember, there are no prizes for second place.

But, if you’re absolutely committed to pursue a prospect who is going to procure through an RFP, then here are a few strategies to keep in mind that can often make a difference.

1. Sell your 1% differentiation.
I wrote an article about how you only need to be 1% better than your competitors to win a customer’s business. If you’re working a prospect that is qualified in every respect, except for the fact that they are going to procure a product like yours through an RFP, then you need to identify what your 1% differentiation is (this could be the one thing that you do that no one else does, or the one thing you do better than every other bidder. ) and convince the customer that they can’t live without it.

This requires significant pre-work with the prospect prior to the RFP being released. You need to conduct an extremely thorough discovery phase. You need to get in front of the right decision makers and influencers develop a very clear understanding of their business objectives. And, you need to quantify, and get their buy-in, on the incremental value that your 1% differentiation would supply.

2. Sell hard on their value driver.
My rule of thumb is that a buyer will cost justify their investment based on less 5% of the features they ask for in an RFP (even though they still expect you to be compliant with the remaining 95%).

Buyers use RFPs to ask for every feature possible and they often require responding vendors to submit a compliance matrix. This matrix will contain all of the buyer’s significant feature and support requirements and sellers are required to indicate whether or not they and their product are in compliance.

The buyer may want you to be compliant with different 200 items, but their decision usually is being driven by just one or two key attributes, features or capabilities out of those 200. The key task for sellers is to get the buyer to tell you which feature(s) will provide the lion’s share of the their ROI. This is the value driver. Discover the value driver(s) and shape your proposal specifically to highlight how you will knock those out of the park. (It will save the buyer a lot of reading!)

I remember one bid I worked on where the compliance matrix was more than 70 pages long with more than a dozen items on each page. I was VP of Sales for a start-up and there was no way we were going to be compliant with every item. Fortunately, I had a good relationship with the ultimate decision maker and over the course of a couple of conversations he revealed what the value driver was for them. In their case it was just one item out of a list of more than 700 features. We completely focused our bid document on our performance, reliability and support as it related to that specific value driver (and largely ignored everything else). We won.

3. Submit a compelling non-compliant proposal.
This is a bit of a Hail Mary strategy. Instead of submitting a proposal for what the customer wants, submit a proposal for what you believe is the best solution for them (short-term and long-term). Of course, this non-compliant approach should be based on some unique value of your product or service.

Challenge the buyer’s paradigm for what they think they want to buy. Force them to stop and think. And, if they come back to you with a question about why you bid what you did, then they’ve opened the door to a conversation that could give you the inside track to winning their business.

There are a couple of potential “gotchas” in this approach. One is that it can slow the whole procurement down while the buyer re-evaluates their requirements. The other is that if the prospect accepts that your non-compliant approach is a better way to solve their problem and meet their business objectives, then they will probably release a new RFP to all of the same bidders. However, the good news is that the new RFP will be built around your product and your unique value proposition.

At one start-up where I was the VP of Sales, we heard at the last minute about an RFP a large, and strategically significant, prospect was going to release. We couldn’t meet their requirements. However, based on one conversation with the buyer we thought that they were fundamentally misguided about how they were trying to solve their problem. Our problem was that we didn’t have the resources to do a full response to the RFP on time. Instead, we submitted a detailed technical brief for a solution that we believed better met their needs. That led to further discussions with the prospect. Ultimately, they withdrew their original RFP and one year later released a new one based on our proposed approach (which we won).

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