Marketing as a function makes a contribution to profits by coordinating the submission of proposals. Any improvement you make in your effectiveness in this area will be reflected on the bottom line. The best way to learn is by doing it, and by winning against the competition. Books and seminars on proposal writing are useful primers.
This post is about several failures I experienced early in my proposal writing career. A few years ago, I found myself thrust into a new job where ALL of the business is won by submitting formal proposals. I found out that I was the “point person” for this activity about one week after I was in the job.
There I am, sitting in my first team meeting, flush with the eagerness that comes with being new and without blemish. We were discussing a major RFQ that had just hit our desks. I was calm, because I was obviously too new in the job to be given a big project so soon. I knew I’d have a chance to learn by watching someone else handle this one.
Gradually, however, I noticed that everyone was looking at me, nodding their heads and smiling. I heard, as if from another world, my boss’ voice finishing a sentence, “… so then you’ll pull it all together, right, Prentis? It will be good training for you.”
“Yes, I’d love to,” came my own voice.
Thus began my journey to discovery.
What I Learned From My First Proposal
I remember my first proposal fondly. It was mush. Nice colors. We didn’t get the business.
The feedback from the customer went something like “your document looked real good and was full of interesting information, but your competitors just gave us a simple clear offer that we could understand.”
I was embarrassed, because this should have been a lay up. The incumbent had lost the account by providing lousy service and inept account management. Only two other companies were capable of serving this customer, and we clearly had the best capability.
One little problem, though. The customer didn’t know we were so good. All they knew was what we told them in our proposal.
Naturally, I felt horrible because I let everybody down. I was angry with myself, and probably not very good company for several weeks. But I vowed to never repeat the same mistakes again. I developed a list of Basic Rules that apply to every proposal I write. These rules are basic common sense, but I find that many marketers I talk to do not find them immediately obvious.
You should follow these rules for every competitive bid.
Keep it simple. Follow the outline of the Request for Quote (RFQ) or Request for Proposal (RFP). Don’t get creative by making up your own format. If the customer needs a roadmap to find the answers to their questions, you’ve hurt your chances. Try to use as few words as possible, because people hate to read proposals. Use tables to summarize relationships between data. Use graphs to show trends. Use checklists or bulleted lists to guide the reader’s eye to key points.
Don’t ask for an extension. Being late only helps your competitors, and makes your company seem inept. Barring some disaster, you should never be late with a response.
Don’t ask questions. If they don’t know how to buy what they want, it’s not your fault. More importantly, you run the risk of getting addition information that may not be shared with your competitors. You could end up bidding on a different scope, and have prices that are higher than the others. When in doubt, bid the cheapest solution, and explain why in the proposal.
Write an executive summary. In the first or second paragraph, summarize what you are proposing in one sentence. On the last page, include a simple cost-benefit table that spells out in financial terms what the customer will spend, and what they will receive in return. Don’t harp too much on intangibles, unless you can express them in financial or operational terms. If the customer doesn’t already know the intangible reasons to make the purchase, it’s not your fault.
If possible, know the customer’s scorecard. Are purchasing managers paid a bonus? Is it based on cutting prices or reducing total costs? Will headcount reduction targets be impacted by your proposal? The more you know about the customer’s scorecard, the better.
My next failure – playing to an empty house
Things went just dandy for a while. I began to get the knack of responding to RFQ’s. Salesman began to call. They wanted my help. What higher endorsement could a marketing manager get!
Then one day, I got a call from Ralph.
Ralph needed my help in the most desperate way. A major prospect had issued an RFP and had somehow left our company off the list. The responses were due in a week, and Ralph didn’t want to be late. Although Ralph was a seasoned salesman, he had been recently assigned to the account and had called on them thee times in eight months.
“Sure, Ralph,” I said. “I’ll be glad to help. How deep is your relationship with this account?”
“Well, I’ve met with the buyer a few times, but really don’t know anyone else.”
“No problem. What do you know about what they’re really looking for?”
“Um, lower prices, I guess.”
“Well, they’ve already got low prices. Why are they going though all this trouble with a RFP and the whole nine yards? There must be some other issue driving this. Did the buyer give you any clue?”
“Well, I can call him and try to find out,” said Ralph, trying to be helpful
“Um, there’s no time for that Ralph. Tell me about the competition. Who’s in there, and who’s bidding against us?”
“Well, they’ve bought from Dirt-Ball, Inc., for about 10 years now, but I really think they’re going to switch because they sent this RFP to everybody, even distributors. In fact, that’s how I found about it, when one of our distributors called me for help.”
This one was doomed from the beginning, and I knew it. Ralph knew it too, although he didn’t want to admit it for fear I would refuse to work with him. He was right.
We had been left off the bidders list because the customer didn’t know who we were. The salesman didn’t have a relationship, and didn’t know enough about the account to understand their needs. Plus, an entrenched incumbent was doing a fairly decent job.
But that was not the problem. These situations occur every day in business. The problem was that I didn’t have the common sense to walk away. I liked Ralph and wanted to be a nice guy.
Knowing when to no-bid is the second rule of proposals. If you aren’t certain you stand a good chance to win, you’re wasting your time. If you’re a typical industrial company, your marketing and sales resources are already thin. Time is your enemy. If I really wanted to be nice to Ralph, I would have declined to work with him on this RFP, but instead flown out to his territory to help him drum up some really good business.
Then there’s this one: “If we don’t bid we’ll be sending them a message that we don’t want their business.”
Well, of course not! But there’s another way to look at this, too. Not being able to win in a bidding situation is different than not wanting to do business with a customer. What the salesman means to say is “They may want to buy something from us later, either on a spot basis or some other non-competitive situation, and I’m not willing to risk closing that door just because we can’t open this one.”
If you work with good salespeople, they aren’t interested in chasing bad business. When they say you need to submit a bid, sometimes you just trust them and do it. A lousy salesman will want to bid everything, and you must make a distinction.
I call this a “forced bid,” because you’re forcing yourself to bid when you’re 100% sure you can’t win. For forced bids, use a very simple standard proposal you can modify in a couple of hours. Usually list prices are sufficient for quoting. But be careful — I’m not saying you should cater to the fears sales. I’m saying you should never bid on bad business, unless you’re working with a top salesman who, after careful consideration, thinks it is worth the trouble.
My next failure – One Man Band
In a short time my success rate improved. Yet, I learned a tough lesson when I got too cocky and thought I could win a piece of business all my own. “Just show me the document,” I said, “I’ve done this so often, I know what to do.” Well, I didn’t know enough, and quickly discovered I was over my head. By then it was too late. Fortunately, it was a fairly small account.
To raise your chances of winning a major piece of business, you must have the right team working on the bid. For small bids, a few people can usually handle all of the tasks. For a large proposal, you will need more people. One way to organize the tasks is break people up into teams for different sections of the proposal. The teams leaders stay in touch daily. This system really works!
Green Team: Sales and Finance. This team makes sure that the offer is priced competitively while also providing sufficient return over the contract. The Green team collects all cost for products and services offered, and prepares the price schedule for the proposal as well as the financial summary for the “Green Sheet” explained later on.
Blue Team: Commercial, engineering, operational scope: The Blue Team is assigned to assemble the bricks and mortar of the proposal. To what extent do you propose do business? What equipment and apparatus must be build or installed, and at what cost? What do you propose to perform in terms of day-to-day service? The Blue Team addresses these questions.
White Team: Assembly. The White Team’s role is taking everyone’s input and assembling it into a single proposal that follows the required format. This team checks to make sure everything meshes together into something the customer will buy. Often the White Team has little to do until the last few days before the proposal is due, then there is a mad flurry of activity and lots of overtime!
Red Team: Final critique and approvals. The Red Team can be a single person—usually a general manager or higher—who reviews the Green Sheet, the executive summary, and any other sections of the document that may be relevant. Final executive approval is usually not required on small bids, but major proposals may require capital investment on your part, and management approval is a must. Setting up a Red Team at the beginning enables you to get the approvals you need in time to meet the deadline. If your team is on the edge of profitability, early involvement by the Red Team is very important.
My next failure — The other shoe, on my head
Sometimes, winning some business can have negative consequences. That happened to me when a large account took 2½ years to make a decision on a proposal. When they eventually selected our company, it was a year later when we looked at the P&L. Apparently, nobody had updated the pricing that was originally submitted, and the customer decided—after the fact—to retain the incumbent at about 40% of its original volume. So, our actual unit sales were about 40% less than projected, and our pricing was about 10% less than market.
The combined effect of these two changes had a devastating impact on the bottom line. When we submitted our results for annual review, management ate our lunch. Why? Because these problems could have been avoided, had we been vigilant.
Which brings us to the internal proposal summary, or what Don Wilson of Allied Signal calls a “Green Sheet.” A Green Sheet is more than a financial review. It’s a request for approval that includes a complete business plan distilled down to its most essential elements. These include the following:
- Project description
- Customer profile
- Competition for this bid
- Proposal description
- Bid strategy
- Risk assessment
- Financial summary
Key issues and recommendations
The Green Sheet can be an indispensable management tool after the deal is inked as well as before. It contains all of the elements that permit you to “make good” on your promise to deliver profits to the company.
Making your “make good” early
You can exceed your promise to management and be a hero if you:
- Generate more cash than projected by increasing volume or price while holding the other constant.
- Earn cash faster than expected
- Earn what you projected but consume less capital in doing so
- Reduce operating expenses below projection
- Reduce WIP and/or finished goods inventory below projected levels
The Green Sheet is a basic information tool that everyone involved with the customer can refer to. Collective focus is what it takes to beat your “make good.”
Whispering In The Wrong Ear
The best time to start working on a proposal is well before the formal request is issued. The more you understand about what the customer really wants, and what they are willing to pay, the more likely your formal proposal will address the core issues the customer wants to solve. If you do this effectively, the customer will ask you to help them write the RFQ.
Put another way, the key to winning a competitive bid is responding to the customer’s problem in the customer’s language.
Understanding the customer’s language has two elements.
Sales is the “Keeper of The Relationship.” A good relationship enables the salesman to ask tough, probing questions, and garner important contacts inside the company. For example, a salesman can find out the customer’s scorecard only if she has a good relationship. Relationship is itself built upon three elements:
- The demeanor of the salesman in conducting business.
- The degree of mutual trust and respect between the salesman and people in the account.
- The track record of the salesman, as a representative of your company, in delivering on its promises and bringing value to the customer’s business.
Marketers play a crucial role in enabling sales to deliver on item #3, and can make a tremendous impact on sales effectiveness. But that’s another article.
Positioning, the second element, means aligning your offer with the customer’s buying needs.
The alignment that matters for your proposal goes beyond the products and services you offer. It has nothing to do with the customer’s industry grouping, location, or size. It has to do with buying behavior.
Tyler Jeffrey, a marketing manager with Dow Chemical does this exceedingly well. I call his positioning approach “The Dow Method.” Jeffrey has two simple premises:
#1: If you can’t treat a group of customers differently, you don’t have a segment.
#2: A customer’s buying behavior is the most important distinction when you’re trying to sell them something.
The Dow Method groups customer behavior into four categories:
Loyal/Security. These companies sign contracts to assure supply. They view changing suppliers as risky, and will reward good suppliers with volume and price. Manufacturing has a strong influence on purchasing decisions. Incumbents usually win. The scorecard is based on total cost.
Price. These companies sign contracts to manage prices. They view changing suppliers as relatively low risk. They often split their requirement among many suppliers. They reward good suppliers (that is, low priced) with volume. The scorecard is price reduction.
Technology. These companies sign contracts to assure supply. Manufacturing and R&D have a strong influence on purchasing decisions. They view change as relative low risk. Although they reward good suppliers with volume and price, incumbents can lose on product performance issues relatively easily.
Value. These companies can drive you nuts. They want low prices and good product performance. They will pay a small premium for a differentiated product, provided it delivers a measurable value. They may or may not split requirements. They place a high value on relationships, and will reward good suppliers with more volume, last looks, and occasionally, a little bump in price.
The Way to Win With the Dow Method
First, position your proposal with the behavior segment of the company. For example, if your customer is a price buyer, don’t offer bundled services. Unbundle everything, and present the lowest price offer that meets the minimum requirement. Price additional services separately, as options. If your customer is loyal, and you’re not the incumbent, provide copious amounts of performance data, references, and guarantee your service level.
Second, offer services that match the segment. Technology buyers want to know about your R&D support. Value buyers want to know how you can help them reduce their cost of ownership. Price buyers want to know about your pricing mechanisms. Loyal/security buyers want to see services in the areas of logistics, emergency delivery, 24/7 customer service, and so forth.—PH