It is tough coming second. No one remembers the runner-up or the silver medallist. In bidding for business, there is no compensation of a prize or a rosette. It is all or nothing, and you could have spent many thousands of pounds on the bid. The terminology of sales pipeline management sometimes sounds like a game of chance – we set our acceptable win rate, such as 1 in 4, and then make sure the quantity of leads feeds into proposals then into contracts. There are stage-gates for bid/no bid decisions, and these should be focused on qualitative factors, rather than the numbers game. It makes sense to withdraw from unsuccessful positions as soon as possible, and to put more resource into winning positions.
There are two underlying questions that need to be answered objectively by the decision-making teams in bid/no bid meetings. How much do we, as a supplier, want this business? And, how much does the customer want us as a supplier? It takes some robust analysis to answer these questions, and if the answer to either is “not enough”, the bid should be shelved.
In addressing the first, the team need to be clear about the strategic direction of the company. Does business that represents growth matter more than business that helps cash flow or contributes a lot to profitability? Is there really a good and easy fit to our capabilities and processes? Could this business enhance our brand or our customer portfolio? In addressing the second, there has to be some realistic wearing of the customers’ shoes. Do we have enough of an edge over the competition against the specification? Do we have ideas to add, which will help the customer to achieve new things for their customers? Can we reduce the risk for them in switching to us? Is it really going to be easy for the customer to do business with us? Here are a few guidelines for the discussion.
How much do we want this business?
DO – let accountants do the maths on return on investment – and remember the saying that growth is vanity, profit is sanity and cash flow is reality.
DO – let the operational experts in the company decide on the fit of the business. Diversification sometimes makes sense, but it creates risk and it will be the operations department who have to manage it.
DON’T rely on the appeal of the brand name of the prospect. How many times do sales managers hear that from salespeople passionate about their prospect that they have “reference value”? Customers who agree to be reference sites do reduce marketing expenses, but they know that and expect “in-kind” returns.
DON’T forget to examine risks. Resourcing any bid means taking resource away from something else that might be important, and success brings challenges as well as rewards.
How much does the customer want us:
DO a deep analysis of the customer’s business environment, including their competition and their customers – what does their strategy need to be? Where does your bid fit into it?
DO assess whether your bid is strategic or tactical to the customer. If strategic, lead on ideas, if tactical, lead on making it easy for the customer to do business with you.
DO consider partnerships with other players in your sector if you need to improve your value proposition. For example, if you are a small company or a new company, do you need a company with a track record to play in this field?
DON’T disrespect purchasing, or the customer’s internal politics. Try to get a handle on their perceptions of you as a supplier. Unless their incumbent supplier has just messed up, or some key decision-makers have changed recently, you are going to be an “also ran”.
DON’T forget to minimise the customer’s switching risk. Even if you are demonstrably better than the incumbent, research suggests that “better the devil you know than the devil you don’t” is a maxim that sometimes plays out in buying decisions, especially in sectors where all players are expected to be difficult, e.g. finance, utilities and information/communications technology.
As bids progress, more knowledge comes to light and circumstances change. The bid/no bid decision may have to be revisited. However, the earlier some analysis is done, the quicker it is to update and the more likely it is that show-stopping problems will be spotted. It is not in the nature of optimistic and resilient salespeople and sales managers to want to think about the business we should not do, when business is scarce and it is tempting to go for every opportunity. Nevertheless, resources are scarce, which is why we need strategy to allocate them. It is not career-enhancing to bring in the business that nearly broke the company, so sometimes we should celebrate the courage of “no bids”, while moving swiftly on to the opportunities which are more likely to create mutual value.