Whether you’re a customer or a vendor, there are many undisclosed facts about proposals. The most protected truth is that the decision is already made and the game is rigged before a proposal is ever presented. As Virtual CIO for the last 20 years, I’ve had the benefit of being on both sides – helping customers identify requirements and pitching solutions as a service provider. Unfortunately, no one can be told the realities of modern buying and selling transactions for technology solutions because you have to truly experience them for yourself.
You know something is not right during the process. You can’t explain it, but it feels wrong. Beware, as this is your last chance. You can stop now and go back to believing whatever you want or you can continue and see how far the rabbit hole goes.
Commerce began centuries ago, when people bartered supplies to live – which eventually evolved into various forms of money for any conceivable good or service. Less than 100 years ago, magical machines like the computer were invented, based upon abstract ideas for virtually any use. Software and other intangibles that you couldn’t really touch or quantify entered the marketplace. No one really knows when the first technology proposal was created. There was no other way to explain the concepts and value. What we do know is that we’ve been a slave to the process ever since.
Buyer Proposal Guidance
For the last decade, customers overwhelming have had the upper hand using the Internet to gather information. The problem is the use of supposed “conventions” from generations ago or general laziness prevents getting the best solution or hiring the best service provider. Customers don’t ask the right questions when first meeting a prospective service provider or reseller, much less avoid even bigger mistakes going forward.
Request for Proposal Debacle. What seems obvious in business is never the case and Request for Proposals (RFPs) are no exception. Internally, there is always a member of the team that has an agenda to steer to their favorite vendor. Also, isn’t it funny that the company that helps put together the requirements almost always wins the bid? The reason is certain aspects that only one vendor can fulfill are slipped into the requirements. Seasoned industry players readily recognize competitor traits, know the RFP game too, and simply refuse to respond if there was no involvement with creating the RFP. To fill out the perfunctory 3 bids, only startups not familiar with the process will quote or wily vendors that seek to change the requirements in their favor during the process.
The other factor customers don’t even consider is that the technology industry has grown so fast, that it has matured in a few decades versus centuries for other industries. For hundreds of years major shipping companies in Europe bludgeoned each other competing on trade routes, until one day the two top shipping firms formed a secret alliance to share information and decide who got the business. Technology firms belong to various industry associations with such arrangements decided long ago. Don’t assume you’re a savvy customer and are ahead of the game, because you’re habits and initiatives are likely known by many vendors who don’t even do business with you.
Customers should be able to gather their own requirements or use a vendor to help that is not eligible to bid. Today, pricing for solutions is readily available on the web including cost calculators for services. Ditch the RFP, identify your needs with an idea of cost, and then pick your two favorite candidates to submit a proposal. Save everyone the time and agony. Besides you never consider the third bidder anyway.
Deal Registration Trap. In World War II, the U.S. had a propaganda campaign of “loose lips sink ships” for servicemen and citizens to avoid unguarded talk. This concept is an important lesson for buyers as well. When a customer asks any vendor for a quote, it’s likely they’ve unknowingly triggered a deal registration. Most hardware and software manufacturers have a deal registration process to identify potential customers and assign the reseller. The twist is that the assigned reseller then owns the opportunity and has the best discount, with other resellers often prevented from getting a quote from the manufacturer. Often when a customer contacts a manufacturer directly, the manufacturer may lock out any resellers to win a deal at the highest margin.
For hardware, the manufacturer has the best price for ordinary purchases and the reseller actually has more discount for high-end or specialty items. For software, the pricing is often controlled and only available through assigned partners. Major software distributors may have year-end rebates that allow loss leader pricing on certain items in order to charge the highest margin on products under deal registration. Understanding this process is just more rationale why customers shouldn’t recklessly solicit quotes from any part of the sales channel.
Qualification Failure. While mysteries like deal registration may be a revelation, many customers fail to properly analyze proposals or truly qualify a vendor. Let’s face it. Most proposals are 90% irrelevant or “puffing” noise. However, besides the numbers, the two areas that should be scrutinized heavily are background and terms.
For professional technology services, customers should only hire C Corporations with listed ownership by the Secretary of State. Otherwise, you don’t really know if you’re dealing with a foreign entity, gambling venture capitalists, potential competitors, felonious individuals, or any other unwanted associations. It’s great if the vendor has 85 people, but it doesn’t mean much if they are all web developers and you need infrastructure support. Always visit the local office and at least have a conference call with the vendor’s board.
Like license agreements or website terms, most customers blow by the fine print in proposals. Invariably, rights are waived for any recourse or liability for equipment and risk is transferred to the customer with heavy penalties. All of these red flags are when customers should not negotiate, but walk away and start over.
Seller Proposal Guidance
While customers may not really know the game, it’s the vendors presenting proposals that are really lost. The whole sales process is generally a hot mess and definitely shows by the time a proposal is presented. Panicked sales people trying to make quota and get paid only really know bluster or deception. The proposals generally mirror this stance with additional irrelevant information as padding to seem more authoritative.
Proposal Dilemma. Here’s the stark reality. Most technology service providers and resellers offer nothing unique or impactful. Further, compensation models are generally not aligned with firm goals to help customers (usually not a concern either). Without any true specialization, customers often decide the cost of doing nothing is less than randomly picking a vendor from a pack of mediocre clone responses.
Up your standards and provide a better offering. If a competitor regularly dominates you in the marketplace, it’s because they have a better strategy. Proposals should not have 10-30 pages of overwhelming detail, but rather succinct solutions with a financial approach. Myriad comparisons, frequent questions, options, and related preferences should be discussed well before presenting a proposal. An overhaul of flawed marketing and sales process develops better proposals and customer buying experience.
Customer focus. The standard proposal formula is all about the vendor: background, current statistics, facilities, and awards. Throw in some specifications with pricing and a terrible impression is assured. Instead, how about describing the customer pain and showing the process of how you can help in graphical form along with a timeline. Also, include caveats so the customer has no unknown surprises. If the customer doesn’t know your story and value by the time a proposal is presented, then you have no chance of winning anyway.
Are you a technology service provider or reseller and think you’re different? Take a few minutes and compare competitive websites in dismay at the similarities. Likewise, stop the foolish and indefensible statements in proposals: leading company, state-of-the-art, best of breed, full service, fast growing, and trustworthy. Why continue to damage your credibility?
Proper presentation. Don’t tell anyone, but do you know the most colossal proposal mistake? Well it’s naïve technologists or cowardly sales people who blindly e-mail a proposal and then wonder why the customer won’t call back or speak to them.
Imagine if your doctor mailed some x-rays and a big bill without identifying the break or explaining the prognosis. Review proposals with customers personally. The concept may seem like common sense, but few vendors get it. Customers who refuse to meet for proposal review aren’t serious about buying either.
Hopefully, the secrets revealed above help you to avoid some pitfalls and improve your approach. Everyone wins with better evaluation and quicker transactions.