The opinions in this piece are based on my past experiences from being the point person handling hundreds of Global 2000 proposals covering e-sourcing, supplier management, contract management, and other solutions that support the upstream procurement function – as well as on recent conversations with managers and executives currently involved in proposing such solutions to the same client base.
At Procuri (since acquired by Ariba), which is the firm where we had the best process (that I have ever worked with) for RFPs, “my” success rate at winning proposals was around 11%, if I recall correctly. (Please note that this was most decidedly a team effort, heavily dependent on our regional sales VPs for ultimate success – but as the company’s proposal manager, I had a unique perspective on what came in and, obviously, what went out.) This success number didn’t include all RFP invitations that came our way, we actively filtered out those where we didn’t see a fit and/or where we had no prior contact with the prospective client.
Yes, you read that right – solution providers don’t go after everything. Typical success ratios are often in the low single digit percentage, meaning that upward of 95% of RFPs can be a waste of scare resources. Even Procuri’s number still meant that we didn’t win close to 9 out of 10 proposals. Obviously this is why the sales funnel is so vital to suppliers – in some ways, it's a numbers game. Depending on the time of year and complexity, I pushed out between 8 and 12 completed proposals per month and even if not all were huge time drains, it is safe to say that each response costs the supplier thousands of dollars in direct expenses, allocated overhead, and substantially more if you also factor in opportunity costs.
Back to the RFP process – clearly buyers need a structured way to evaluate solutions, and at Spend Matters we don’t propose to do away with them, just to make them better. From the supplier’s point of view – what is a “bad” RFP? What gets them discarded? If you’re asking why buyers should care about getting a response, well, that is what makes for a competitive bidding situation. Obviously assuming that the responses come from qualified and capable suppliers who can meet the needs.
About the needs… this is where so many solution RFPs go off the rails. From my experience, it was (probably still is) rare to see a well-written RFP built on a clear use case, with sufficient data and other information to provide the solid assessment of needs that is needed to deliver a response that is reasonably close to what the client needs in order to make a down-selection, or even an award recommendation.
This is the reason why cold-call solution RFPs (from previously unknown prospects) are unlikely to receive much attention. The better the firm is, the busier they are, and more likely to weed out such RFPs – and the responses you get back can very well be from firms that are either less capable (desperate) or haven’t truly understood your needs. In other words, reducing your chances of a successful first round outcome.
What you need is to build rapport with the solution provider – make them understand that you are serious, that you have firm plans to actually do something (suppliers hate it when buyers decide to do nothing), and that it’s not a foregone conclusion who the winner is. This process will also help you understand your specs better.
Check back later this morning for Part 2 of our series.