Listen to the authors present their findings (source: September 2019 JM Webinar)
Responding to request for proposals (RFPs) can cost firms upwards of $10,000 per submission depending upon the complexity of the deal, yet the odds of success are often low. What’s more is that sellers are often limited in their ability to communicate with buyers, which makes the task of responding to RFPs even more uncertain. A new study in the Journal of Marketing explores key ways to sell through the RFP process.
To ensure fair and competitive purchase processes, most states and many leading organizations limit the amount of contact suppliers have with buying team members once RFPs are released. Accordingly, our research team refers to these buyers as “barricaded buyers” because it is difficult for suppliers to communicate with them. How can suppliers effectively sell to buyers who are shielded by these barricades? Through our case studies and interviews with public and private sector managers, we discovered several means by which suppliers can enhance their competitiveness when selling to barricaded buyers.
In the typical RFP process, there are fewer restrictions placed on communicating with buyers during the development of the RFP (i.e., the “pre-RFP” phase). In this phase, buyers involve suppliers to help clarify their needs so they can develop more appropriate RFP specifications. One frequent and efficient way to involve them is commonly referred to as a “pre-RFP” meeting. These meetings (some of which require attendance) bring together competing suppliers who participate in facilities walk-throughs, inspections, and clarifying Q&A sessions. We discovered that while some suppliers remained silent during these meetings, other suppliers took the opportunity to engage in what we call “peacocking” behavior. Peacocking is when a supplier signals or “shows off” the strength of its knowledge about, or its connections to individuals within, the buying firm. Our findings indicate that doing so can substantially demotivate one’s competitors from responding to the buyer’s RFP.
In addition to demotivating competitors through peacocking, we learned that suppliers can demotivate competitors by embedding their unique capabilities and language into buyers’ RFPs during the pre-RFP phase. To do so, shrewd suppliers often shared facilitating documentation (e.g., marketing materials or sample RFPs) that included some of their unique capabilities and language. Buyers, some of whom had less experience developing RFPs, appreciated the help and used suppliers’ facilitating documentation to help develop RFPs of their own. Suppliers were quick to notice the unique capabilities and language of their competitors and lamented about the biased nature of the RFPs (whether the bias was intended or not).
In the post-RFP phase (i.e., once the formal RFP is released), buyer-supplier interactions are much more restricted. Upon reviewing RFP responses and speaking with suppliers, it became clear that a common approach to developing an RFP response was to meet requirements exactly as requested. Buyers, however, often mentioned that the RFP requirements are really just the minimum requirements. We discovered that more competitive suppliers not only met the requirements of the RFPs, but also went above and beyond the requirements in two critical ways—by also providing innovative solutions and/or by providing solutions buyers hadn’t thought of. Doing so signals to buyers a sincere effort by the supplier to claim their business and that the supplier may provide additional value going forward in the relationship.
In addition to the solutions offered, we learned that buyers lean heavily on the subtle signals suppliers convey in their RFP response documents. For instance, several suppliers were surprisingly inattentive to the poor tone conveyed in their RFP responses and some used canned responses that were not tailored to the RFP’s buyer. Buyers quickly removed such suppliers from their decision sets. Further, buyers paid particular attention to the similarity of the references suppliers provided. Similar references signaled the requisite experience and ability to handle the buyer’s account; dissimilar references either triggered fears of supplier inability to handle their account (when references were smaller or less prestigious) or fears of inattentiveness to their account (when references were larger or more prestigious).
Although price is certainly important when selling to barricaded buyers, our research suggests its importance is largely situational. When asked specifically about the relative importance of price, respondents indicated it ranged from zero percent (for some services) to 75 percent (for some commodity products), with the average around 30 percent. This is consistent with data a large public organization shared with us in which the decision weight for price averaged 29 percent across all its 2018 RFP scorecards. As a result, suppliers engaging in the barricaded buying process should acknowledge the important role of price, but also the importance of these other strategies as ways to enhance their competitiveness.
Read the full article.
Read the Press Release
From: Kevin Chase and Brian Murtha, “Selling to Barricaded Buyers,” Journal of Marketing, 83 (November).
Go to the Journal of Marketing