Clash Of The Titans: Sales Strategy vs. Procurement Strategy
A quite common strategic sales objective is to grow revenue, as a result, companies invest in sales teams or selling activities to win more deals and grow sales. Yet many sales strategies do not include continuously improving win rates, hence too many companies are left floundering in the face of competition and market forces.When your customer finally asks for a price and terms, you know they are ready to buy. So, what happens when they present you with a formal request for a quote called an RFQ? Seller beware because a formal RFQ indicates that the buyer has a procurement strategy, a process and is ready for a tough negotiation. A formal RFQ is meant to give the buyer more information than the suppliers allowing them to dominate the seller in the negotiation since they usually have more market intelligence about alternative solutions and pricing.
Good sellers have a strategy, a process and are ready for a tough negotiation. Sadly, when it comes to responding to RFQs, many companies have no strategic long-term goals, no targets, few metrics if any, and certainly no well-designed process for responding to RFQs. In a recent study conducted by Loopio, a third of the respondents participated in formal bidding processes to retain existing customers. In their study, most of the respondents reported having a process and using metrics. Imagine the high risk and anxiety of employing NO strategy or NO process to maintain ongoing business.While most leaders will tell you that their goal is to maintain and grow their volume. They also aim to track metrics like RFQs won and lost. Yet, they cannot delineate a strategy that strengthens their win ratio. Without a clear strategy, sales managers usually hire people who know products, can maintain effective relationships with customers, and document interactions in a CRM. However, few companies give their sales force a strategy or process or even training for winning RFQs. Great sellers with high win rates trump a buyer’s strategy and process with a better strategy and process.Processes make sure the right people do the right things at the right time. In addition, a good process reduces the risk of failure by ensuring consistency and proper resource utilization. Consequently, it makes sense that most companies rely on processes. It makes no sense that most companies do not rely on processes when it comes to sales. At no time is this more critical than when faced with a formal RFQ from a prospective customer. When a prospective customer has a formal RFQ process, you can be certain they have a clear strategy aligned with their values. If a supplier participates in an RFQ without a clear strategy or process, they do so at their own peril.
In fact, they have imperiled the company’s growth and performance.
Rather than strategy and process, many companies deploy tactics in response to RFQs to attempt to break the suppliers' process and composure. Even though upper management has high expectations for success, these tactics are usually risky since they are inconsistent from RFQ to RFQ and are not tracked to improve effectiveness. However, without a clear strategy to a formal RFQ, these tactics are defensive at best, and defensive tactics are no substitute for an effective strategy fortified with a reliable process.
Often, however, no strategy or a process, leads to the following:
costly or late responses
lack of consistency
responses that do not include the company’s unique value proposition and marketing messaging.
responses that are contrary to your strategy, vision and values
indicating you are a fast follower when you want to be known as a market leader?
your growth strategy fails because your RFQ response is to maintain volume with reduced margin.
missed co-selling opportunities. inefficient use of resources (Drop what you are doing because we need your input.)
lack long-term strategy.
low customer satisfaction.
no accountability or insufficient legal compliance. dropping or stagnant margins.
no performance metrics.
low win rates
Some readers will insist they have a process even if it is not written down. However, it is much easier to improve win rates with a defined and consistent workflow. How can you tell if you have no process or if your process can be fortified? Your process can be improved if…
decisions are slow and rely solely on senior management approval.
there is no or ineffective metrics (i.e., only win or lose)
there is no RFQ documented history, so each RFQ requires multiple resources to do a lengthy analysis year after year.
analysis is solely based on the “right people” reviewing multiple spreadsheets.
there is no intake process for incoming RFQs/RFPs.
there is no decision-making framework including a Go/No Go decision for responding to RFQs/RFPs.
the process or salespeople or RFQ responders do not include marketing, finance and procurement input.
there is no negotiation strategy
there are no dedicated RFQ/RFP/bid response resources or team.
there is no written policy document or process or software.
there is no consistency in understanding or practice. In other words, various salespeople describe the process differently and new salespeople do not know the process. Worst still, new salespeople cannot review the process, so they learn it ad hoc in real-time when the stakes are high.
If you want to increase the odds of winning RFQs and reduce the risk of failure, focus on continuously improving your win rate with a documented process and using success metrics to track progress.
A defined process can pay off big time with higher win rates. Less time spent on mundane tasks and more time spent on quality content leads to higher quality responses and efficiency. Higher quality responses and efficiency bring in an increased average sales price, a reduced sales cycle, and improved win rates.
Therefore, assemble your sales team, develop a flowchart of your sales process and get feedback from responsible individuals or departments before adopting. Include process maps of the workflows for pricing and bidding (RFQ/RFP). Then produce and publish your new policy and train all impacted staff on the process as well as their roles and responsibilities. If you want to really boost your effectiveness, consider purchasing software that helps automate your process. If you purchase software, train again. Finally, track success metrics that focus on process and people such as process utilization, deal size or revenue and volume, forecast accuracy, win rates and sales cycle length.
Companies with the highest RFQ win rates have a clear strategy and defined process and they track metrics to improve their win rate. If you want to achieve the highest win rate despite competitive pressures and market forces, develop a sales strategy consistent with your corporate values and clearly define and implement a process. Track your progress and adjust for continuous improvement. Take control of your growth and performance!
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