Loss Avoidance as a Sales Tactic
From GOVSALESWIKI
Installment [ 37 ] Loss Avoidance as a Sales Tactic By Richard White
Companies hoping to land large federal sales opportunities quickly discover that bids offered under a public, Request for Proposal (RFP) are often expensive prospects to bid upon. Losing can be quite costly - both in terms of a bidder's real, out-of-pocket costs and the intangible "costs" such as a possible decrease in corporate morale as the losses mount. Although bidding on RFPs initially appears to be a simple process, it is often quite complex and also labor intensive. The time and money you spend on preparing a bid should be based on a careful risk/reward analysis.
Most businesses engaged in the federal sales market have limited budgets and bidding resources. Therefore, your winning percentage must be very high in order to maximize your company's resources. Avoiding losses is often overlooked as an effective federal sales tactic. Obviously, taken to an extreme, loss avoidance can result in your offering so few bids that you are not really in the game. In making bid decisions, you must temper your loss avoidance strategy with good, sound business judgment.
Always consider the following questions in making your bid/no bid decisions:
Pre-established Business Relationships
- Are you the incumbent contractor? An incumbent bid usually has a distinct advantage over other contractors unless the customer is so unhappy with your company's past performance that the agency has, in essence, told you not to waste your time on a bid.
- Is the project or tasks referenced in the new RFP related to the current contract work your company is performing for the customer? If the answer to this question is "yes," contractors performing similar or related work are usually placed at the top of the customer's list.
Other Issues
- Are you teaming with a prime contractor who has an established relationship with the customer?
- To what degree have you pre-sold the opportunity? Review this issue with an objective eye. Temper the very optimistic view of your sales staff with a more objective review of this issue.
- Which of your competitors are also expected to bid on the RFP and what, if any, advantages do you foresee they might have?
- Will the decision makers recognize your company's name when they first see it in the proposal? Do you have any contacts in the agency?
- Have you done other work for the customer (the agency involved)?
- Is the work reference in the RFP a close match to work you have done for other agencies? If it is, also consider what other agencies might say about your past performance when they are called for a reference.
If you follow the analysis above, you should have a list of possible bids. Place them in the order of your probability of succeeding with the least favorable bids placed on top. Using this approach, your blind bids (those in which you have not pre-sold the opportunity and have had no other contact with the customer) would be at the top of the pile and the bids in which you are the incumbent should be at the bottom. The next step is to determine how many high-quality proposals (see last week's installment) you are capable of producing and select from the bottom of the pile up. Ask yourself the following question, "Will writing a proposal for any of the potentially losing bids still on the list affect the quality of my high-probability proposals?" If the answer is "yes," eliminate the less favorable bid opportunity and write less to win more.