Great article from Tim Williams on the importance of competing on value rather than cost: Agencies should understand the critical importance of signaling value, and some exert considerable effort in dressing up the visual design of proposals. But when you look past the style, there is often a serious lack of substance and a striking lack of differentiation in the offering. The majority of RFP responses and proposals are littered not with the language of value, but the language of cost.
When we walk into a store to purchase a product in a category in which we have no prior experience, how do we make our choice? Mostly, we depend on value signals.
One important value signal is design — the design of the package, the display, and of course the product itself. But prior to our visit to the store, value might have been signaled through the brands’ advertising, website, or social media. And of course, as we stare at our choices on the shelf, value is signaled by the price. Most of the time in most categories, a high price is correlated with high quality.
Could these signaling dynamics possibly apply to the world of professional services? Absolutely they can, and they do.
The language of value
Advertising agencies especially should understand the critical importance of signaling value, and some exert considerable effort in dressing up RFP responses to appear polished and professional. But when you look past the carefully-kerned typography and high-resolution images, there is usually a striking lack of true differentiation in the firm’s offering. Instead, the vast majority of RFP responses and proposals are littered not with the language of value, but the language of cost.
There’s no doubt that the questions asked in RFPs are cost-centric, but that doesn’t mean we have to answer them in that context. Procurement’s job is to put firms on a “level playing field” by asking questions designed to break down a firm’s offerings into the simplest comparable components. But you have a job as well, which is to make it difficult to compare your firm’s offerings. While procurement seeks apples-to-apples, your job is to be an orange.
Answer the questions that should have been asked
Your other equally important job is to completely avoid playing the cost game. You are not selling your costs, so don’t allow your offerings to be viewed through the lens of hourly rates, blended rates, FTEs, or any other unit that does not correlate to value. The inventory in your firm is not a warehouse full of hours (which essentially just represent your costs), but rather a storehouse of intellectual firepower. You sell solutions to business problems, not units of effort.
The language we use in new business proposals and RFP responses represents a tremendously powerful value signal.
LANGUAGE THAT ERODES YOUR VALUE
LANGUAGE THAT ENHANCES YOUR VALUE
RFIs, RFPs and RFQs are all notorious for asking questions that are useless in providing information that can help evaluate the real value a professional firm can provide, such as “Indicate the percent of time that will be devoted by each person working on our account” or “Outline the processes that are in place to manage agency time.”
The common thread in these misguided questions is a focus on inputs, as though you’re being evaluated as a supplier of ingredients for a manufacturing facility. But you’re not in the ingredients business; you’re in the business of solving business and marketing problems.
So answer the questions as they should have been asked and show how your firm is focused on outcomes and outputs, not inputs; results and return on investment, not time of staff; systems that track marketplace metrics, not hours worked.
Signaling value with both style and substance
You will appear valuable to a prospect not just because of the style of your proposal, but because of its substance. Far too many new business proposals are wholly dependent on their look and feel to carry the day, which makes their value only skin deep.
Brilliantly designed proposals are important value signals, but so are brilliant replies to senseless questions. When the client wants to deconstruct your cost structure, diplomatically reply that you’re not in the business of selling your costs. When the clients asks about “resources,” you reply with an answer about “talent.” When asked about “hourly rates,” you answer by saying you don’t have them because you don’t believe that solving problems “by the hour” makes economic sense for either party. The client asks for “estimates” on a “scope of work,” you reply that your practice is to provide firm pricing based on a clearly-defined “scope of value.”
Your goal is to compete on value, not cost. And the first step in changing the game is to change the dialogue. And as many firms have learned, once you get sucked into discussing cost, you’ll likely never get to value.
Read more from the source: Ignition Consulting Group
Sign up now!