EP081: How to Develop Your RFP Pricing Strategy
How do you decide what your solution is worth? Of course, pricing is dependent on the ask involved in a given RFP. But there are a few guidelines that can help you think strategically about how to price the goods and services you provide.
On this episode of The RFP Success Show, I’m sharing five best practices for developing an RFP pricing strategy, explaining why it’s crucial to consider your pricing early in the response process and NOT wait until the last minute.
I discuss how to tie your pricing to the solution you provide, challenging you to price your proposal based on what matters most to the client.
Listen in for insight on understanding where you fall on the value spectrum (and bidding accordingly) and learn how to clearly communicate the value of your solution throughout the RFP response.
Key Takeaways
Why it’s crucial to consider your pricing early in the response process
How to tie your pricing to the solution you provide
The importance of communicating the VALUE of your solution (i.e.: efficiency, effectiveness and results)
How to price your proposal based on what matters most to the client
The significance of understanding where you fall on the value spectrum
How to develop a solid value proposition and communicate it clearly
RFP Success Show EP81 Transcription
You're listening to the RFP Success Show with eight time author, speaker, and CEO of the RFP Success Company, Lisa Rehurek.
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Tune in each episode to learn what today's capture and RFP teams are doing to increase their win percentages by up to 20, 30, and even 50% and meet the industry trailblazers better getting it right. Let's get started.
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Hey, everybody. Welcome to the RFP Success Show where I will provide you with teaching tips and strategies to help you up level your proposal game. I am your host, Lisa Rehurek, founder and CEO of the RFP success company. So, today's topic. Pricing strategies. We get this question all the time, how do you know how to price things? And, it's such a loaded question because it really depends on what the ask is in the RFP, but we've got some best practices so you can think strategically about how you're going to price things.
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Your first thing that I want to say is, please consider your price early in the response process. Do not wait until the last minute. And, this happens all the time is that price comes at the end and that can't really happen. It can happen logistically possibly, but on the front end, you need to be considering your price when you're considering your solution and your approach and your promise that you're making in this proposal.
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So, everything that you are writing about, your differentiators, your promise, the theme that you want to weave throughout your proposal, the pricing has to be attached to that. And, if you come in at the tail end and say, "Okay, here's the proposal, we've written everything so now let's price to that." There's generally some rub there, "We were not really positioned to price for that" or "We didn't think about this" and then there's there's revisions that have to happen. So, on the front end, the conversation about pricing has to happen when you're talking strategy for the overall bid. So that's number one.
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Number two, always tie your pricing to your solution. And, a little bit of what we just talked about but, when you are responding to an RFP, you are basically telling the buyer why your solution is the best and pricing has to be part of that because in your solution, you have to be showcasing the value that you bring and pricing can't always be about pricing alone. Sure, there are RFPs out there that will say 50% is about price, but less and less these days is that price is priced that high of a percentage of the evaluation criteria.
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What's happening these days is people are like, "Okay, we went low price and we got burned. Now we need value." So, your solution needs to talk about the value in terms of efficiencies and effectiveness and results in addition, obviously, to price. So, you've got to make sure that you tie it all together. Always tie your pricing to your solution, through that value proposition.
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The third strategy that we want to talk about, what the client needs and wants should drive your solution. Not what you think they need and want, not what you're selling, but what and why the client is buying. What problem or issue or whatever caused them to issue this RFP? And, when you think about it from that perspective, instead of like, "Oh, we can do it. We've got something." Think about, "Okay, what do they really need? And then how does our solution fit in that?"
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I read an interesting story recently that brings this point home. So, the US Air Force is the biggest outsourcer of services in the world. And, they put out an RFP to maintain a fighter jets in foreign countries. And, the successful bidder offered a unique solution to win that proposal based on two simple questions. So, internally they ask themselves, "What is the true value that the Air Force is seeking?" And, "What business are they in?" So, kind of seems obvious like, "Well, Hey, this is a no brainer. Everybody knows the answers to these questions." But, when you really sit down and you think about it and put pen to paper with it, you start to really understand and peel that onion back.
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So, what those questions did is it led to an understanding that their jets are on the ground and when that happens there, they clearly can't perform the tasks that the Air Force needs them to do. And, it's imperative that they're on the ground for just a short time. As short a time as possible. So, because the successful bidder really thought about it and peeled the onion back to understand that and to see that, that successful bidder really knew and they developed their pricing and the solution accordingly. And, they spoke to that. They spoke to the fact that "We want to get you off the ground, we don't want to keep you on the ground." So, the price wasn't presented as a price per part or price per number of services hours and this RFP, there was openness to how they presented their price, but the price was presented as a price per number of hours in the air.
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So, they really tied their price to the value that hit home for the Air Force. That's what you want to think about with pricing strategies. And, I tell you what, it can be a hard conversation to have because you might not know the answers. It takes some time people get lazy and they're, "Yeah, whatever. We're just going to respond to their questions." But, I tell you what, if you can do that and peel that onion back and get to the bottom of that what do they really care about? They care that their fighter jets are not on the ground for very long. And, now we're going to write to that and show them we're going to price to it and we're going to write to it. So, that is a fantastic pricing strategy.
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There's so much more behind a failed RFP than just lost revenue. Employee engagement decreases with each loss and a GALLUP survey suggests that it cost up to 10 grand in salary per employee, with 15% lower profits. If you're ready to increase your win rate consistently and put our winning and repeatable strategies in place, schedule your consultation now at Bit.ly/chatRFP. That's Bitly, B-I-T.LY/chatRFP.
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All right. Another thing that you need to think about is where are you on the value spectrum? Meaning are you the Walmart or are you the Bergdorf's? And, this is not a knock on Walmart at all because Walmart brands themselves as the low cost store. So, do you want to be known as the low cost store service offering whatever product, if so, then that's fine. But, if you were not the Walmart, then why are you trying to underbid? Why are you playing that pricing game?
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I mean, obviously you've got to play a little bit. Don't just rip your prices in half or whatever, because you feel desperate to get the business. Unless there's a strategic reason to buy that business, or unless you are that low cost provider and that's your differentiator, do not automatically go in low cost. I would say that if cost is 40% or more of the evaluation criteria and you are not the low cost provider, that's not your brand, then why are you bidding? You shouldn't be bidding on that.
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So, really understand where you are in that value spectrum in order to set the stage for what you should be bidding on and then that helps you with your pricing strategy.
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Last but not least price is about value. So, always make sure that your value proposition is solid and that you have communicated it clearly and consistently and that is very important. That really kind of sums up everything that we've talked about. Price is about value, show them that the value that you bring, tie your value, your solution to that value. And, when you help them see that, then you are golden and that's when you're going to get those next points.
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All right, everybody. Thank you so much for being here. That's our show for today and we appreciate you listening.
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This has been another episode of the RFP Success Show with Lisa Rehurek. Eight time author, speaker, and CEO of the RFP success company. Thank you for joining us.
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If you have feedback on today's episode, email us at podcast@rfpsuccess.com.
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No matter your business size, industry, if you have an in-house RFP team or need outside support, RFP success company helps increase RFP win ratios by 10 20 and even 50%.
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Learn more at therfpsuccesscompany.com.