Five Things Vendors Get Wrong with Proposals

Inevitably in all business relations, we get to the point of the vendor presenting a proposal. Some vendors do a decent job with this, and others, not so much, and particularly when they have an existing relationship with that customer.

My goal is always give my clients a great experience and introduce them to excellent vendors and products that will help their businesses. This means I want the vendors to be well positioned to put their best feet forward and highlight how they can help the organization. Simply that means, up to a point, I’ll help you, if you engage me. We often remind vendors that we’re happy to help them prep for presentations so the client gets a good sense of the offering and overall business value. It’s amazing how often that offer is ignored or the vendors try to work around us. I won’t help you convince a client to do something they shouldn’t, but I want the client to really understand the drivers behind their business, and the overall value of the offering is key to that. Unfortunately many vendors focus on the wrong things and it dilutes the value message.

The suggestions and tips in this article are intended both for new prospects as well as existing customers where the vendor is proposing a significant upgrade or set of enhancements. To that end, here are five key things that I feel vendors commonly get wrong when presenting proposals (to me). Some of these are based on “typical” and “proven” selling strategies, however when they aren’t executed well, they come off poorly and can harm your relationship with the customer or prospect.

Caveat: As before, these are my opinions and the approach that I take when looking at proposals and pitches. Your experiences and mileage will vary, but hopefully this will be food for thought for you and those that purchase from you.

Discounts for Products We Don’t Care About

This is one of my biggest pet peeves and can be a big distraction. Often vendors will try to sweeten deals by throwing in incentives or discounts for services and products the customer isn’t already using or hasn’t expressed an interest in. Sometimes the first time the client is hearing about them is in the pitch, and often the references and values are ambiguous or unclear, particularly with products or services that aren’t in production yet. If we haven’t talked about it before your pitch, we likely just subtract it out of the value equation when we consider the overall offer. Usually the math is simple, but there is a negative impression of you and your products for having to do so.

Tip: If you want to incentivize us with additional products, talk with us about those products early and establish that there would be a value to the organization for using them. If we demure on them, drop them from your pitch.

Pointless Time Based Discounts or Penalties

Something we run into a lot is the concept that if we sign now (before of the month, quarter, end of year, etc.) we will get an additional discount. This just feels like a ploy and is based on something you want (to hit your quarterly numbers) and little in it for us other than a discount – that we now assume should be available to us at any point so the client re-calibrates to that number. Related to this concept are penalty fees; by not renewing by a certain date or not upgrading often enough, some vendors increase certain costs such as support fees. At best, it can set an adversarial tone, and at worse it may cause the client to do the math and decide that the extra fees are worth reducing the pain of an actual upgrade. Once they do that, they give themselves time to start considering a full replacement with another solution and you have just invited competition.

Tip: If you want to incentivize us based on time, make it more practical, such as your organization usually sees a slow down during the summer when things quiet down in your market, so you can give us a lower labor rate. You could incentivize us to a timeline based on the measurable value we are losing by not already being on your product.

Disregarding the Past

With existing clients, particularly if things haven’t gone well before, often vendors will want to talk about how things are different and then focus on “moving on from the past” and advance the conversation beyond those issues as quickly as possible. That’s understandable, but if the vendor under-performed in the past, we want to know how things will be different this time. If this isn’t the first time you’ve had to explain how things will be different, it’s even more important to address it and provide extra credibility. Unfortunately by not giving the client an adequate opportunity to vent and then work through the issues, some vendors bring that negative energy into the body of a negotiation. And then seem surprised when things don’t go the way they scripted out.

Tip: Don’t present a proposal until you have agreement that the changes your firm has put in place should address our concerns about past performance and that the customer is comfortable with them. If there were significant performance issues in the past, have a separate meeting to address how your firm will operate differently in the future. Only after we tell you that we believe this satisfies our concerns should you try to schedule a proposal discussion.

Not Articulating the Business Value

This is one of the most significant places where I feel vendors fall short, and it feels weird to have to say it but in many proposal pitches I hear, this is missing. When seeing a proposal for an enterprise level system or components of it, what we are going to want to understand is the overall value of that feature or capability to the organization. Vendors often just give us pricing, when this could be so much more powerful. Without the value side to the equation, then you run the risk of being compared based on price alone. Sales 101 says you never want to do that, even if you are a commodity.

Vendors and staff alike often feel that these are immeasurable but I can assure you that with a little discussion we can find specific metrics that could be used to determine value and ultimately drive the go/no-go decision. If you aren’t part of that process, we do it after you leave the room. That’s probably not the best situation for you, particularly if our value formulas were influenced by one of your competitors (around their key differentiators).

Tip: Where possible have specific measurable benefits to the product or service you are pitching. Back them up with case studies. In most cases, we’re even happy to help refine them with you based on actual customer transactions or points of pain.

Basing Future Pricing on Past Spending

Often we talk with vendors who are surprised when we push back on the proposed price of a solution, based in part on how much more expensive that solution was in the past (“this is a 30% discount from the last price you didn’t like!”). If the organization hasn’t upgraded their ERP or CRM system in several years, there is probably a good reason – most specifically that you or other vendors haven’t demonstrated sufficient business value for the cost and pain of that upgrade. Telling us that this upgrade will cost less than it might have before is usually irrelevant to us – we are looking at the increased value of the solution against the price – discounting from a number we thought was too high before is a good start, but focus on the value of the upgrade to the customer.

If you are the incumbent, there’s a good chance that the customer is comparing your pricing to newer solutions that have entered the market that have a completely different cost basis – it doesn’t always matter whether they are rational or not. A sales person (from a different company) may have gotten their attention and anchored them to a completely different pricing level or model.

Tip: By focusing on the business value as in the previous recommendation, and showing the math for the return on the investment, the organization is better able to pitch the expenditure internally.

Final Thoughts – Whether there is a consultant or not involved, ask your primary contact how you can create a compelling value based proposal. Get us to help you understand the full set of concerns and more importantly how we must validate the expenditure with the company. For related reading, I strongly recommend the book “The Challenger Sale: Taking Control of the Customer Conversation”. It talks about the value of creating much stronger relationships with customers by focusing on the overall value of your offering and finding new ways to educate your prospects or customers to value opportunities of which they were previously unaware.

George Breeden, CAE, is an experienced CIO with Hartman Executive Advisors and helps nonprofits of all sizes be more effective with technology. From time-to-time he guest blogs for Vendor Centric on the topics of technology and vendor management. You can reach George at: gbreeden@hartmanadvisors.com.