If you can bring together multiple relevant data points, you can be surer of your million-dollar decision than ever!
B2B CXOs approve multiple commercial bids/pricing every week. Whether you are an Infrastructure company, a IT/ITES solution provider, an EPC major or any other systems integrator. Chances are you have taken the pains to bring together a solution in response to the client requirements and are now about to make the most important decision!
Mostly this process involves coming together of key stakeholders on a call/meeting, with the sales team justifying lower price and the delivery/engineering team highlighting the complexity. The larger the project, the more details are analysed in terms of effort estimation, vendor costs, margin expectation, deliverability, etc. However, the final price is generally decided in either of the two ways: if it’s a must-win project the management will decide a price and others have to figure out a way to make it work within the given constraints of time/resources/margins. Alternatively, a more liberal/rational analysis of the various factors, calibrated with expected competition pricing, eventually leading to the final price. Either ways, how often are you confident that you are submitting the winning price?
Before your next approval, try and bring together few more data points:
1. Recent bids submitted to the account (across business units/practices) – Most proposal pricing decisions are made with a very sharp focus on the existing bid – What is the margin on services? Where can we cut costs? Can we take forward call on some partner? Instead, look at the recent 5 bids submitted to the account. What has been our win history? What has been the delivery and payment behaviour of the client? Is the customer open to CRs? This will give a good view whether it makes sense to go aggressive with the pricing or not.
2. Competitive info – Most organizations celebrate wins. Some also invest time in analysing a loss. But very few capture the loss details for future. Mandating capture of loss pricing data can be a valuable input in guiding future pricing decisions. Ensure that the pricing information is stored in as much grain as possible and is not left in the sales person’s diary. This can be very handy in projecting competitive pricing in the upcoming bids.
3. Vendor pricing trends – System integration (SI) projects can have as much as 50-70% components coming from third parties or OEMs. While SIs and OEMs work together over multiple projects and clients, many a times the teams involved are not the same. Thus, the configuration and pricing information remains with the respective teams. Bringing it together and joining the dots can reveal pricing trends that can be used for strategic pricing decisions.
4. Pricing Scenarios – This is talked about a lot but practiced verbally only during the final approval calls. Why not have a system where the different scenarios are calculated, stored, and available for those concerned to review, comment. May be even create a new scenario altogether. This makes the decision making practical, transparent and combines the collective wisdom much before the submission.
5. Territory data – Customers are not just buying your solutions. They are also buying other products and services. Many companies are mandated to publish their procurements on their websites. A smart sales person will always know about the other deals going on in his accounts. What is their procurement cycle? Who won the most bids last quarter? Do they prefer T1 or L1 process? Such information can be captured by account, and can act as a strong guidance in making the final pricing calls.
6. AI – Today AI is being employed in industries as diverse as pharmaceuticals,
beverages and agriculture. Can someone deploy it in determining the wining price? Yes of course!
With the right amount and properties of historical data AI or predictive analytics can assist
a. Determine the winning price range for categories of projects
b. Determine the probability of winning a bid
c. Better effort estimates and sizing ranges
All put together can get you closer to that million or multi-million-dollar question – Is this the winning price?
Comments and observations welcome at email@example.com.