L1 always puts a lot of price pressure on vendors. Here’s discussing the other option they have.
In many bids, L1 is a given. But quite a few times its because sellers haven’t educated their customers about a better option – QCBS (Quality and Cost Based Selection), or simply put – T1. So how can sellers suggest this alternate buying metric to their customers such that it benefits both?
1. Demonstrate distinct differentiators, which resonate with the challenges your client is looking to solve – There are two parts to this statement. First up - you should have a set of distinct differentiators. They could be in the form of your product, service, or the total offering. This is required so that they can be baked into the RFP and then included in the technical scoring. Without this, attempting to play T1 may not yield the desired outcome.
Secondly, and equally important, those differentiators should directly relate to the challenges your client is facing. Think of providing a CRM solution with location-based tracking – now this will matter for sales force management but may not be relevant for customer service priorities.
When you have a set of neatly identifiable differentiators your customers can relate to, then your client will be more open to including them as a part of the technical score.
2. Establish Leadership – Most clients value leadership. It implies track-record, safety, support, adoption, industry-leading features, and resource-availability. E.g. Oracle is a clear leader in database software. AWS is in Cloud. Analyst reports and press coverage are the common means to establish leadership with your customers.
3. Show Specialization - Specialization can be in the technology, service or industry domain. You can leverage this especially if you do not have Leadership – the David vs the Goliath story. Highlight how you may not be the biggest or the largest, but the best in solving the problem which your customer is struggling with. This will especially matter if the project/solution/industry domain is relatively new and the client can benefit from your specialized experience. Client references or academic/industry recognition is a powerful way of showcasing your specialization.
In one of the tenders worth Rs 45 Cr for an IT solution, this strategy worked for a relatively young organization. The technical advisor to this bid was from academic background and the young company was able to establish itself as a new but breakthrough solution compared to the established leaders.
4. Remain flexible – Your T1 strategy should not mean you will be the most expensive. T1 should not imply that you won’t be competitive on price. T1 should not imply you are the only one who can do it. Secondly, if you want 70 : 30 and the client is more comfortable with 60 : 40, try convincing them, but let it go coz 60 : 40 is still better than L1.
5. Keep a hawk’s eye on the technical scoring mechanism - In a QCBS evaluation the Technical Scoring sheet is a key factor. Ensure that the scoring is as objective as possible – “3 client reference letters from the same industry” is way better compared to “Vendor should have references in the same industry”. The scoring sheet must be almost self-calculatable.
6. Execute the acceptance test prior to the award of the contract – Acceptance Criterion determines whether the proposed solution will be accepted by the customer or not. In another tender, the client decided to run the acceptance criterion of a performance SLA, after the award of contract. This enabled one of the vendor’s to under-size its solution configuration (by assuming a certain percentage of risk) to beat the competition on price. Even if they had to compensate for under-performance of the acceptance test, the client had already awarded the contract and had no other option but to continue with the current vendor because the contract was already awarded..
7. What’s the organizational mind set - Research the organizations or stakeholder mindset – how have they evaluated bids in the past - are they price conscious or do they appreciate value adds. It is well known that in selecting new solutions, India’s no. 2 bank mostly likes to go the low-cost way, where as no. 1 bank tends to take a big-bang approach.
8. Examples of T1 bids – While this one is difficult to do, it can be extremely effective. If you can point your customer towards others who have adopted T1 bids, that could give your customer the confidence to take this step. Could be some other project within the same organization. Check of for any industry/territory/project patterns. How did they benefit? How did they handle the process without any bias? How did it effect their project TCO? Answers to such questions will help your customer make the case for a T1 evaluation.
Needless to add starting early will help your case. Such decisions get formulated much before the release. Use the eligibility criterion, to weed out ultra low-cost providers. Check if a consultant or an advisor is involved. Address apprehensions early. This will also give your client an opportunity to clarify the process and guidelines .. before the game begins.
Comments and observations welcome at firstname.lastname@example.org.