The all-important question! Hear an industry stalwart share his experience and suggest top-10 things you must do to come out on tops.
L1 is probably the no. 1 challenge most organisations struggle with. With majority of buyers focussing on “value buys”, for potential suppliers, the need to be L1 becomes paramount. However, one needs to first determine what L1 truly means to a customer. L1 is a measure of an outcome. Some customers may certainly look at L1 as the lowest price they can get for a specific bill of material. Others may take a more holistic approach and evaluate based on the Total Cost of Ownership (TCO) over the lifetime of the product/service, whilst some others may first do a technical rating and then measure based on an overall score determined by a technical and commercial weightage. Thus, “L1” evaluation for one organization may be different from how another one looks at it. And therefore, the first step is to try and understand “L1” from the lens of the customer.
So how can we be L1 without the need to give a 90% discount? This is where the art and science come together. Now that we have discovered what L1 actually means to the customer, the next step is to focus on the PQ (Pre-qualifications) stage. PQ gives you the opportunity to influence what the competitive landscape will look like. If you are not early in the deal then it becomes difficult, but if you are early, then you certainly have an opportunity. As an OEM (Original Equipment Manufacturer), while you may focus on ensuring that you are qualified and your competitors are at a disadvantage, you must also be vigilant about ensuring that the SIs (Systems Integrators) who work with your competitors stay out. If you are an SI, you will have to lay the rules such that those SI’s who pose a threat or tend to play dirty, are not able to make the “gate”. You can use revenue, installs, employee count, balance sheet and similar measures to make your case. Thus, even before you start thinking about the technical specs, you first need to flush out the PQ, so that you can “control” who you are potentially going to fight against.
Next you need to look at the Evaluation Criterion very carefully. If your strength is technology/solution, it makes sense to influence the customer to consider QCBS (Quality and Cost based Selection). 70:30 is a well-established ratio (Quality : Cost). Now imagine, if you are able to get a 10-point lead over your competition based on the technical score, it basically means you can be higher in price by 32% and still be L1! So, even if you are able to secure a 4-5 point advantage, you are significantly increasing your chances of being L1.
To improve your odds, also look closely at the terms & conditions (T&Cs). Different organizations will take a different view of the T&Cs based on their – strategy, current state, nature of opportunity, and risk appetite. E.g. Some may load the pricing higher based on their risk perception of the payment terms or LD charges. If you have someone on your team who has worked with your competitor earlier, he or she can provide you this vital insight. If that’s not the case, you may need to analyse the recent wins of your competitors and compare it with your pricing and then make a sound judgement. If the terms are too stringent, some of the players may altogether develop cold feet. Thus, when we are determining our pricing, we need to assess the overall terms & conditions as well. Please remember that at the end of the day, we are in business to make money.
Here are some tactical tips that you should consider:
1. Technical stack – Do not get locked into a single stack. Provide clients multiple options when it comes to the solution stack. Choice is good for the client and for you too - it allows you to retain the pricing flexibility that will be offered by competing OEMs/vendors.
2. Forward calls – Be incredibly careful when you are thinking of making one. Sometimes this can be very dangerous. You need to take into account the solution stack, pricing trends, and forex fluctuations. Also, analyse the historical bids where you had taken such calls and see how they panned out. Base your forward calls on as much data as possible.
3. Element of surprise – Try and introduce something in your bid, which has not been seen by the market earlier. You could bring in a radical new technology element or bring in a new partner. Find ways to surprise the market in every deal. Try and create asymmetry. Keep your competitors guessing.
4. Do not be mis-lead by the client’s comforting words – Clients are smarter than we think. They want multiple vendors for the bid. They will be nice to all of them. They are in no one’s “pocket.” Be sure to validate your assessment thru multiple sources both from within the account as well as from the outside. Keep triangulating
5. Going late into a bid is not always a disadvantage – The reality is that you will not know all the bids going on in the market. Even if you know them all, you will not be able to always influence the PQ. If you enter late, you will know about all the bidders who have thrown their hats in the ring and their partners/stack. Enough hungry players who have been late like you or have been left out in the cold would be more than happy to back you to the hilt, to upset the applecart. Of course you will need to be incredibly smart about your deal strategy. You will have to put in extra ordinary efforts in a real short period of time. Going in late, can offer distinct advantages to the latecomer.
6. Analyse your losses – Capture as much competitive info as you can. Get client feedback. Store it in a common repository. Build on your intelligence which can help you price better in the upcoming deals.
7. Support your processes with a robust bid management system – In large bids one requires multiple executives to work together, including – technical, legal, finance, and risk. Multiple elements are owned by different executives within the organization and without their involvement you may be missing a key component of the deal. So, ensure that all contingencies have been identified, the respective sign-offs have been taken, and relevant reviewers/approvers have been kept in the loop. Doing this without a system may leave your decision making to chance.
8. Quality of the bid - The bid response should enthuse confidence about the seller’s capabilities. Take care about cut-n-paste jobs, spelling mistakes, page numbering errors and the like. They create a very poor impression with the customer, and even if you may be lower in price it may signal an inferior solution or a lack of preparedness to the client.
You become L1 because the customer wants you and makes you L1. Remember decision makers are also human. And like other human beings they too are rational and emotional. Price is always given as the excuse but it is not the real reason for losing a deal. Understanding the real motive of the customer and planning your deal strategy accordingly is the key. Good luck!
The above blog has been authored by our guest expert Mr Manoj Chugh. Manoj has over 38 years of experience having bid and won multi-millions dollar deals. During this tenure he has worked with marquee organizations such as Wipro, Cisco, EMC, TechM, etc. He is currently – President, Group Public Affairs, Member Group Executive Board, Mahindra & Mahindra.
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