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Positioning your price

 August 27, 2019
by Paul Heron

This month’s posts have made the case for treating price as more than a number buried at the back of your proposal. We’ve explained the importance of price in proposals, how to write a pricing executive summary and various ways to defend your price in a proposal. This post looks at how to position your price against your competition.

In large bids, the price quote is typically packaged separately from the technical proposal. In these cases, a bidder can be disqualified for including price in the narrative. But that doesn’t mean you can’t position your price—and you should.

Understanding positioning

Positioning is the technique of describing various features—in this case price—in such a way that your offer becomes the best option in the minds of the evaluators.

Buyers want to know a price is based on some logical process, includes all their requirements, and is competitive.

Ways to position your price

Positioning is industry and project-specific. Here are some examples from situations we’ve seen.

Using trade-offs: Make any cost and price trade-offs in your pricing decisions explicit in a table or text. For example:

  • We considered using the slightly cheaper D433Z technology, but our recommended solution provides 30% greater reliability (MTBF), giving you much better system uptime and lower lifetime costs.
  • The recommended approach uses open trench construction. Open trench is 20% less expensive than the trenchless technology used in your reference project, which had to accommodate greater environmental and traffic issues.

As reasonable and low risk: Savvy buyers want to know your price calculations are based on sound information and that you can deliver within it. For example:

  • Our price quote is calculated based on our experience with a project last year for XYZ Corporation, used as a reference. The XYZ project, which had an 90% functional overlap and was slightly larger than yours, was completed on time and within budget.
  • Over 85% of labour and management costs will be for internal resources. Our two proposed subcontractors have each teamed with us on three projects in the past year. This structure enables us to price your project realistically with low risk of cost overruns. 

Against competitors: If you know one or more competitors typically cut corners to make their price more attractive, call them out (without mentioning them by name). For example:

  • Because of your high availability requirements, our price includes OEM warranties providing 24-hour repair or replacement on all major components during the five-year contract life. Some competitor prices may be based on cheaper third-party warranties. These technically comply with the RFP, but are typically less reliable, risking major disruption to your operations in case of a breakdown.

Find what works for you

Use the above techniques as thought-starters and brainstorm with your team to find ways to position price.

Your goals are to help evaluators have confidence your pricing is based on sound reasoning and to pre-emptively explain away any variances with competitors’ prices.

 

 

Challenged to express the value behind your price offer?

Contact Complex2Clear

 

Photo credit


Paul Heron, MBA, is the founder and managing partner of Complex2Clear, and leads our bid response practice. LinkedIn 

 

 

  

Defending your price

 August 20, 2019
by Paul Heron

Last week we made the case for including a pricing executive summary in proposals. The aim is to show your offer was carefully developed, and is realistic and more attractive than alternatives.

This post shows how to make that summary easy to consume and responsive to your prospect’s issues.

Organizing your cost/price summary

Structure the summary around 3-5 themes important to your prospect. Themes vary by industry and project type, but common examples include price reasonableness, total cost of ownership, costs aligned to progress payments, risk of overruns and/or non-performance, return on investment, etc.

Present the information at a high level and aim for a 50/50 balance of text and visuals.

Rich visualization gives evaluators fresh perspectives on your price and builds comfort. Your goal is to make the evaluator’s job easier, not to complicate it.

Cost/price presentation examples

Use these examples to stimulate your thinking, and then decide what will work best in your situation.

  • Over time: Show costs broken out by major milestones and/or project segments
    Purpose: To show affordability, alignment with progress payments and/or possible divisions between budget categories (e.g. capital vs. expense items).

  • Compared with similar projects: Use a table and visual to present costs of recent projects of similar size and scope to the current project.
    Purpose: To show price is realistic and competitive
  • How estimated: Diagram your estimating process
    Purpose: To reinforce that your price is cost-based and carefully calculated, so the prospect understands your price is realistic and any contracting negotiations must be logic-based.
  • By subcontractor: Use a pie chart to show the relative size of contracted segments, together with information on each contractor.
    Purpose: To show how costs are allocated, emphasize competitive selection process, contractor capability and low non-performance risk.

  • Including trade-offs: Use a table to show options and how each decision impacted cost and price
    Purpose: To show how cost/price decisions align with the prospect’s strategic drivers and hot button issues. Also use to ghost competitors’ price offers.
  • Return on investment: Use a graph to show value added, compared to project costs
    Purpose: Where your solution will increase sales or reduce costs, to show a comparison of costs and related profits/savings over time

Add a selling caption

For each visual, include a selling caption to stress the benefits it conveys. Write these so they can be cut-and-pasted into an evaluator’s summary.

Here’s a post on writing selling captions in proposals.

The payoff: Better contracting conversations

In the absence of cost calculations, market comparisons or alternatives considered, your prospect has little basis for negotiation other than “your price seems high.”

A strong summary will help prospects see you as a responsible and reasonable vendor, willing to share information and seeking a fair deal.

This is to your advantage, whether you want to avoid turning an informal opportunity into an open competition, or in a formal bid situation where final selection is subject to successful contracting.

Next week: Positioning your price

       

Need help presenting price information in complex proposals?

Contact Complex2Clear

 

Photo credit


Paul Heron, MBA, is the founder and managing partner of Complex2Clear, and leads our bid response practice. LinkedIn 

 

 

  

Pricing executive summary

 August 13, 2019
by Paul Heron

Because price matters so much, it makes sense to invest in presenting it as favourably as possible. Despite this, many companies relegate price to a single number at the back of informal proposals and submit only the issuer-supplied pricing forms in formal bids.

A better strategy is to give your price the prominence it deserves.

Price-included proposals

Informal proposals (solicited without an RFP process), and many private sector RFPs, call for a single document that includes both the solution and price. In these cases:

  • Include your price in the executive summary. The belief that burying the price quote will force your buyer to read the proposal is false. He or she will read a page or two at most, then flip to the back to find the price. That brings us to the next point.
  • Present your price favourably. Use the executive summary to telegraph that your quoted price is logic-based and competitive, and then make the detailed case in the pricing section.

Remember: Almost always, the person who solicited your informal proposal needs internal buy-in for the purchase. Anything you can do to help—and avoid involving other vendors—is worth the effort.

Two-envelope proposals

Include a summary with your price submission in all large RFPs. Do this unless the RFP specifically forbids including additional material in the price binder.

This practice has at least three benefits:

  • Creates an executive summary for senior decision makers. Senior people seldom read pricing tables, which are often highly technical and complex. A plain language summary, including visualization, increases your chances of getting senior-level attention to price.
  • Sets up a positive evaluation. A well-crafted summary creates context and positions your price as carefully reasoned and organized.
  • Makes it easy for evaluators. The team evaluating prices on complex RFPs usually need to prepare a written summary with their recommendations. An ideal way to think of your summary is as cut-and-paste content for evaluators to include in theirs.

Stay client-focused

The goal in your informal proposal is to close the sale without involving competitors. In a formal RFP response, you want to show your price covers all requirements, is reasonable and realistic, minimizes risk and includes trade-offs that best address the prospect’s needs and issues.

In both cases, keep your prospect in mind when presenting your price.

 

Next week: Visualizing your pricing and costs.

 

Want to add a cost-price summary to your next bid?

Contact Complex2Clear 

 

Photo credit

 


Paul Heron, MBA, is the founder and managing partner of Complex2Clear, and leads our bid response practice. LinkedIn 

 

 

  

The importance of price

 August 6, 2019
by Paul Heron

Although our posts focus mainly on differentiating and presenting your proposal’s technical offer, we’d never suggest price is unimportant.

Even in the case of two-envelope RFPs, where prices are revealed only after the narratives are scored, price looms large in the final decision. This is true even when the narrative sections are weighted at more than 50% of the total.

The chart below shows the narrative points advantage you need to prevail (expressed as a percentage of the total) if your price is anywhere up to 10% higher at various weightings.

In competitive situations, bidders are unlikely to overcome a price disadvantage of 5% or more.

Favouring price

If a buyer is determined to award to the lowest priced bidder—whether due to budget pressures, or to avoid protests or public scrutiny—there are at least three ways to accomplish this.

  1. Adjust technical scores after the price envelopes are opened (This is unfair and/or illegal—but it happens.)
  2. Score the technical narratives in a very narrow range, so the lowest price is likely to prevail, despite the relative weighting scheme
  3. Structure the RFP rules so the lowest qualified bid wins

The good news is, most buyers are looking for value and strategic fit, not just the lowest price.

Also, nearly every bid we’ve supported has been run fairly. In fact, evaluation teams for large government bids typically include an independent monitor responsible for ensuring a fair process.

Still, as a key element of your offer, price deserves the same attention to expressing value as do the sections devoted to your understanding, solution, experience, team and implementation plan.

Presenting and positioning and your price

This month, we’ll look at ways to help evaluators understand how you reached your price, why it is reasonable—and proof you can deliver within it. This will include ideas in two areas:

  • Presenting: Most bidders limit price presentation to completing the issuer-supplied forms. But—especially for multi-phase projects and complex blended pricing situations—we’ll suggest other approaches.
  • Positioning: Every technical narrative reflects choices made when developing an offer. Many of these will differ from your competitors’ decisions and will impact price. It’s important to make your trade-offs visible and to justify them.

Added benefit: By making the effort to present and position your price, you and your team will gain new perspectives on decision making that impacts costs and pricing. This may well lead to adjustments in your process that improve your chances of winning.

Next week: Pricing executive summary

 

Need to do a better job of presenting price in your proposals?

Contact Complex2Clear

 

Photo credit


Paul Heron, MBA, is the founder and managing partner of Complex2Clear, and leads our bid response practice. LinkedIn 

 

 

  

 

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