Episode #0039 - Can your business say no to tenders?

In this episode of Pricing College - we ask a big question. Can you business simply say no to tenders?

Do you have to take part in tenders - or can you simply say no?

Does your business really want to take part in tenders as the normal option - or is there another way?

 

We've been talking in the past few episodes about tenders. And generally speaking, I think you can get the picture here that tenders, can be quite a negative and painful process. So we did touch on the idea of, what can we do differently to make tenders better? And what we're going to debate today is whether companies should just say no to tenders. Is that the best solution?

Clearly, this would take a very brave company. It would take a company very confident in the value they provide. They’d have to be aware that they're either super-sharp pricing or a differentiated product or service and more reliability etc versus competitors. This could be for new business, or it could be for existing B2B style business also. Would you have the guts? And is your company set up to just say, we don't have a tenders department and we do not do tenders?

When you think about tender in your company that is agreeing to go through the tender process, and other persons tender to process. What you're agreeing to is you're becoming beta to the alpha, it's their process. They initially came to you because you have the solution to their problems, yet, you're the beta in this relationship. It's completely dysfunctional. If you truly are and do have that solution. You should be driving the whole process.

In any walk of life if you want to buy a product or service that you like, what you do is you go out and you do the legwork. You research it, you spend a bit of time, and you find the one that you want and the one that suits you. This could apply to anything from buying a car to buying a house to buying a puppy dog, a pet for your kids, whatever you're going through. You do the research, you find out the one that suits you and you make that specific choice. The person who bought it from or the supplier that you buy from will be confident. You want them to be confident about what they're offering. You don't want them to be desperate to super keen or super desperate to get the sales in. Because otherwise, you'd be suspicious in your mind. You'd be like, what's going on here? Are they selling me an inferior product? and you think, why would that not also apply in many regards to a B2B environment? We're not foolish we know in a lot of scenarios that are the way industries are run and that's how they operate. But if you even take a bit of what we're saying here on board, you can hopefully minimise that aspect.

I think it comes down to the idea of reframing, a dysfunctional and largely unhelpful process so that both the seller and the procurer get a better outcome. I think that is essential, this is what we're trying to say. And so, what can you do? Somebody comes to you with a tender, you read through that tender often it's nonsensical. You don't have an idea of what they're trying to buy, their business, their agenda, their strategy, and things like their financials. How can you truly help them? At that point, just disrupting that dysfunctional sort of process is advisable. Because by saying no, they'll come as a shock to them. They'll not have heard that before, because most people just jump to and just provide a generic response to a generic RFQ. But you're going to be doing something different, and the reason you're going to be doing that is that you care. You care about delivering good outcomes for your potential client or customer. And you also want to understand whether you actually can serve them well. Why would you agree to a job with a customer if you can't deliver? At that point, you would recommend and maybe come up with a solution, another partnership or whatever but what you're trying to do is understand that problem. By saying no to the tender process is a real sign that you care. 

When we said say no to a tenders or by no means saying do not discuss, do not provide communication, do not talk about pricing, do not cover every topic under the sun. What we're saying is do it better, what you want to do is have chat with the potential customer. Talk through what you have, you do not give them cookie-cutter style information that to some extent is useless. Give them the information that they need. If it's an existing customer, in any negotiation, there has to be a pro and a con. If there's no cost to doing something people either won't permit or avoid doing something. So in a theory, if you've had a customer for 10 years in a B2B environment, and they are saying oh we're just going to go to tender. I think any supplier would be fine and that's perfectly fine. There's no actual penalty on that supplier or that customer in doing that instead of you saying, “well we don't do tender so we won't be taking part in that tender process”. In the customer's mind, are they going to rip off that 10-years relationship just on a whim? Or, are they going to discuss with you and have that discussion like the adults about the situation? I would suspect they will be adults, at the end of the day.

For instance, if you then decide, I'm not going to take part in that process. Because we've got another way of doing it that will ensure that we both know where we're at with that situation. Then we're very clear that we can serve you at the level that you want and give you the prices that you want. Would you like to choose that as an alternative to this process because we know it works? If they say no. Aren't they destroying not only their value but sort of fighting themselves in the foot a little bit here? Also, you get an insight into what they would be like if you work with them over a longer time. They're gonna just say no, you've got to do it this way even though you've got a better way of doing it and you can show them that will get them better results. And then they say no to it, then I think you've got an insight there about whether you want to work with them. That's the point. Then you can go back to management and go maybe this isn't the type of customer that we can deal with and may have a higher cost to serve. May be quite difficult to give them what they want and at that point, you move on is called segmentation. You want to work with people that you can work with, at that point you're being able to give them. Especially if it's a sophisticated solution that does require more than just transactional buy, sell, you do need to have that relationship.

I worked in a B2B industrial business previously and one of the things that I noticed was they do tenders for anybody. They do tenders for a 50,000 deal, they do tenders for a $2 million deal, they do tenders for a $50 million deal. At what point in time are we segmenting the market? At what point in time are we thinking, this isn't the customer for us. Or, what this customer looking for is not something that we want to want to be in. It was almost like a one size fits all environment. Whereby we were putting the same effort into the tender, which was a lot of effort but not much thought to it. To a large extent, the company wasn't differentiating and it wasn't thinking what this customer wants. Because so much time and effort were involved in putting together documents. You're almost kidding yourself, staying busy but not being productive. What is more productive? Increasing value in your company, and marketing that value to the market so that they will come looking to you. Or by being reactive and answering questions when a tender is sent out to 10 potential suppliers. And you’ve no ability to differentiate yourself. Always being differentiated, it's always beneficial at least people will know who you are, you want to differentiate yourself in a positive light. But my personal view is in many regards if you can't say no to tenders I think you should consider it. At least for certain segments of your market. Of course, we are always aware, we're not foolish either there are certain markets where tendering is required. Such as government-mandated areas or where this legislation requires but if you can reduce tender whenever possible. I think you really should. 

Yeah, I agree. So I think what I’ve learned from all of this is, saying no doesn't mean having an antagonistic relationship with your customers straight off. It means the reverse. It means that you do care, they want to learn more about the problems, you want to help them achieve their outcomes. And you want to make sure that you can deliver on what you're saying. You want to make sure that you can serve them as best you can. And from the customer is a good time if you say no, let's do it this way it's better. Listening to the feedback from your customers and hearing what they would say in response to that will give you insight into long term sort of relationships. And business deals that you're going to have posted at that point in time, especially if it's your new customer. And if it's an older existing customer I think they'll be quite happy to go through that process. Especially if you've done the hard work and you've delivered on your promises in the past. Why wouldn't they?

I think this is all predicated on you being a great company. Your company provides great service, great pricing to the customer. At the end of the day, if you are a trusted supplier, if you've been given great service they're more than likely to listen to you. People don't want to get rid of what they're used to that works well for them. If you're a shoddy below power supplier, this technique or this approach will destroy your business, you have no room to be using this. When you know your value when you are capable when you are competent. If you know your own value, the customer should also know it, how would have customer know your value if you underappreciate yourself also? As Joanna started the conversation, who's the better alpha in the relationship? If you doubt yourself and just think you're the lowest cost provider that is inevitably where you'll end up.

This requires a lot of backing from stakeholders and executives in the business. You can't do this as a solo player it just won't work. You'll be considered like a lone wolf and unpredictable and all those things which you're doing great account management. But it needs to be a strategy, it needs to be agreed upon. And, it can only work if you have data, you've got insights that you use to improve your account management and pricing capability. But you've got to learn and trust that as well. That is taking time in many businesses it's like, how do we use this data? A lot of CRM is still really not filled in, not very helpful. It's a working progress. I take that but if people are coming to you and consistently that the business delivers on what it promises. Then maybe it's a strategy that suits you.