September 5, 2019

When You Should (or Shouldn’t) Bid for a Sale

By Cedric Girardclos, Co-Founder, Adjungo

As the cost of bidding for a project is usually high, businesses cannot pursue each and every opportunity. As a result, bid/no-bid decisions are critical strategic issues: How can a firm rigorously and efficiently prioritize bidding opportunities before developing expensive proposals?

Facing this challenge, the author developed a novel approach to quickly make disciplined bid/no-bid decisions about complex business-to-business project opportunities. The method, which was successfully implemented in companies of different sizes and markets, is based on an assessment of both the attractiveness of the project and the competitive strengths of the bidding organization.

Balancing External and Internal Factors
Thoroughly performing this assessment means balancing a large number of disparate factors. To help executives achieve this balance, we split the approach into two simple surveys (the 20 questions in the next section), each illustrated by a specific matrix. One is customer centric (or external); the other is company centric (or internal).

The two matrixes can then be merged into the conclusive bid strategy matrix. On this final matrix, each opportunity is placed at its mean position between the first two matrixes. As depicted in Figures 1 and 2, every bidding opportunity falls into one of its four quadrants, i.e., must win, no bid, low attractiveness dilemma, and low ability dilemma.

Figure 1: The three-matrix structure of the bid assessment

Figure 2: The bid strategy matrix

Positioning Bid Opportunities on the Matrixes
Should your company bid for this project and commit to a costly bid preparation? Let’s take five minutes to position the opportunity on both the internal matrix and the external matrix and make the right bid/no-bid decision: Answer the following 20 questions with your account team to properly evaluate the project opportunity.

For each question in the left-hand column, select the answer that best describes the project opportunity. Multiply the corresponding point value by the specific question weight. Add the five weighted scores of any particular section to determine the bid opportunity’s coordinates on the related matrix axis.

The weight factors reveal the relative importance of the corresponding questions. The set of weights provided in the following table reflects the characteristics of the author’s industry; you should hone them to fit your specific business profile and challenges. Keep in mind that the weight sum for any section should equal 1, so that projects will be positioned on 0-3 point scale axis.

Position on the customer-centric (or external) matrix

Vertical axis: project strategic value to the customer

Question Weight Answers Points Weighted Score
What is your customer’s own business at stake? What is the project’s potential impact on its business strategy or key business drivers? 0.30 None or insignificant 0
Moderate 1
Considerable 2
Major, business critical 3
How senior is the project sponsor within the prospect’s organization? 0.25 Not appointed yet 0
Middle manager 1
CTO 2
CEO, COO, or head of division 3
What is your customer’s budget for the project? 0.25 The project is not budgeted, or budget is not communicated 0
Budget is unrealistic, too low 1
Budget is adequate 2
High investment 3
Who is your customer’s project owner? 0.10 Not defined yet 0
Internal 1
Mainly internal, with external support from experts/consultants 2
External experts/consultants 3
What drives the planning of the prospect’s decision making process? 0.10 No decision deadline scheduled yet 0
Tentative decision schedule 1
Solid decision schedule 2
Tight business-related decision deadline 3
TOTAL (add weighted scores for vertical axis coordinate)  

 

Horizontal axis: capability to influence the customer

Question Weight Answers Points Weighted Score
How is your relationship with the client’s true decision maker? 0.30 The true decision maker is not clearly identified 0
The true decision maker is identified but has not been met about this project 1
The true decision maker has been met about this project 2
A close and trusting relationship with the true decision maker 3
How are your relationships with the client organization’s other senior executives who own a stake in the project? 0.20 No access at all, or existing quarrels against your organization 0
Disparate relationships with a few of them 1
Existing relationships with the majority of them 2
Well-developed relationships with all of them 3
What kind of information did you gather about the project? Who provided information? 0.20 No supporter/coach within the customer organization, hardly any privileged information 0
Information gathered through partner companies 1
Useful information received from the supporter/coach who wishes you to win the deal 2
Exclusive information shared by the client’s true decision maker owning the project 3
How is your customer satisfaction? 0.10 Customer is dissatisfied 0
Indifferent for this deal 1
Customer is satisfied 2
Customer satisfaction runs high 3
Did your company positively influence the RFP? 0.10 No information about the opportunity prior to receiving the open RFP 0
Informed about the opportunity prior to the RFP being issued 1
Your organization influenced/participated in defining the requirements 2
Engaged in exclusive discussions 3
If applicable; otherwise, disregard this question: What kind of cooperation do you have with your customer’s strategic partners for this project? 0.10 Strategic partners not known 0
Strategic partners for this project have been met 1
Engaged in non-exclusive cooperation with strategic partners 2
Exclusive agreement and coordinated actions with strategic partners 3
TOTAL (add weighted scores for horizontal axis coordinate)  

 

Position on the company-centric (or internal) matrix

Vertical axis: project strategic value to your company

Question Weight Answers Points Weighted Score
What is the strategic value of the project to your business with this customer? 0.30 None or insignificant 0
Moderate 1
Considerable 2
Vital importance, related follow-up opportunities expected 3
Is this project potentially valuable to other customers? Is it replicable? 0.30 The project cannot be replicated 0
Moderate value to other customers 1
Considerable value to several customers 2
High potential value to your entire customer base, key reference 3
What is the expected revenue share of your company’s strategic products/services in the project? 0.20 None or not worth mentioning (less than 5 percent of expected revenue) 0
Project includes some strategic products/services (5-15 percent of expected revenue) 1
Considerable share (15-50 percent of expected revenue) 2
High share (above 50 percent of expected revenue) 3
What is the expected time to close the sale? 0.10 Long, uncertain timeframe 0
Definite time to close 1
Short time to close 2
Fastest to close, time pressure 3
Is this customer attracted by your company’s new, strategic products/services? 0.10 Lack of interest 0
Moderate interest 1
Considerable interest 2
Target segment for new products/services, fully aligned with your company’s strategy 3
TOTAL (add weighted scores for vertical axis coordinate)  

 

Horizontal axis: capability to design and deliver a unique solution

Question Weight Answers Points Weighted Score
How experienced is your organization in selling and delivering similar projects? What are the business risks? 0.30 Highest risk (experimental, very innovative project) 0
High risk (main products/services in launch phase) 1
Moderate risk (main products/services in growth phase) 2
Low risk (main products/services in maturity phase) 3
What is the credibility at the executive level for this project? 0.05 Adverse perception 0
Indifferent for this deal 1
Favorable 2
Most legitimate player 3
Is the project delivery schedule risky? 0.15 Highest risk, unrealistic timeframe 0
High risk, tight deadlines 1
Moderate risk 2
Low risk, effortless delivery 3
Do you know the competition? Can you differentiate your solution? 0.30 Competition is unknown 0
Competition is known: Your solution is hardly differentiated 1
Competition is known: Your solution provides unique, compelling features 2
No competition, exclusive discussions 3
If applicable; otherwise, disregard this question: How experienced is your organization in cooperating with your customer’s strategic partners for this project? 0.20 No previous experience in dealing with these companies 0
Hesitant partnerships 1
Effective partnerships for this deal 2
First-class partnerships for frequent cooperative projects 3
TOTAL (add weighted scores for horizontal axis coordinate)  

 

The author implemented this set of 20 questions into a spreadsheet, automatically charting the matrixes. Its simple graphical user interface allows teammates to evaluate any bid opportunity in 20 clicks, i.e., in less than five minutes. The resulting ease of use has made account teams positively adopt the bid screening tool.

The questionnaire can also help resolve differences of opinion among team members by unearthing the precise aspects of a lead evaluation that generate disagreement. For example, if two people find out that they disagree whether the customer budget for this project is adequate or too low, they can thoroughly discuss this topic to reach a consensus on the best answer. The exercise simultaneously prompts them to broaden their respective understanding of the opportunity. At last, if teammates cannot arrive at a compromise, note that hesitating between adjacent answers to one or two questions will usually not drastically alter the position of a bid opportunity on the matrix.

Account team members’ personal stakes in a bid/no-bid decision may lead them to lose sight of their own company’s interests and, one way or another, misuse and manipulate the questionnaire. To avoid cursory – or even misleading – evaluations, it is important that the team regards the screening tool as a real lever to secure company resources and not as “just another administrative task imposed by management.” A sound practice is to encourage employees from across functions (with an emphasis on non-sales functions) to voice concerns about the upcoming project and really challenge dubious statements.

Cedric Girardclos holds an MBA from ESSEC Business School in Paris and is the cofounder of Adjungo – a high-growth, innovative IT services company based in France: cgirardclos@adjungo.fr.