The Proposal

Great Advice today from SalesDog.com:

Proposals that Wow Prospects
by Tom Sant

You'll learn several ways to stand out from your competitors when presenting your proposal.

Recently a major corporation invited six consulting firms to make one-hour pitches for an EDI project. Five followed the same basic presentation:

• Company background and experience
  
  
• Project team members and their qualifications
  
  
• Comments about billing practices
  
  
• Timeline

The sixth presenter began, "We'd also like to say a little about ourselves, but first we'd like to tell you what we know about the inventory problem that's costing you $250,000 every year."

For 30 minutes, this firm discussed the problem, how to attack it, and how much the corporation would save with their solution. Then they related their experience and their staff's strengths. Later when the selection team gathered, the EDI project leader asked just one question, "Does anybody have any doubts about which firm to hire?"

People don't buy proposals. They buy help for their problems.

Calm the fears
The two biggest fears people have when making a buying decision are:

• They're wasting their money by not getting the solution they really need
  
  
• They're not going to get the kind of business results they want

The successful vendor will address these fears at the outset and allay them by demonstrating the specific value of the proposed solution.

The problem is proposals often feature products and services with an internal focus while top executives are bottom-line oriented. The more broadly your solution affects an organization, the more likely it is that a top corporate officer will get involved in the buying decision. And, the more carefully they'll scrutinize your value proposition.

Show me the payback
A value proposition is the message that differentiates you from the competition and tells why your solution will help solve the customer's problem. There are two principles to follow when crafting your value proposition.

First, focus on what the customer cares about. Suppose you have some data showing that your system reduced overtime hours by 17 percent. That's only valuable if the customer has a problem with overtime. If what they really care about is increasing market share, it's not very compelling.

Second, quantify the value proposition with numbers. Numbers are more persuasive than words. Even if the decision-maker doesn't really buy into your payback analysis, the fact that it's quantified tends to give it impact.

In trying to show value to customers, don't mistake features for benefits. A common example of this tendency is to focus on your own operational efficiency as a reason for the customer to buy from you. For example, let's say your company is a Third Party Administrator with the fastest computers in the insurance industry. You tell your prospects you can process a claim in 7.6 seconds, where the industry average is almost 20 seconds. Their response may be, "So what?" Unless that 12 seconds benefits their operation, it's meaningless.

Stand above the rest
To stand out, you need to focus on your industry differentiators––things you do differently or that nobody else does––but always show how those differentiators deliver value to the customer. Differences based on processes or systems or methodologies are generally longer lasting and harder to overcome than simple operational efficiencies.

If you look at the entire lifecycle of the customer's interaction with your company and your products, you will probably discover many areas where you do things differently. From sales to installation to training to technical help to upgrades––determine where you excel and show how this will help customers.

For most, the easiest calculations of value are those derived from use. If you're providing training, for example, your clients are most likely to measure value by looking at how your training has an impact on customers' performance, productivity, profitability, or cost of operations.

How can you quantify your impact? Here are a few ways of measuring value in terms of business efficiency and profitability:

• Return on Investment (ROI): earnings/investment
  
  
• Return on Equity (ROE): earnings/equity
  
  
• Inventory Turn: investment turnover x margin
  
  
• Cycle Time: activity ratio that drives investment turnover
  
  
• Market Share: sales/value of actual market
  
  
• Cost Reductions
  
  
• Cost Avoidance

Look at your differentiators, figure out how they can help the customer achieve the desired outcomes, and develop a specific value proposition for your proposal or presentation.

Draw them a picture
When you can present your data graphically in charts, you'll add punch. Pictures talk even louder than numbers. To see the power of graphics, suppose that you are trying to sell a company a back-up server and a fail-over network to protect them from a major system crash. You might want them to realize the cost of having their network down for one hour is $XXX,000. But that cost doesn't stay even. The second hour they're down costs even more. So the second hour costs them $XXX,000 + $XX,000, with the costs escalating the longer they're down.

But math bores people. Instead, you should present a trend curve showing their potential losses from an extended downtime period. It will look like a jet take-off pattern and have a similar persuasive impact on the decision-makers.

Finding the payback
Here's a simple method for calculating the payback you want to illustrate in your proposals. First, determine the total cost of the solution you're recommending. That includes the sticker price, plus any implementation costs, but it also means subtracting costs they can avoid by using your solution.

Next, find the impact on revenue. Maybe it's increased sales or reduced headcount. Then find the ratio between revenue impact and total cost. Real numbers are easier to follow, so let's take a hypothetical example.

Let's say you're selling a computer-integrated telemarketing system. The software and equipment cost $450,000, but there is also $67,000 in installation and training costs. However, with the new software the company can drop maintenance on the old system and will need two fewer people to do the same work saving $80,000. So you calculate the total cost as $437,000.

Suppose there's no impact on sales. They'll sell the same amount with our system as they did with the old one. But, their costs have gone down (they're spending less on labor and support). As a result, net income goes up from $100,000 to $170,000. The impact on net revenue is an increase of $70,000 or a rate of return of 16 percent. Calculations for the second and third year will be even better, because there'll be a tiny investment in equipment and the same higher level of revenue.

Beats saying "Trust me"
Quantifying the payback is more persuasive than just claiming your recommendation is a good thing. If baseline measurements aren't available, that's okay. Offer an estimate or a projection based on industry averages. Even if they dispute your numbers, you're still discussing the overall value of your unique offering.

By connecting your payback analysis to what really differentiates you from competitors, you're in a much stronger position: They can't use the easy "Me, too" comeback.

Dr. Tom Sant has been a featured speaker at hundreds of conferences, meetings, and events. He has been called "America's foremost practitioner of proposal writing" by the American Management Association, and was named one of the first ever Fellows of the Association of Proposal Management Professionals in recognition of his lifetime of contributions in the field of proposal writing. He is founder and board member of The Sant Corporation.

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