So, you’ve got a problem, and you need a solution.
‘Who you gonna call?’
Whether you need a quote from the Ghostbusters to handle that pesky poltergeist under the stairs, or —even worse — you have an IT scare that could have implications for corporate security, there’s a way to solve your problem.
In this case, your problem is an RFP. But what is the definition of RFP? Why do businesses use them? And what’s involved in successfully sending and responding to RFPs?
Never fear! Navigating the complexities of the RFP process doesn’t have to be rocket science, or even as mystical as discerning a ghost’s presence. To help you get started, we’ve put together this guide. Get to the bottom of the RFP meaning, the process, and even how to use automation software to help your team respond to — and win— more bids.
What is an RFP?
An RFP, or request for proposal, is an important business document. Organizations use RFPs to inform contractors and vendors of a specific project to solicit bids. Once bids are received, the buyer can compare prices, project scope, security, and overall fit.
Although there are many beneficial reasons to send RFPs, managing the process both on the procurement and bidding fronts is a lot of work. On average, top performing RFP teams respond to 175 RFPs annually. In the enterprise space, that number is even higher, sometimes reaching hundreds of responses annually.
“The research shows teams that win more than 50% of their RFPs submit an average of 175 responses per year, as opposed to the average of 147”
To handle high RFP volumes, organizations hire entire teams of bid professionals, including RFP managers, proposal writers, and business development managers to ensure the RFP response process runs smoothly. However, there are many moving parts involved in the RFP process, both from the requesting and responding sides, that quickly coalesce into a large workload even for seasoned RFP professionals.
Later, we’ll investigate how RFP teams can take advantage of technology to help save time and bolster win rates. But for now, let’s look into the RFP meaning and basics, as well as some of the competitive advantages organizations can glean from these critical business documents.
RFP Meaning and Basics
RFPs are made up of a few components that help explain the reason for the request and the solution and/or service needed. These components might include:
- Background on the organization that is requesting the solution.
- A description of the Line of Business (LOB) or operating region. The LOB gives insight into the specifics of what solution or service is being requested. Additionally, it defines what part of the organization that will leverage the solution.
- Use cases that describe how the organization’s employees will use the solution or service.
- A statement of work (SOW) outlining the scope and breadth of the work to be performed by the vendor.
- A timeline for the RFP response process and implementation/installation of the solution or service.
Why Use an RFP?
Other than the obvious reason of soliciting a solution to a problem, organizations typically issue an RFP for one of three reasons:
- RFPs Drive Down Cost Through Competition: Imagine if when you went to buy a car, multiple dealerships were bidding for your business. You would likely get a great deal on your car purchase. RFPs work like that. They put the purchasing organization in the driver’s seat when it comes to selecting the right vendor for their needs. Instead of evaluating a single vendor, RFPs allow buyers to compare vendor offerings competitively against one another. This enables them to compare qualifications, solutions, and prices to get the solution that works best for their organization.
- Enable Organizations to Establish Scope: RFPs are instrumental in enabling organizations to understand exactly what a vendor has to offer. Additionally, it’s an excellent way for organizations to gauge how well a vendor understands their unique business space and needs.
- Ensure Compliance with Industry and Government Regulations: Formalizing the RFP process is a vital step in ensuring compliance with laws, while also staying transparent to the public or to other influential entities and stakeholders.
“The average public sector RFP achieved 22% cost savings” – The State of RFP
To address all three of these points, it’s essential for the RFP’s creator to be as explicit in their needs as possible. This way, the bidders can provide all the details necessary to ensure the procurement team makes the right purchasing decision.
Investing time and other resources into responding to RFPs is equally important. As many organizations live and die by their ability to win bids, making sure they rank at the top of an organization’s short list is integral to their success. After all, most RFPs receive multiple responses.
In B2B, purchases are more like investments. An effective RFP can help get a new business relationship off on the right foot by letting all parties involved know what is expected of them to ensure the success of the project.
The Difference Between Proactive and Reactive Proposals
Proposals are reactive when they are requested by another business; however, proposals can also be proactive. Proactive proposals occur when salespeople submit proposals to businesses as a result of some trigger that they have independently identified — not as a response to a formal RFP.
Benefits of Proactive Proposals
By proactively proposing goods and/or services to buyers, vendors can get ahead of the competition.
Used primarily by sales professionals to land new business, in the case of proactive proposals, the seller isn’t competing with many other bidders like they would in responding to an RFP. Additionally, the seller has time to analyze the buyer’s needs and perfect the proposed offering without a looming deadline.
The RFP Process – Everything Involved in Creating a Successful RFP
As with any other weighty decision, the RFP process is all about setting expectations and goals internally before distributing the RFP document. To ensure that vendors have all the information they need to respond to an RFP, buying organizations must think about the problems they want to solve, and the measurable outcomes that will define success. Without measurable goals, it is impossible to discern whether the new vendor — and solution — is successful.
Here are the steps usually taken during the RFP process:
1. Define the organization’s goals
Before writing an RFP, the buyer must be clear on the business challenge(s) the vendor will solve and establish a scoring rubric. This will give vendors insight into how responses will be weighed and compared against one another. It also gives internal stakeholders a means to score a vendor’s strengths and weaknesses.
2. Writing an RFP – the Secret Sauce
There is no “one size fits all” approach to writing a successful RFP. Instead, buyers need to consider several things:
- What kind of trial period is available? Knowing that one vendor offers a trial period, while another does not, could influence a buyer’s decision on which solution to choose. A trial period will give the organization a chance to assess the solution before making a commitment.
- What does the implementation process look like? Understanding the steps involved in onboarding can help the buyer see how much work is going to fall on internal resources, how much of a time commitment it’s going to be, and more.
- Are training and ongoing support offered? Good vendors set their customers up for success in the long run. Once they get a customer organization up and running, they should be willing and eager to invest considerable time in ensuring everyone is properly trained and supported as time goes on.
- Does the vendor understand our needs and goals? Buyers want to know that the potential vendor understands their specific business challenges, as well as the challenges of their industry. It’s important to include questions that can help in assessing the potential vendor’s fit.
3. Edit, Edit and Edit
Once written, it’s important to edit the RFP for clarity and precision. To get the best — and most useful — responses, vendors need to understand exactly what’s needed. They’ll find it difficult to respond to an RFP with vague questions and those filled with grammatical errors.
4. Invite Vendors to Respond
Once the RFP questionnaire is written and polished to be an accurate and professional representation of the buyer’s business, it is ready to send to vendors.
5. Evaluate Responses
A thoughtful and detailed RFP document is likely to get plenty of interest from vendors. Once the buyer has the response documents, it’s time to evaluate. If a scoring rubric is already established, it can help the evaluation team whittle down responders to only la crème-de-la-crème.
A few additional data points to consider at this stage include:
- Who best addresses the organization’s needs?
- How do costs compare?
- Which vendor is most likely to be the best to work with for the desired duration?
6. Determining the Short List
In most cases, buyers narrow potential vendors to a short list. This puts the attention and focus on just a handful of select, top vendors.
- Reference Check: Just like when hiring a new team member, or checking online reviews before making a purchase, checking vendor references is a good practice. This gives buyers a chance to investigate the past achievements of the vendor. It also gives them an idea for what working with them will be like. References can be either actual business contacts (phone number, email) or case studies on work performed for similar organizations.
- Check the Culture: Is there a cultural connection between the buyer organization and the vendor? Investing in a vendor is often a big commitment in time and money. Buyers want to make sure their business is set up for success by working with vendors that are culturally compatible.
7. Review Internally and Select a Vendor
Given there are always multiple stakeholders involved in the RFP process (more on that below), buyers are going to want to include them in the decision. Gaining an internal consensus on the top vendor needs to happen before moving forward with the final stages of the process.
“The average RFP project includes between three and five evaluators.” – State of the RFP.
Now for the fun part: negotiating the deal. Although the vendor’s pricing and scope of activities have been well defined in their winning proposal, that doesn’t mean they are set in stone. Buyers should negotiate for the best price and other aspects involved in the solution, including hours of support, expectations, deliverables, and deadlines.
9. Sign the Deal
With everything agreed upon and the contract approved, it’s time to sign the deal!
10. Measure the Solution’s Influence
Lastly, measure the influence of your chosen vendor on your business challenges. Have they met the stated goals, or far exceeded them? Knowing this information will be critical when it comes time to renew the contract.
The People Involved in the RFP Process
There are several key professionals involved with RFPs on the procurement/buying side. And, like many lofty endeavors, it takes teamwork to make the dream work.
While the exact makeup of the procurement team will vary from organization to organization, roles often include:
- The RFP Consultant: The RFP consultant’s job is to understand their client’s needs better than anybody else, and then communicate those needs in the RFP document.
- Procurement Professional: Planning an RFP, much like planning a ghost hunt, an undercover sting operation, or any complex business process, takes meticulous planning to get it right. A procurement professional manages the entire process from start to finish, focusing primarily on rallying the team to create the RFP document.
- Stakeholders: There will usually be multiple stakeholders involved in the process. They are the ones whose need sparked the hunt for a vendor and will also most benefit from getting the right fit.
- The CFO: The Charlie to these angels. The final boss, the CFO, ultimately needs to sign off on the budget. The buck really stops with this role.
How to Write and Manage an RFP Response
Although sending RFPs and responding to RFPs may at first seem like two different sides of the same coin, they are, in reality, very different processes, each with their own nuances and pressures.
In fact, RFP responders must work under added pressures, such as time restraints and quotas. Not only must vendors come up with phenomenal answers to challenging questions on a deadline, they must also do so knowing that their proposal is going to be going up against many others. Therefore, delivering persuasive, timely, and well-designed proposals is incredibly important for bidders.
The process behind writing an effective RFP response and winning the bid typically includes:
- Making sure the deal is qualified. Before going to the trouble of writing RFP responses — designing, formatting and presenting — it’s up to the RFP team to ensure the potential deal is qualified.
- Focus on the prospect’s pain points. What are the actual business challenges the prospect is facing and how can the bidder uniquely solve them? If the bidder can answer this question and convey it intelligently in an RFP response, they are likely guaranteed a spot at the front of the pack.
- Be persuasive. In their response, the bidder must highlight their understanding of the buying organization’s needs and goals, and how their proposed solution addresses those criteria and provides value. They must answer the questions the RFP asks directly. Additionally, they must anticipate the underlying issues and questions that are being indirectly asked.
- Create a killer executive summary: An effective executive summary focuses on the buyer and their needs and goals.
- Highlight how the bidding organization is different. If, after writing the proposal, it sounds like the bidder could be addressing just about any organization and any solution, then they are doing something wrong. Bidder’s responses must show how they are different, and how that makes them stand out from the competition.
- Communicate a value proposition. A step often forgotten, a clear and concise value proposition is a key component of a successful RFP response.
- Make sure the proposal is easy to digest and well edited:. How many proposals have been dead in the water because the bidding team made errors? These could be big picture things like failing to answer a question satisfactorily. Or it could be something as small as poor formatting. Grammatical errors and typos won’t pass muster with a particularly scrutinizing evaluator.
Who is Involved in the RFP Response Process?
Just as there are various stakeholders and team members involved in the RFP process, pushing it forward to completion, there are likewise several key players making it possible for their organizations to win proposals.
Although the actual size and composition of a bidding team will vary from organization to organization, key players often include:
- The RFP Manager who coordinates the proposal process.
- A Proposal Writer who puts pencil to temple and connects it to their brain to write a great RFP response.
- An ace Content Manager who coordinates winning responses.
- The Bid Manager who ensures the proposal is won.
- The Graphic Designer who makes the proposal look its best.
- An Executive Sponsor who ensures the bid conveys the message the buying organization’s leadership will connect with.
- Subject Matter Experts (SMEs) who provide accurate technical details.
Can You Use a Template to Respond to RFPs?
With so much pressure put on bidders, wouldn’t it be nice if there was a one-size-fits-all response template they could use? Unfortunately, there is no such thing as a full RFP response template.
To separate themselves from the pack, bid teams need to customize their responses to best suit the RFP that’s in front of them. After all, buying from a B2B vendor is an investment and the opening act of a long-term partnership. No two partnerships look the same because no two customers’ needs are the same. Bidders can’t possibly hope to forge a lasting relationship by replying to an RFP with a cookie-cutter template.
But, without a template to work from and so many RFPs to respond to under pressure and tight deadlines, how can a bid team ensure they complete as many qualified RFP responses as possible, without slipping up and missing out on opportunities?
The answer: RFP automation.
Leverage Proposal Software to Automate RFP Responses
While you can’t simply work from a template to ensure the success of your proposals, you can use technology to your advantage. RFP automation software can go above and beyond a static template to help bid teams deliver timely, relevant responses.
By implementing RFP automation software, organizations can streamline the RFP response process to improve effectiveness and productivity for the entire bid team.
What Does Proposal Software Do?
The best proposal automation software will be one that:
a). Enables the bid team to complete more proposals, faster than before.
b). Offers features needed to get the work done.
c). Helps the team answer questions in one voice.
d). Measures answers used and promotes winning responses first.
At the end of the day, investing in RFP automation software enables bid teams to save time and increase their win rate. When choosing the best proposal software for your team, it’s important to keep several key factors in mind, including how well it integrates with your current technology stack, how well it enables collaboration, and how well its features meet the needs of your team.
What’s Next? Measuring the Effectiveness of Proposal Software
Bottom line: RFP software should save bidding organizations time and money. Vendors of every size can benefit from RFP automation software. This is true no matter the size of the bid team or the number of RFPs received annually.
There are metrics available to evaluate the successfulness of RFP response software. While the software itself will help identify which responses lead to higher win rates, the best metrics for success are those that are shown in the business’s bottom line. These include whether there’s been an increase in win rate and/or reduced time spent on RFP responses.
Additionally, the best proposal software will help determine whether the bid team is targeting the right customers and if they’re involving the right decision makers. It should also measure and track progress for the RFP response team and help your content managers maintain your RFP answers.
If you’re wondering how beneficial RFP automation software might be for your organization, you can calculate the ROI using our investment calculator.
RFP Meaning In Conclusion
The importance of RFPs in today’s business world is hard to overstate. By now, you should have a solid grasp on the RFP meaning. Additionally, you now understand the process, and the lengths to which RFP response teams will go to win a bid.
Whether you are responsible for winning bids or finding your organization’s next vendor, having a strong understanding of what the entire RFP process looks like will help you and your team succeed.