We have all been there: an email arrives asking us to quote on dozens of products in multiple quantities. There are usually very specific instructions that must be followed which may include complete background information on your company or on you personally. If the request is from a government entity or a licensed business like a casino, the time and work to respond can be even more daunting. But the prize of winning a bid for thousands of dollars of business is too big of a carrot dangling from a long stick for you to ignore. Just like that donkey that can’t realize he will never reach the carrot, you keep plodding on and respond to RFQs.
The first thing to realize is that a bid system is designed for only one thing, to acquire goods or services at the lowest cost - period. Purchasing agents would like to think they can also insure quality, creativity and service by including endless “terms,” but in reality the low bidder can’t afford to provide the level of service, quality and creativity that a supplier making a reasonable profit can and will. The next factor is what I call the “desperate bidder”. This business (salesperson) is willing to take the business at ridiculously low margin and has the attitude that ‘something is better than nothing’.
If that desperate bidder instead used the hours necessary to fill out the RFQ to build his business, work with prospects, develop strategies for current customers and make sure customers are reminded about seasonal reorders, the bottom line profits would be much greater time after time.
If you still want to give RFQs a try, here are a few things to keep in mind. Once upon a time the entire bid was considered in the awarding of a contract. Today that almost never happens. Today the ‘line item’ is all you get consideration on. So never low ball one item expecting to make it up on another. It is also a good idea to ask the bid administrator how many invitations to bid were issued. If there were 3, 10 even 25 you may be dealing with a more legitimate process. Too often that answer is 250, 300 or more! If you were unlucky enough to be the low bid on a few items, just keep in mind that a couple hundred other people realized that the price needed to be higher!
Another point to get clarity on is any guarantee. If you successfully are the low bidder, are they obligated to give you the business. The answer is almost always no. This is especially true when many different quantities are asked to be quoted. That is an indication that the organization has no real plan for the use of the goods.
One of the most important areas on RFQs is liability, insurance, compliance and other official sounding subjects! In addition to all the work you have to do just to find pricing, delivery and availability, you have to agree to “boilerplate” language in the request that was intended for anything but promotional specialties. It may not seem important because all you want to do is sell some baseball caps - but when the top brass of the megacorp you sold them to develops a bad rash after wearing the caps - you might reconsider!
Sure, we want all the goods we distribute to be safe, but signing RFQs all to often create obligations you never thought of.
The most undesirable part of the process is the assumption that our industry is a commodity industry and that promotional merchandise can be purchased like rock salt or light bulbs! The most expensive marketing any organization can do is marketing that does not work. Filling out RFQs does not give you a chance to understand what the client wants to accomplish. You don’t get a chance to help budgets do more. You don’t get a chance to make recommendations you know from experience could make a positive impact. And by participating in the RFQ process you insure that it will continue.
For many years I handled the internal promotions for what was at that time the nation’s largest retailer. I provided things like employee length of service pins, recognition awards for sales up-selling and special goods for annual meetings and picnics throughout the country. Then everything went to a bidding system administered by a third party procurement company. I refused to participate and simply wrote off all that business. Less than 8 month later they were back telling me that creativity and service was so bad from the “low bidders” that they wanted me to take back the business.
My isolated example was a bit unique because I had the business for years before the bidding went into effect but it does illustrate that a low bidder can’t do the same work and still make a profit. Keep that in mind whenever you drive over a bridge - it was built by the lowest bidder!
Gregg Emmer is chief marketing officer and vice president at Kaeser & Blair, Inc. He has more than 40 years experience in marketing and the promotional products industry. His outside consultancy provides marketing, public relations and business planning consulting to a wide range of other businesses and has been a useful knowledge base for K&B Dealers. Contact Gregg at gemmer@kaeser-blair.com.