How a capture strategy helps avoid competitive bidding
Is your client due for renewal? Avoid a bidding war and follow these 10 capture strategy tips to keep your client long before they think of going to RFP.
Capture Strategy Tips
A capture strategy identifies how to position organizations as the supplier of choice and convince clients to renew without considering alternatives.
- Develop the right relationships with the right people. Build relationships with decision-makers and expand your network.
- Define price strategy. Decide on your best price, walk away price, and your bargaining strategy.
- Create sustained value. Add value on a regular basis and show your client the benefits of your partnership well in advance of the renewal.
- Analyze the competition. Recognize market trends as well as the strengths and weaknesses of competitors.
- Assemble the win team. Invite subject matter experts from your company to help you develop a renewal strategy.
- Maintain (or restore) confidence. Unhappy clients don't renew. Close any gaps in your solution, meet all commitments and ensure your client is satisfied.
- Don't get too comfortable. Don't assume because you have the business, you'll keep it. Demonstrate that you value your client's business.
- Improve communication. Create contact plans to keep in touch with key stakeholders in your company and your client's.
- Beware the 'Pyramid of Renewal Doom'. For client renewal, there are eight possibilities. Think about all of your possibilities and pick the best one.
- Create capture plans. Create a plan that outlines the steps that will lead to customer renewal.
Let's talk about the client lifecycle
The sales cycle attracts qualified leads, engages and converts them to clients. From there, they enter the client lifecycle, nurture, grow and retain them.
Your job as a key account manager is to deliver the kind of value that convinces your clients to stay in the loop.
This means sooner or later, you will have a conversation with them about renewal.
Do you make the first move and present a compelling proposal that positions you as the partner of choice? Or wait until they go out to the market and invite our competitors to bid for their business?
Which would you prefer?
What Is a Request for Proposal (RFP) and why you want to avoid it?
A request for proposal (RFP) is a document clients create that defines their requirements for the provision of goods and services. Suppliers submit proposals to provide them. Clients use bid decision criteria to decide who wins the contract.
In other words, your client sends out a couple of hundred questions to you and your competitors. It takes you weeks to come up with the answers, decide how much to charge and make the proposal look pretty.
Finally, you send it to your client and keep your fingers crossed.
The bad news is, according to a Rain Group study, an average of 28% of sales bids loses to competitors.
The good news is that RFPs are a huge amount of work and a pain in the arse for everyone. They're expensive too.
There are alternative approaches to avoid RFPs and competitive bid situations.
Don't jeopardize your renewal.
A well crafted pre-emptive bid can seal the deal. It brings the story of your client partnership to life. All the great achievements in the past and the wonderful future ahead.
With preparation and a little luck, there's a good chance your client will stay.
And why wouldn't they award you the contract?
You shared a brilliant business case to renew. And they'll also avoid unnecessary hassle and costs.
Alas, it's not as easy as it sounds. Many B2B buyers prefer to issue RFPs to
- Re-evaluate scope, specifications and requirements.
- Learn about new vendors.
- Compare available solutions.
- Benchmark pricing.
- Be transparent and accountable for purchasing decisions.
So you have some groundwork to do first.
Graham Ablett | LinkedIn and I have 10 tactics to help lay the foundation of your capture strategy.
What is a capture strategy?
Let's face it, anything worth doing is worth doing well. That applies even more so to client renewals when there's so much at stake.
Now you could go with hope as a strategy, but I don't recommend it.
A capture strategy is the process by which you position your business as the partner of choice and convince your client to renew without considering alternative suppliers.
You'll need to understand the decision-making process, the competitive landscape, develop solutions, pricing, negotiation tactics and lots more.
Unhappy clients don't renew, so it's important to identify any gaps and how you'll close them.
From there, you'll create a capture plan to map out the specific steps you'll take to win that renewal.
It may sound like a lot of work.
And that's because it is.
So, the earlier you start the easier it will be.
I've joined forces with Graham Ablett, Director at Strategic Proposals to share our top 10 tips to lay the foundation of your capture strategy.
1. Develop the right relationships with the right people
Seek out the people within your client's organization that have influence, hold budgets, make decisions or get things done. If you don't know who they are, find out and then create an engagement plan to nurture those relationships.
Customers are your lifeblood, so it's essential to have healthy relationships in place. Otherwise, you'll struggle because your ability to influence outcomes diminishes.
It's easy to slip into business-as-usual.
Don't forget to chat with your clients regularly, talk about successes and find out what's going on. All those good things help build understanding and strengthen relationships.
Build relationships with people that you might not deal with on a day to day basis. Even people that are outside your current network. The people that sign the contracts or the people that have budgets. The depth of the relationship depends on who they are, what they do, and where they fit into the big picture.
2. Define pricing strategy
You can't have a conversation about renewal without a discussion on price. Either it goes up, goes down or remains the same. Know the underlying calculations that influence the price. Before you talk to the client, know your anchor price, walk away price and have a negotiation strategy.
Clients don't realize that tweaks to the scope and specifications, may change prices. Build a price bridge to justify changes up and down from what they paid to the price you now offer.
It's important to understand how and when budgets are decided. What are the trends with your client and in their market? What influences their strategy?
Power tip: Do your homework. Review recent bids for other clients. Get advice and insights from colleagues. Talk to the pricing team before you create the capture strategy.
Prepare for objections! Don't wait until your client raises them. For example, clients may expect a discount for loyalty, but in fact, you may need to increase prices. Position your price in the context of value created and know what you'll say if they ask you to reduce it.
Power tip: There should always be a trade-off for dropping your prices. What else can you get in exchange for a discount? Here are some ideas:
- A 3-year contract, not a one year contract.
- A commitment to increase spend volume.
- Be a preferred or exclusive supplier.
- Reduce payment terms.
- Increase the price of something else.
- Move from a dedicated service team to a shared configuration.
You get the idea.
3. Create sustained value
Value isn't a one-and-done. It's so obvious when suddenly, out of the blue, you improve service, deliver all the long-outstanding requests and pay attention to your client. They can smell a renewal coming and will be very cynical of your motives if you don't create sustained value.
Different stakeholders will value different things. Who are your stakeholders, and what floats their value boat? What makes their lives better? Knowing that means you can work out what they value and what you need to measure your impact.
- Shareholders and board/directors value growth, costs, profit and cashflow.
- Stakeholders value business improvement. Think easier, better, more efficient or simpler.
For something to be valuable, it needs to tick a few boxes:
If your client doesn't know you're doing something or they don't care about it, then it's not valuable.
Improve your client's bottom line through cost reduction and cost avoidance. Then move on to other things, like user experience, efficiency, quality and simplicity.
4. Analyze the competition
A word of caution. A discussion about renewal may prompt your client to test the market. Do competitor research in advance of the conversation. That way you're prepared to deal with questions about what the marketplace is offering.
You need to know your market. Ask your marketing team to collect competitor intelligence, or gather your own data.
- What's going on in other accounts?
- Who's talking to your clients?
- Who are the new kids on the block?
- What are they saying or doing online
You must be aware of what's trending in your market. Do your own research on competitor activity:
- Watch videos on company products, culture, vision and mission.
- Follow competitors on social media. What are they saying?
- Read press releases, white papers, earnings reports and news.
- Listen to podcast interviews.
How does their message and value proposition differ from yours?
5. Assemble the win team
Don't do this alone. Assemble your "win team" early to secure the resources and cooperation of people you need. There's too much at stake to prepare, present and close the renewal proposal by yourself.
Client renewals are like an internal marketing campaign. Get the right people involved early and let them know what you need from them. Work backwards from the contract end date to develop a timeline for your renewal strategy.
Your client's procurement team is involved 3 to 6 months before the end of the contract. Define the capture strategy and plan early and get your internal resources ready.
Run a report for every client with expiring contracts in the next 15 months. It will help you understand busy periods and you may need to adapt your plan to accommodate peak periods. For example, if you have half a dozen clients with renewals in August, start preparing in January. Stagger these projects, so you're not overwhelmed.
Set reminders in your diary of the renewal dates, so you don't miss important milestones.
6. Maintain (or restore) confidence
It's difficult to convince a client to renew if there's dissatisfaction or issues. They are a big distraction. Your client may not want to focus on long-term plans until you solve the short-term problems.
IACCM research shows the most significant reason contracts fail is misalignment on expectations. Don't rely on the SLA/KPI dashboard alone, as they don't tell the full story. Continue to communicate with your client and ask how they are doing to get the full picture.
If there's an issue, react to it with a plan to rectify the problem. Include your management team in recovery plans. It shows you take your client's concerns seriously.
Sometimes, service levels agreements or key performance indicators slip below expectations. Alert your internal teams a renewal is imminent, and you expect a plan to get things back on track.
Consistently achieve SLAs/KPIs. When the client agrees the issues are behind your, you're ready to submit the renewal proposal.
7. Don't get too comfortable.
Don't take your client for granted. Anything could happen between now and the renewal, so ramp up your engagement.
Too scared you'll lose your client? Or too arrogant you'll keep them? Either way, the renewal will happen. And your client will award their business to someone else if you don't show them you want to keep it.
According to The Challenger Sale data, the incumbent wins 47% of the time. The odds are high you'll lose when it comes to renewal if you're complacent.
Have the renewal conversation with your client. Let them know you want to keep their business and ask what you need to do to win it. Don't ignore the fact that the contract is renewing and hope no one will notice.
8. Improve communication
A successful renewal takes teamwork, from the client and the supplier side. It's a challenge to keep everyone informed.
Many internal stakeholders lose sight of when renewals are due. Strategic Proposals surveyed a range of UK blue-chip companies to ask them to name their top 10 renewal deals in the next 12 months. On average, they could only mention one.
The key account manager must scream and shout to keep their renewals in focus. Remind your leaders it's far harder to win new business and will cost a lot more money to win that amount of work again.
It's essential to communicate. Get into the habit of sharing what's coming up for renewal, where you're at, what's left to do and where you need help.
Celebrate success. If someone has helped you find an answer, write the bid or fix a problem – let them know they've made a difference.
Be sensitive to everyone's time pressures. The fact that you have deadlines doesn't mean everyone else has to fall into line. Be as flexible as you can; give as much notice as you can.
9. Beware the 'Pyramid of Renewal Doom'
Take a look at the Pyramid of Renewal Doom. It's a simple model Strategic Proposals created to help you decide on a capture strategy. It guides you through different approaches, from walk away to renew the client before they go to market.
- Kicked out. Competitors influence your client to leave and you're not even invited to submit a proposal.
- Lose re-bid. The renewal goes to competitive tender but you lose. Worse, you don't even make it to the final round.
- Win via responsive bid. The client goes to RFP and you retain their business.
- Planned re-bid. You have influenced the requirements of the RFP and it's strongly in your favour. It goes to market and you retain your client.
- Extend. You renew your agreement for a short period without a competitive tender.
- Walk away. The deal is not competitive and will not deliver value to your business so you decline to bid.
- Retain. You keep the agreement for a significant period without competitive tender, on broadly the same terms.
- Renew. You retain the client for a significant period without competitive tender but on better terms or margins.
It will spark ideas on what you could do to keep your clients in the context of a renewal.
10. Create capture plans
The aim of capture planning is to create a strategy with specific steps that lead to customer renewal. There are a range of factors you need to include in your capture process, like
- Your clients most essential requirements
- Who are the influencers vital to the decision-making process?
- Win/Loss factors
- Competitor analysis
- Pricing strategy
And lots more.
You need a capture plan. Otherwise, you risk losing your client to a competitor.
Client renewals are rarely easy, but always rewarding.
They're a great opportunity to recalibrate your vision, pivot your strategy and get better aligned to your client and their objectives.
And to remind your clients of the great value you've delivered and the bright future that lies ahead as your partnership grows in strength.
You've got this.