Beyond RFP to Request for Costs

Working on an RFP for a prospective customer last week, I had an interesting experience. The consultancy running the process requested pricing across a broad range of products and quantities. Nothing new or surprising there.

What came next WAS surprising. The company asked that I provide my pricing model by completing a grid of cost drivers. Uncomfortable sharing this information with strangers, I declined to take part in the exercise.

You see, I knew that they were going to use the model to compare its output with the prices I had entered in the grid. Essentially, therefore, I’d be competing against myself. In my view, there’s already enough competition out there; competing against myself doesn’t seem to be in my interest.

The company then requested a phone call to explain to me the benefits of full participation in this exercise. After all, I was to understand, this IS a $5 million annual opportunity. During the call, I learned that the consultancy was going to generate an estimating system based upon all the bidders’ data, allowing the client to “manage” (read: “dictate”) costs over the long run.

While this, arguably, seemed reasonable—if not mutually beneficial—I further questioned how the company would use the tool over time. I learned that the model’s output pricing was something I was implicitly committing to with its delivery. It would be compared to my grid pricing, with the lower number taking precedence.

That might seem like the kicker. However, as they say on late night TV, “But wait…there’s more!”

For the 20 percent of the work that comprised 80 percent of the volume, I would have the “opportunity” to cut my price even further, in the event that I had excess capacity and wanted to fill it with timely work. Consequently, each project would be triple bid between me, myself and I!

Categories:

A third-generation printer, Dustin LeFebvre delivers his vision for Specialty Print Communications as EVP, Marketing through strategy, planning and new product development. With a rich background ranging from sales and marketing to operations, quality control and procurement, Dustin takes a wide-angle approach to SPC

Related Content
Comments
  • insideguy

    Major textbook publishers have been doing exactly what you described for the last ten years. They asked their composition vendors to quantify and qualify their pricing. The expressed purpose was to create scales pricing, which would be lower, and supposedly more competitive. When we declined to participate it was made clear that the publisher would simply stop sending RFP’s.

    One could make the argument that if all the vendors had stuck together the inevitable could have been avoided. What happened was that all of the publishers banded together.

    The end result is that most (90+%) of our college and K-12 textbooks are composed overseas in India and the Philippines. To some degree, even editorial development of these important learning tools is happening overseas.

    Good luck in fighting the trend.

  • Anonymous

    Agree wholeheartedly. I need to control my business and not allow anyone else to dictate what I quote and for how much.
    This is becoming more commonplace as quasi-MSP’s (brokers) try to justify their existence. You can change the name of the snake oil, but it is still snake oil.
    This type of buying and purchasing behavior demonstrates the desperation level in our business; an industry filled with washed-up salespeople who become brokers (they can only sell price) and the printers that would sell their Mothers’ soul for a $5 Million contract. Sad, Sad state of affairs.

  • Printing_Rocks

    We had the unfortunate luck to go through this process with one of our largest clients a few years ago. After two weeks worth of work, conference calls and more cost disclosures than were prudent, we were notified that we would not be receiving any work as we were now deemed to be geographically undesirable. Unfortunately they ended up with our cost models, which I’m certain they used to grind away the profits of the other particpants.

    We’ve declined a few similar RFPs since then based mainly on the fact that the client will end up picking the printer who is willing to do any job at any price, but also because we want to *gasp* make a profit and these exercises do nothing to further that goal.

    We do continue to participate in reverse auctions for one customer, but do not continue to bid below a comfortable markup, and prices tend to remain reasonable since there’s only a handful of participants.

    But I agree, at some point we all have to say enough is enough and stop doing our work for free or below cost in the hopes that somehow we’ll make it up in the long run that will never come.

  • Kelly Mallozzi

    I wish every printer would read this and then agree not to participate in these exercises that hurt our industry. Good for you for standing up to them.

  • Dave

    Good for you standing up to them. The problem is companies in today’s know what state the print industry is in and if they are dangling a $5 Million carrot, they know someone will fill out the pricing and provide them a price. It is mainly the big printers of the world. The RRD’s, Quad, Consolidated etc. that wold do fill that out no problem as they want the money in the end. That is my opinion anyways.

  • Mark H

    When consumers buy solely on price they are making the assumption that "all things are equal" in regards to the product being purchased. It is sales role to educate the buyer and help elevate them above this assumption. Unfortunately, too many salesmen today are lazy, don’t understand their product, can’t or wont sell on value (rather than price), and are just too busy flitting from one customer to the next to help fix the situation.

    Is there a fix for the industry as a whole, or is it too late (and we’ve already been commoditized)? I don’t know, I don’t have the answer. I do know, that many of my competitors who focused on shorting a deal have closed and many others been consumed. Maybe that in itself is an answer.

  • DAN MALACINA

    This takes any value added we have left right off the table I agree the more printers that allow this to continue the worse off the rest of us will be.

  • pistolprint

    Can you say " InnerWorkings"

  • Craig Hath

    Couldn’t agree more with your decision to pass on the "Opportunity" Dustin. We’ve had similar situations and the buyers are always trying to convince us that it isn’t all about price and these program are good for both parties. Why do we have to walk away feeling like we got the short end of the stick ? So much fore adding value to the business relationship. everhttp://www.piworld.com/blog/beyond-rfp-request-costs-printer-printing-services-bid-dustin-lefebvre#y time?