The Ultimate Guide to Proposal Building

Chapter 4: Price to win

1. Introduction

  • Price-to-win is a process for analyzing competitor and customer data to determine how other bidders are likely to position their solution and bid price with their understanding of the customer’s budget and their assessment of value.
  • Cost is the total range of expenses the offeror expects to spend to deliver the requirements. Price is the monetary payment for the offeror to deliver the requirements.
  • Generally, the following relationship must be true:

Customer’s Perceived Value ≥ Customer’s Budget ≥ Your Price ≥ Your Cost

1.1. Best Practices

1.1.1. Understand the characteristics of a mature, successful price-to-win capability.

  • Strong price-to-win activities depend on:
    • A strong, long-term commitment to price-to-win resources and strategy
    • Investment in price-to-win activities that are not subject to arbitrary cuts
    • Mechanisms that allow for the capture of intelligence at all levels and from many different sources
    • Encouragement of honest analysis that challenges internal assumptions
  • Successful price-to-win activities share several additional key elements:
    • A knowledgeable senior management champion who understands price-to-win and is committed to using competitive information for decisionmaking
    • Getting an early start in the opportunity stage to allow for sufficient time for effective research and analysis
    • An independent price-to-win function from the opportunity team, whether in-house or obtained outside, to ensure objective assessment
    • Consistent use of repeatable tools in a well-documented process
    • An attitude of continuous improvement
    • Involvement of all stakeholders, including the pricing team
    • A clear focus on providing actionable outcomes

1.1.2. Engage price-to-win as early as possible and update as new information comes to light.

  • Price-to-win is used to identify what kind of solution your team should offer and the price point at which you should offer it which is crucial in winning a bid.

1.1.3. Employ information systems and analysis tools.

  • Important tools and techniques used to conduct price-to-win are Customer Relationship Management (CRM) system and an internal knowledge base.
  • The most useful analysis tools for price-to-win analysis are custom built using Spreadsheets.

1.1.4. Gain as much customer intelligence as possible.

  • Obtaining customer intelligence is essential in the price-to-win process. This can be obtained from customer meetings or presentations, as well as industry days and opportunity teaming meetings.

1.1.5. Gain as much competitor intelligence as possible.

  • Competitive analysis can help establish what your competitors’ bid and actual award prices would be based on prior similar contracts.
  • Price your competitors’ likely solutions using the work breakdown structure (WBS) developed for your own organization in a bottom-up fashion. Adjust prices to allow for changes in business climate, rates, technology, and other sources of information.

1.1.6. Maintain strong opportunity activities parallel to price-to-win analysis.

  • To succeed at price-to-win, it is essential to know how you will stack up against your competitors. Take note of the following within your organization:
    • Your historical cost data.
    • Your competitive position.
    • Your pricing differentiators.
    • Your internal risk.

1.1.7. Focus pricing on value to the customer.

  • When it comes to presenting price, look for the ways you offer value to customers.
  • Maximize the value you bring at minimum cost.
  • Make it a point to show, in graphic form, what that value means for them.

1.1.8. Align pricing strategy with your sales strategy.

  1. It is crucial for the sales team to determine the type of solution the customer seeks.
  2. Determine if the customer wants lowest price technically acceptable (LPTA), or wants more features and innovation? Align your pricing strategy accordingly.

 

2. Common Pitfalls and Misconceptions

  1. Belief that price-to-win is an externally set parameter
  2. Failure to embrace price-to-win concepts