The cover of Dr. Tom Sant’s book “Persuasive Business Proposals” (American Management Association, 3rd Edition, 2012) belies the richness of information it presents on the psychology of proposal selection. I’m glad I picked the book up. Let me describe some of what I learned from it.
There are many ways to analyze the way our prospective clients will choose us. One way, Tom Sant tells us, is based on simple decision making methods which have been identified and analyzed by scientists and presented in a another book he cites called Simple Heuristics That Make Us Smart (Oxford University Press, 2000). Simple Heuristics describes a limited set of processes, hard wired into our brains, that are used by people to quickly make decisions based on minimal information.
The first and simplest principal of decision making, as Mr. Sant describes, is that if one of two objects is recognized and the other is not, that the recognized object has a higher value. This leads me to feel that if all other things are equal, then the proposal by the company with the recognized name will be chosen over others,. Similarly, companies with no name (or brand) recognition have little chance in being selected.
Let’s say there is an RFP and 20 proposals are submitted. At the beginning of that proposal screening process, the simplest factor, recognition, comes into play as the evaluator tosses the “no-names” into the wastebasket, according to Sant. After the initial screening for recognition, the evaluator will apply a basic screening criteria to the pile of proposals and eliminate most of them. Some proposals do not follow the RFP instructions. Some don’t answer all the required questions. Some indicate that they are non-compliant by the way they answer a key question. So these proposals are tossed. According to Sant, this part of the decision process moves very quickly until the stack of proposals is a more manageable size.
All Recognized or All Unrecognized
The decision studies in the book Simple Heuristics go on to describe the selection process if all the options are recognized or all are unrecognized. It turns out that decision makers typically use a single criterion to choose among the selectable options. Sometimes there are two or even three criteria, but seldom more than that, says Sant.
This single factor is one that is thought by the decision maker as being the most useful indicator to sort among the options. There are three types of these single factors, the simplest being the arbitrary criteria. A slightly more complex process is called using the last, which utilizes a criteria from the last time the decision maker had a similar process. The third type of single criterion being taking the best, which assumes that one criteria will determine a better result than other criteria.
The Key Criteria – Relevant Experience
Tom Sant explains that the implication of the single-factor theory is that a proposer can improve their attempt to sell a product or service by asking the right questions to find the prospective client’s single criteria. So, if the the client recognizes all firms, or does not recognize any firm, then what might the selection criteria be? My answer is that the criteria for architects and engineers selection will typically be “relevant experience”. Of other possible key factors, price is probably the most important, and less so are references, timeline, or business “fit”. Sant says that the criteria depends on the client and that it can be uncovered relatively simply, often by just asking.
Implications of the Single-Factor Selection
We may think that there are multiple factors that are involved in a selection process, but perhaps, these are only factor options that are available to the evaluator. Based on the simple heuristics decision processes described above, the evaluator will choose one or very few selection factors to use.
According to Sant, there are three general implications of the single factor selection on proposals and sales processes. First, a relatively simple effort can identify the prospect’s key selection criteria, and this information can be used to improve the proposal. Second, if the key factor is too simple, we can use the sales process, possibly through our proposal, to educate the prospective client and add informed selection criteria to the client’s set of factors, therefore adding value to our services and proposal.
The third implication asks us first to differentiate between 1) responding to an RFP, versus 2) writing a proposal based on a pro-active request or a client’s verbal request. If we are responding to an RFP, then we need to make certain we first avoid the toss-out- we respond carefully to every requirement of the RFP and make sure we meet its basic requirements.. Sant says that an effective tool for this is a “compliance matrix”, which lists each of the client’s requirements, then lists the degree of compliance with each specific requirement.
More than a Single Factor Available
But in responding to verbal, or pro-active request from a prospect, Sant says, decision makers will search based on their own criteria until they find a differentiator. Then they stop and make a decision. So, it is imperative that the proposer determine the key factors that the client may use for determining the selection for this proposal.
So here more than one factor comes into play, because unless we are certain that only one criteria is used, the prospect has more factors available for the differentiator. Sant says that these factors might include whether the proposal gives the client what they need, whether it represents a good value for the money, or whether the vendor can really do the project.
Rate of Return Heuristic – the Value Proposition
In the chapter of his book in which he covers the heuristics of decision making, called “Why the Inuit Hunt Whales and Other Secrets of Customer Behavior”, Sant says that the researchers who created Simple Heuristics found that we all have a “rate of return” or “estimation” heuristic built into us that can weigh the cost versus benefit of choices between different courses of action. Decision makers who are responsible to groups want the group to achieve the best possible return on investment for their group. This has some implications for the proposer.
Take Advantage of the Rate of Return Heuristic
Taking advantage of the “rate of return heuristic” involves creating a value proposition, which is a promise to deliver the best value for the least cost. To take advantage of our understanding of the value proposition, Sant says, we should first describe the improvement of the client’s explicit or implicit return on investment somewhere in our proposal. Second, we should document this improvement with case studies. Third, be certain to determine what the key criteria is for this decision maker, because this key criteria defines the return on investment that we are trying to achieve with our proposal. Lastly, emphasize our differentiators, so that the decision maker has a clear choice between proposals.
The Single-Factor Selection Process
To summarize, along the way to a winning proposal, there are many “single factors” that may require response. First, market to the prospective client so that you have some recognition. Second, don’t be eliminated during the toss-out phase. Third, identify the factor or factors that are driving your prospective client, and respond to them in your proposal. Lastly, create and justify a “value proposition” that feeds your prospect’s “rate of return heuristic”, promising the best return for the least cost.
There are many similar insights in the book Persuasive Business Proposals, so I recommend you take an evening or two to read it.