This document discusses developing strategy for winning price targets in proposals. It covers understanding the difference between value and price, examining the development of sound business cases, learning how to work with others to set cost targets, analyzing competitors and customers to establish winning price targets, and building up to the winning price by considering what the prospect values, their budget, the target price, solution costs, competitors' prices, and the winning price. It emphasizes that showing value is important to win when displacing incumbents, changing processes, or when doing nothing is a viable alternative. It provides guidance on establishing value propositions, setting cost and price targets, using top-down and bottom-up approaches together, and positioning prices relative to competitor value in
2. Learning objectives:
In this unit we are going to
Understand the difference between value and price
Examine the development of sound business case
Learn how to work with others to set a cost target
Analyse competitors and customer to establish a
winning price target
Proposal Guide 182
3. Building up to the winning price
What does the prospect Value?
What is the prospect’s Budget?
What should be the Target Price?
What are our solution Costs?
What will be our competitors’ price?
What’s the Winning Price?
Proposal Guide 182
4. Value and Price
Price to Customer
Value to Customer
Capability
5. Value and Price
Value to Customer
Price to Customer
Capability
8. What is your Value Proposition?
– Starting……………………………...…………………… [implementation date]
– As a result of <your company>’s… [service or product]
– Client will be able to……...................... [do what specifically]
– Resulting in………………………………………….. [quantified business improvement]
– With payback within………………………… [timeframe]
– We will document our
delivered value by……………………………… [result tracking strategy]
9. Different strokes for different folks
The Value Proposition varies depending upon the buyer, for example:
CFO • Cost reduction, CAPEX savings, efficiencies
CEO • Shareholder value, market value
CTO / CMO • Quality, capability, competitive position
Value must be QUANTIFIED
10. Value drives the prospect’s business
case and purchase budget
Their
internal cost
assumptions
Their
Their view of
perceived
risk
value
Their Their vendor
Vision &
benefits Business price
Case assumptions
12. Establishing a Target Price
achieve your take into account
A Target be within the
Customer’s
organisation’s your
acceptable competitor’s
Price should budget
margins prices
Establish the target
price early
Use both, until
Methods: Top down Bottom up
they converge
13. Your target solution should support
the Sales Strategy
Non
Compliant Minimal
? Compliance?
Additional
Value?
What is your Strategy?
14. Setting Cost Targets
Target Cost may be less than, greater than
or equal to Target Price depending on the
business case for the opportunity
Include the total cost for a technically
compliant solution, including:
• Resources
• People / facilities / sub contracts
• Deliverables
• Risks
• Contingency
• Bidding costs (sometimes part of overheads)
• Cost of finance (if appropriate)
15. Use top down and bottom up together
Top Down
• Customer value
• Customer budget
• Competitor price
Bottom Up
• Cost roll up
• Risks
• Required Margins
16. The bidder and prospect business
cases must both stack up
Delivery Risks &
Costs Assumptions
Achievable ROI &
Revenue Margins
Objectives Our Bid Budget
and Business and Sales
Benefits Costs
Case
17. Competitor price positioning
“You will achieve more value with our solution than with the next best alternative”
Value Price Value Price
Winning Solution Next best
alternative
23. Quick Quiz Question:
Which is most likely to be the winner?
a. Value equals price
b. Price is greater than value
c. Value is greater than price
d. The value proposition for each type of buyer is the same
Please make your selection in the Polling pane
24. How did you do?
When perceived value equals price you may end up competing purely on
price. If the competition has exactly the same features and benefits set as
yours and a lower price then the prospect may find it difficult to justify
choosing your offer.
If your price is greater than the value being offered then unless the prospect
has other choices they may not take your offer. Expect to negotiate to
preserve your price.
Where the value is greater than the price then the prospect is more likely to
look favourably on your offer. You should still expect to negotiate.
If the value proposition for each type of buyer is the same, then this suggests
that all are buying for the same reason and have identical motivations. Can this
be true?
25. In this session we have:
Analysed competitors and customer to establish a winning
price target
Worked with others to set cost target
Examined the development of sound business case
Understood the difference between value and price
Proposal Guide 182
26. Preparing for the e-torial
• Consider how and when pricing for proposals
is done in your organisation?
• What kind of pricing challenges do you face?
• What would ManCo perceive as value?
• What would ManCo perceive as risk?
• Prepare your answers and put into the class
space.
Note: You are not expected to share your pricing information at the eTorial.
Editor's Notes
Welcome to the third session in our Developing Strategy module in our APMP Foundation Training webinars.In the sessions so far we have looked at proposal strategy and teaming.In this session we’ll look at how our understanding of the customer and competition will inform our strategy on price.
In this session we’re going to introduce the concepts of Value,What this means for Budgets, How we set our Price and Determining CostsAnd then we’ll look at all of these again when we consider that we’re doing this in competition.We will cover the ideas we need for the examination syllabus and also cover some further ideas of best practice.
We used this formula earlier in developing an Initial Value PropositionIt’s important that when we’re quantifying the value delivered we work as far as possible with the Prospect’s underlying assumptions and data because that is what will inform their internal business case.
In preparing a business case there are many sources of value but the Financial Case will be driven mainly by the TANGIBLE BENEFITSIncreased ReturnsReduced CostsMake sure that you understand the Propspect’s assumptions about these and where possible help them develop an investment case for the project.
This goes right back to basic sales questions: What would be your vision of the solution What would that be worth to you? What would be involved in getting there? How certain is the outcome? What are the obstacles and risks? What would you expect to pay for that?This will set their view of BUDGET (what they expect to pay suppliers)
If you don’t know the value and you don’t know the budgetYou’ll have big trouble setting the winning priceHere are the basics:
Key is return on investment – RoI, margin, payback, whatever criteria you useOptions – offer min compliant bid, add options, no bells and whistlesEach party has a business case. Both the customer and the supplier have them. They have to align.Business Cases should include:ObjectivesBenefitsReturnonInvestmentOptionsCashFlow and Finance CostsRiskAnalysisAssumptions
Would you rather buy a software service solution costing £10,000 or one costing £35,000. Easy question all things being equal.But what if the £35,000 package includes free training, maintenance, and upgrades. And what if it works so much more efficiently, you can reduce your customer support staff by one full-time equivalent position? Now which one is more tempting? It's the difference between price and value. And sometimes we forget to show our customers what that difference is. We need to communicate a value proposition that equates to an advantage for our solution. The basic value proposition can be expressed like this: (Values - Costs) > (Valuea - Costa) where the value of our solution (Values) minus its cost is greater than the value, minus cost, of any alternative.Customers are often willing to spend a little more if they see they are getting a lot more. But if there's no compelling difference among vendors, if there's no compelling value proposition, they'll buy whatever is cheapest. That's why it's so important to offer a value proposition. And to do it in a way that gets noticed
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Pause the presentation to read the answers above.If you selected C, you got the right answer