We do not do RFPs. We do not enter them. We do not defend the account if a client RFP’s us – even if it’s a “due diligence” review. RFP’s are a waste of an agency’s time. They are most definitely a waste of a client’s time.
I write this post at the risk of sounding bitter, but actually, I am filled with a sense of empowerment over our new business policy. It’s liberating. I calculate our company will save ~3,000 hours of staff time and at least $80,000 in travel each year by not participating in the coin flip called RFP’s.
As I review all the business RMI has landed over these nine years and as I look at our best clients, only one significant piece of business was won in an RFP and another one retained. In both cases, we lost those clients within 30 months in subsequent RFP’s after all the client’s marketing staff changed over.
Any client can review its agency without a formal selection process. They just have to pick up the phone and ask a competing agency to come give a “capabilities” pitch. Doing this does not publicly harm the incumbent and it doesn’t place a crazy presentation burden on a dozen agencies pitching. A client can have these conversations at tradeshows, on site, and off site with ease. That is to say, it can do so discretely.
A formal RFP is different. A public RFP says to the world “we’re not sure we have the right partner.” This immediately disrupts the incumbent and puts them on defense in the relationship. Partners trust each other. An RFP is a statement of distrust.
I entered eight RFP’s last year and lost them all. We were frequently told we were the best at paid search but other agencies “had “other capabilities”, “were bigger”, and very often “have done projects for us before.” Maybe they were just saying we made a good showing to make the phone call easier. If you won a lot of RFP’s last year then you think I am just a bad presenter. You may be right. But I don’t care.
I could give you a dozen stories where we were invited in to what was promised to be an objective process only to find out that it was not objective.
Here below are the common things I see:
5 Dirty Truths About RFP’s
#1. An RFP is often a company’s way of pretending it’s not political, or (gulp) that a winner hasn’t already been picked. Rather than starting with participants saying “let’s find a good vendor”, the deciders usually start with some preference. That preference is based on brand impression or having a friend at an agency. This is what makes up “politics” – when colleagues want different solutions, but business etiquette mandates they hide their preference and suggest a non-biased decision process. This means that an RFP is used to eliminate competing preferences and make everyone feel as though they were “heard.”
#2. RFP’s are used to teach and include junior employees. Great mangement is getting the right person to do a job then getting out of their way. Instead, most corporations would rather assign some pre-determined process to a junior executive without actually granting decision-making authority. This grows bureaucracies and matrices where consensus is valued as the dominant way to make a decision. What’s the truth? The truth is that there is always one senior the senior executive in the room who is going to have his way because it’s his butt and bonus on the line. Yet, to establish an air of “inclusiveness” and to keep junior staff from feeling like they have no say, an RFP committee is launched. After a month or two of “objective” data gathering and inquiry of the candidates, the selection is narrowed. Then the senior executive begins to weigh in with his opinion of who should win. Here’s a great example:
One SVP at a large travel services company consoled me after an exhaustive, six month review, “your team was the smartest, the most prepared and had the only buttoned up transition plan of all the agencies.” She then told me that her CMO boss had lunch regularly with the founder of a competitor so the decision was out of her hands. Kudos to the competitor. They deserved the business by building a relationship. The fraud is that we were induced to spend 800 hours of staff time and $20k in travel and pitch costs for that one and it was a foregone conclusion before the RFP documents hit the mail!
#3. RFP’s commodify the participants instead of highlighting their unique value. Joe Southworth of The Complex Sale points out that RFP’s ask vendors to answer the exact same three dozen questions in a formatted document which makes all vendors look alike. The actual RFP device is rarely even read by the committee. This experience below illustrates it perfectly:
I once entered an RFP that had 108 questions. It was sent to 25 agencies and us, as the incumbent. That means over 2,700 answers were generated. Since it took me about 100 hours of time to wade through the questions, I figure collectively, 2,500 hours of agency time was wasted on round one. I later heard from the RFP organizer client that she could “not possibly read them all” and after the first few, “everybody started to sound alike”.
#4. RFP managers don’t know who truly has the power to decide. Historically, we asked who and how the decision will be made on the RFP. The answers always come back either-
a.) “We have a selection committee who will vote.”
b.) ”I’ll be making the decision.”
Both answers are always wrong. A person who has decision making authority is never the one administering an RFP. The boss who ordered the RFP will decide. Being removed one to two steps from the actual decision maker makes it impossible for the entrants to get a clear understanding of the actual problems the prospective client needs solved. Frequently you’re asked firm-o-graphic questions in order to size you up. The person asking them almost always has very tactical, specific problems they need solved.
The boss has strategic problems. Without having a direct access to the real decision maker, it’s impossible to determine how to solve the problem. What’s worse is the employee calling you to participate often doesn’t even know they aren’t permitted to decide.
#5. The biggest agency usually wins. Add it all up. If there is not a pre-determined winner, then all the candidates start to look alike and the client then has to decide how to decide – which means they go with the “safe” bet. The truism “nobody ever got fired for hiring IBM” is a testament to bad management. Large companies are operated to preserve their run rate and avoid risk. They don’t play to win as much as they play “not to lose.” This means to protect their career, corporate executives choose the biggest vendor. The decision becomes defensible. In the agency world, this is why Madison Avenue gets to charge a lot more than independent agencies. They represent a safer bet in the client’s mind and their fees seem justifiable. Here’s my own experience with trying to retain our largest client last year:
We started working with this large, national retailer on a paid search project in 2003. Over five years, we grew online revenues 25X and efficiency 42%. The problem was the client churned through 4 CMOs in that time. That means that the current marketing management had no idea of our history and our accomplishments. They just knew that an RFP seemed like the right management tool as they assessed all their advertising efforts.
I tried not to pitch it. I wrote a letter to the CMO explaining my skepticism at being invited and that clearly, the client was signaling it wanted a big agency. The five contenders were us, a local Atlanta independent shop and four of the large agency holding companies. Obviously they wanted the comfort of working with a large holding company shop.
“No no no” they assured me. “No winner has been picked. You should stay in and pitch us.”
2,000 staff hours and five months later they awarded the business to a NY conglomerate who already handled other media activities.
The new CMO and his team couldn’t possibly appreciate the details of how we had grown the program for the company. He believed this “big single agency is easier and should be cheaper.”
The fact is that an RFP did not determine the choice. Neither did our own historical success with the client. The choice was predetermined. The CMO had a vision that all marketing should go to one company. He should have saved all the RFP agencies and his staff the time and hassle and just made his selection.
Fast forward 18 months later. The NY agency is now fired and the client has chosen several new vendors. If you consider the onerous and confusing transition process to move the management of tens of millions of dollars in media buying and planning, the RFP process did a terrible disservice to the client. OH, incidentally, the CMO was fired too.
What Really Matters in the Vendor Selection
In order to win an RFP, you must fit the mental image of the solution that the decision maker has in his or her mind. No one other than that vendor will win. Sometimes that’s a trusted hip-pocket vendor. Sometimes it’s a referral. Very often it’s just the biggest, shiniest vendor. The problem is that an RFP process is never designed to share that vision. It’s designed to hide that vision behind a political, managerial goal of following a process.
So, what should you do? That’s a great question and here’s how I would answer it:
Incumbent Vendors - Resign the business and commit to a smooth transition and setting the new vendor up for success. Be gracious but protect your resources and time and morale. Don’t participate. You’ll be better off in the long run.
Invitees to the RFP - Pass. Unless you are the insider having lunch with the CMO your response is merely a foil to justify a winner. Recognize how the process is geared and that it is not ever objective. Think about the hours you could invest in networking, visiting existing clients to get more business or projects you could start doing pro bono to ingratiate yourself with a another prospective client. As a last resort, offer to do a capabilities pitch if the prospective client will come to you. If they won’t do that then pass.
Clients - First, be honest with yourself. Be honest about what you want and go find someone to give that to you. Quit asking agencies to compete and give away their advice and work for free to put “skin in the game” just for the honor of pitching you. Pay agencies for their time to pitch you and put your own skin in the game. More to the point, if you have concerns over your current vendor, just tell them honestly and give them a chance to correct the issue. If they can’t, then just give them notice and move on. Stop wasting your own time too!
As a parting thought consider this. What if, as an agency, I instituted a policy that every 3 years, “RMI will do a due diligence review of its clients” I’d write a letter saying -
We love you. You’ve done a great job but we’re going to bring in five of your competitors to make sure we have the best, most innovative client out there. We may get higher fees. We might get more projects to work on, but we’ll probably stay with you. This is just company policy. Rest assured the process will be fair and objective and even if we stay with you, we may be able to bring good ideas back from your competitors that you can use.
You’d fire me that day. It’s offensive and demonstrates that the relationship is not a partnership. I’d be hiding behind procurement-speak, while trying to better deal you in some way.
If we’re the incumbent and we have done a good job, the client should continue to partner with us. If we have not done a good job, they should fire us and move on.
RFP’s are at best, a biased management exercise and at worst, a predetermined fraud. Either way, I can no longer waste my precious staff time entering these lotteries.