Preferably, you score them all. In sales, we have long known that you can’t win everything. But what are good conversion rates for an RFP and tender? And so, when do you need to get started?
Roughly:
If you win less than 50% of the bids, you’re not doing well
This conversion rate does need some nuance. There are 3 things to consider:
| 1. | From what point do you count? From qualification or only when you submitted it? |
| 2. | How much time does it take to write an offer? Ready in half a day or weeks of work for several people? |
| 3. | How much competition do you have in your market? And what does that competition look like? |
How do you calculate the conversion rate?
Conversion rates are essential in Sales. This is because it indicates how much your work rewards itself in results. The lower the conversion rate, the more time you spend on things that don’t accomplish anything. Nobody wants that. After all, time is scarce.
If you’re going to judge whether you’re good at responding to tenders and RFPs, it makes a difference whether you look at conversion from qualification or only after submission.
Indeed, qualification is an essential component in Bid Management. By carefully considering whether a customer request fits your company and its services, tenders often fall off. The tighter you qualify, the more you will fall off. So that also means that when you get a lot of requests just in without having done sales work for them, your qualification method affects your overall conversion rate.
Stryfes advises:
To separately analyze qualification (competing or not) and actual profit of an RFP
If you include qualification, your bid conversion is almost always below 50%. How much lower depends on how rigorously you qualify and how well your sales people have influenced the content before receiving a bid.
More on qualifying a bid.
The effort per response
If responding to a tender or RFP (and often even an RFQ) only takes your organization half a day’s work at a time, then it’s no big deal to get things wrong regularly. You would almost say the more, the merrier.
But that’s not usually the case. Most queries from organizations and companies take a lot of time to answer and always require the efforts of several people in the company. All these people then have to work under high pressure. Either way that comes at the expense of other work. So that’s costing money. If your average odds of winning are less than 50%, you lose too much time. Time better spent. Read more about the chances of winning.
Competition matters
The number of competitors who provide the same services or products as you do matters. Without starting an excellent treatise on market forces here, let’s connect two parameters: the number of competitors versus homogeneity (the degree to which they are similar to you).
1.Many competitors + homogeneous services
We all want to stand out, but if you’re sincere: how different are you? You can buy the same products at all supermarkets. They hardly differ when I want to buy food products for my business.
So many competitors are all more or less the same: your average conversion rate is often a lot lower than 50%. Rather between 10 and 25 percent. Are you higher? Then you are lord and master of the market. Are you below 15%: get to work on bid management; the competitor is running away with your customer?
2.Few competitors (max 3) + homogeneous services
Your customer isn’t happy about this. Because they have little to choose from. We all want to stand out, but if you’re sincere: how different are you? KPN and Vodafone are different companies, but to a customer, they are not. They hardly differ if I want to buy mobile phones for my business.
Here it would be best if you aimed for more than a 50% average conversion rate on your offers because only then will you outperform your competitor.
3.Many competitors + non-homogeneous services
The market is then still growing but already entirely developed. That means the customer has something to choose from. Here, your conversion rate is unlikely to reach 50%. The lower limit here is as much as 30%. If you get less than that, you are not good enough to explain what the customer should expect from you (or the customers don’t want it, but we won’t assume that).
4.Few competitors + non-homogeneous services
This market is somewhat dangerous for your conversion rate. This market is still immature, and thus the customer hardly knows what he should be asking for. Conversely, if you respond to a long-standing problem but with a different solution, that raises questions from the customer.
In this market, conversion rates are often meager. Companies issuing RFPs almost always look for certainty. Not to mention tenders. We advise answering as few RFPs as possible and focusing mainly on “normal” sales activities.
Do you get more than 25%? Then you’re sitting on a gold mine. Develop further in bid management as competition is on the way…
Conclusion
To understand your conversion rate well, it is essential to know some market data. With this market data, you can determine for yourself whether your conversion rates are reasonable or not.
Stryfes tip:
Track your conversion rate over more extended periods. You can then see how it develops over time
Want to learn more about bids? Below each links to articles:
