Many companies know the truth about responding to RFPs. Successful conversion rates of RFPs are very low—in fact, the common win rate for RFPs is less than 5%.
RFPs play a prominent role in the sales process for most organizations…to generate revenue. Unfortunately more often than not, sales teams simply aren’t sure whether an RFP is a genuine opportunity in a level playing field, or a buyer’s tactic to gain intelligence.
Still, sales teams should consider every RFP to be a golden opportunity, and put in a commendable effort with the response.
Since C-level execs are challenged with pinpointing their sales team’s’ efficiency by their win rate alone, we pulled together three key metrics to help you improve your RFP response process.
Metric #1 – Average Response Rate for RFP Process Agility
Typically RFP response is not a primary job responsibility. Team members will often wash their hands of RFPs in favor of higher priority tasks, leaving them with no time for the RFP contribution effort when the deadline arrives.
Many RFPs will never come to fruition due to the limited availability of one or two SMEs (Subject Matter Experts). Because of this reality, determining the average response rate will illustrate whether or not the organization as a whole is motivated to respond to RFPs.
Average RFP Response Rate = # Incoming RFPs / # Outgoing RFPs
If the RFP response rate is high, you might conclude that your organization is keen to grab every opportunity that comes its way. However, it could also mean you are not employing enough checks to identify if the RFP source is genuine or not.
If the RFP response rate is low, your company might be losing out to more competitive and nimble organizations. Low RFP response rates commonly happen when teams are more engaged in servicing or firefighting with existing customers than pitching for new ones.
Once you have calculated your company’s response rate, you can determine the root cause of the problem and make the necessary improvements to increase productivity.
An acceptable ratio to keep in mind with both scenarios would be about 50%, to strike a balance of responding to the RFPs that are the right fit without going after ill-fitting opportunities.
Metric #2 – Average Team Hours for Coordinated Effort
Most products and services in the market today are complex and knowledge-centric, so giving an in-depth explanation involves experts from multiple fields. A single RFP might consist of hundreds of questions that need to be answered within a tight deadline. (You read that right…hundreds!)
Responders should consistently measure the amount of effort that goes into creating a solid response for every RFP. In addition, every team member who has collaborated with the response should track their hours.
This simple calculation of hours can go a long way, informing executives with hard data about how much that effort is truly costing the company. Then with this metric, two crucial questions can be answered:
- Is this RFP worth the effort? If the chances of success are low, the organization would be better off diverting their energy to other priorities.
- Is it time to purchase an RFP solution? One of our clients calculated he was spending 20-40 hours on a single RFP and he used this data to make a case for an RFP management tool. Using RFPIO, now he can complete an RFP response in less than 5 hours.
Metric #3 – Average Response Time for Process Efficiency
The average response time for an RFP is a metric that captures how well-coordinated the organization is. It helps identify process bottlenecks, those specific tasks or teams that are taking longer during the RFP response process.
A late response isn’t necessarily a poor reflection on a team. While response time can vary from a week to a month in most organizations, one should also consider the enormous interdependence of various teams involved in the RFP process.
This insight could help shed some light on a particular department that is under-staffed. It can also help you standardize an RFP response process—or better an existing one—ensuring roles and responsibilities are clearly defined for a smooth submission by the deadline.
Is someone making a big impact in your organization? Knowing which team member is contributing more gives you an opportunity to recognize their talents either with an incentive or even a leadership opportunity. Offering a chance for that person to share what is working to help improve the overall effort is a great team-building exercise or lunch and learn activity.
All organizations—big and small, old and young—face tremendous challenges in getting prepared to respond effectively and efficiently to RFPs. To get an RFP to completion, teams across departmental boundaries and organizational ranks have to work together.
Calculating and tracking these RFP metrics can help your business understand the holes in your RFP response process, so you can take the right steps toward improvement as an organization.
How are you tracking RFP response metrics in your organization? We would love to learn from your experience!