Software execs dread the time it takes to respond to RFPs (Request for Proposal), the limits placed on them to gather insight about the customer’s needs, and the challenge of responding in a way that both meets the requirements and effectively differentiates their offering.
Yet while they often rail against the RFP process as an ineffective and inefficient way to choose a software vendor, it is not unusual for software companies to issue their own RFP to help them choose a pricing consulting partner.
Is an RFP process better suited to choosing a pricing partner than choosing software? Let’s explore.
The reality of issuing an RFP for choosing a pricing consultant
Like a good software product, the capabilities of a software pricing firm are not easily reduced to functional checkboxes, charts, and price points. Questions about services offered may identify capability gaps, but they don’t lead to an understanding of how those services are provided. Questions about process may explain the firm’s approach, but they don’t reveal the skills that sustain the effort. And questions about past engagements may shed light on performance impact, but they don’t expose style or fit.
Software pricing—or more accurately, software monetization (the integration of licensing, packaging and pricing of intellectual property)—is a highly specialized and niche service. The few who do specialize in it deploy vastly different methodologies, making the type of apples-to-apples comparison for which RFPs are ideal nearly impossible to apply.
What’s more, some leading software pricing firms believe the constraints of a formal RFP process don’t allow for an effective evaluation and therefore decline to respond to RFPs as a matter of policy.
A better way to choose your software monetization partner
Software companies seeking expert support for their monetization program are much more likely to find the right partner via a personal, relationship-based approach:
Get a feel for the market of software pricing firms
Look for websites, thought-leadership articles and content that resonate with you. Try to use the knowledge you gain from this exercise to better describe the problems you are trying to solve and what you are looking for in a partner. This allows you to “try on” the thought processes and approaches of the firm you are considering. Remember that ultimately you are buying a methodology that you can execute on internally—at least in part—as part of an ongoing process of improving your monetization approach.
Engage with a small number of firms
After you have a rough problem description, engage with a small number of firms (e.g., one to three) that pique your interest and begin an open dialog. Spend an hour or two getting to know each other. You will likely be able to zero-in on a preferred approach and style.
Select a firm early on
Fight the urge to keep searching for options and select one firm early on after your first pass evaluation. Continuing to seek out different firms—all with different methodologies, scope of services and technology platforms—is a recipe for a lot of confusion. If your team gets overwhelmed, or the project appears too complex or confusing, it’s likely to get shelved.
Find out what information the pricing vendor needs from you
Execute an NDA with your chosen firm and ask them what information they need to assess your situation and make a proposal. This will likely include confidential information like sales transaction data, customer breakdowns, internal presentations that address value, competitive intelligence, etc. Firms that don’t ask for or use this data may be showing you their “one-size-fits-all” hand.
Be open to adjusting your goals
Explore an engagement with great care and depth. Go slow to move fast. Invite other decision-makers in during this stage to gain consensus, especially on the problems you are trying to solve. Be open to redefining the problems and overall goals of the engagement as this process unfolds and you learn more.
Focus on getting the initial configuration correct
Focus on getting the initial configuration of services and work products correct. Do you need to address sales compensation? Sales transformation? Competitive intelligence? What kind of support will you need during and after the rollout of the new pricing?
Finally, be sure to understand what they will need from you and your staff throughout the process. An effective monetization transformation can require significant effort from multiple people in your organization and you don’t want any surprises. Firms that don’t have solid information on your required time commitments during the engagement process may be showing you an unproven process.
Software pricing consultants can help with monetization optimization
While the RFP process has its own appeal, software companies know from experience that it may not be the best route for choosing complex, multifaceted products.
The same is true for choosing specialized monetization consulting support.