| "Vendorship" is another Marketsmithism, combining vendor and a personal relationship. We are defining the term to mean the practice of using an outsourced resource because of a prior relationship rather than the value or core competence of the vendor's service. |
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| As we noted earlier, the business of direct is very personal, and "vendorship" is a reality of our industry. I am sure that many of the vendors who are reading this newsletter right now have faced the phenomenon as you responded to RFP's. It certainly can be annoying or frustrating. But we all recognize that it is up to the Brand/company to make a choice based on its criteria or expectations, whatever they may be. Therein lies the rub, and hence this article. |
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| I am finding more and more Brands are not demanding the most from their vendors, for a host of reasons. And therefore "vendorship" becomes the selection criterion, followed by a request for significantly reduced pricing rather than a demand to effect improvement on current business stratagems. |
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| As a vendor's workforce ages and its technology/toolbox or service offering becomes a commodity, the relationship with the client is the determining factor. I have always been of opinion that it is really, really important to like the people with whom you surround yourself in business. I also think it is really important for companies to evaluate their relationship with a given vendor. Of course you want to make sure you have a great relationship BUT you also need to ensure that vendor is providing value. As the client, you need to demand excellence; demand insight and big ideas that are actionable and make a real difference on your business model. Don't just accept the idea of being with a company for a long time, or where else would we go, or that person got me a job in 1985. I am not one to change vendors for no reason nor am I the type to hammer vendors for a discount just to show my muscle. But I do demand performance from vendors. |
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| In the following paragraphs, I would like to share with you some ideas about how to evaluate your vendors and how to create an RFP Marketsmith style. |
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| When we look at hiring a vendor for ourselves or for our clients, we evaluate at least three companies, ideally with distinct points of difference. We do our homework on those companies up front, securing recommendations where possible. We create an RFP which includes: |
| 1. | An overview of the requirements |
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| 2. | A calendar of events, that is, a specific list of deliverables in a time line that we expect the potential providers to meet |
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| 3. | A brief history of the company and its current processes |
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| 4. | A vision statement |
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| 5. | A hierarchy of who will be a part of the process and why |
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| We then start by assessing each responding company's initial reaction to the RFP - whom they contact, what questions they ask, how interested do they seem in the opportunity, general understanding of the requirements, and willingness to meet the time line. |
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| Next we set up an informational conference call with those responders who are interested in order to present a more detailed history of the contracting company and its vision for the future, and how this RFP fits into that paradigm. We also use this time to answer any questions regarding the scope and interpretation of the RFP. |
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| During this process we observe or ask the clients to observe what are the vendor's requests for data. This gives a strong indication of the vendor's perception of what it needs to get an accurate picture of the client's business and what the real numbers are. We are looking for a vendor who understands the client's business model, objectives, challenges, competitive landscape, and any other aspects unique to the client's business. The potential vendor must be able to speak intelligently to the model as well as be able to demonstrate the fit of its services and products with the client's needs. |
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| For the presentation, which could be face to face (preferable) or by phone/web, we ask the vendor to identify by name and title beforehand who will be attending, in person and tapped in by speaker phone. As the buyer of services, you want to know what involvement and responsibilities each participant would have going forward - who is a sales person and who is on the integration team, if needed, and who is on the account, who are the generic participants who do not touch your brand and who will be specific to working with you to meet your needs. What are the portfolios of the client team and what is their availability to devote to meeting client requirements. |
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| During the actual meeting you judge the vendor's pitch based on relevancy, its point of view on your main competitors, and its vision of integration and implementation. Assess the presenting company in terms of the depth of skills and longevity of its personnel, the successes and statements of impact upon which they can draw from other engagements, the tenure of their current clients. |
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| The key is to evaluate a potential provider's ability to be more than about price, or a technology, or dynamic person in the room. Consider if this company and its services will fit into your model three years from now. Or if it is a project, look at the provider's last five projects and their outcomes. |
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| We also review the pricing as part of the final view of the proposal process. If the price differential among the three vendors is greater than 12% initially, you have to determine what is reasonable and understand why some may be either too high or too low; make sure there is no misunderstanding in the expectations. Since many outside vendors are providing a commodity service, pricing should be fairly consistent with what the cost of a service should be. Moreover, we judge a company's willingness to come down more than 20% from the initial price as suspect. In that case, you need to judge whether you want to do business with someone who pads the business that much. |
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| Recently, I sat across from a celebrated direct marketer at the ACCM, it was an early meeting, it was rushed and it was over before it began. I have been doing this for a long time and I do not need a Dear John letter to tell me that I did not make the cut. But here is the important thing, I was up against "free", fringe services provided by a "vendorship" that was willing to give valued services at no additional charge. My response is that it is hard to compete with free. But where does that outcome get us all? Either the client wonders why the vendor never offered that service before; since the vendor should know what of her services will benefit her client and provide those services if they are available free of cost. Or the vendor shoots herself in the foot because she has devalued a product/service by giving it away for free. |
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| The key take away is that in this environment you need to take a strong look at your vendors and double check why you are using them and make sure that they are delivering benefit every single month. My Marketsmith clients get this newsletter and I am putting my money where my mouth is. We work every day to make our clients and ourselves better. |
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| You do not need me to tell you we are working in interesting times right now, but what I will tell you is - I believe few companies will be left standing when we get through this time of ever increasing pressures from the rising costs of the operation and from the decreasing need for the core services once celebrated in our industry. |
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| Shake it up. Challenge the vendor teams surrounding your business by asking them to provide value at a level that shows they understand your business and the challenges you face. Make sure their services are clear, grounded in historical data, and highly actionable. |
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| There is a small window in which a Brand can be successful and contribution positive in this industry. Do not let comfort, price or conformity blur where your line of success is. It is important to have people you like surround you. But if I were you, I would ensure they are people who are able to get you across the finish line, and more importantly, that they will do it on their backs if they have to. |
