27th Aug 2010 AUTHOR: Robert Machin

Strategy: Bid, No-Bid Analysis - the business of choosing customers

Can you really afford to pick and choose your customers? Can you really afford not to?

KEY POINTS

  • Choose only customers that fit with your strategic direction.
  • Bid for work you have the greatest chance of winning.
  • Undertaking a Bid, No-Bid Analysis will help you to allocate your resources where they can be most effective.

It's far easier to select customers up front than give them the flick later because they are losing you money

The idea of being selective about your customers is one that has been a topic amongst marketing professionals for a long time, not least in the world of advertising. A Bid, No-Bid Analysis can help you to avoid wasted resources now and even greater challenges in the future.

Can We Afford Our Customers?

A few years ago I presented to a marketing alumni class. The topic set was: "Can We Afford Our Customers?" I was up against a Professor of Marketing from Manchester University, UK. I was speaking as a healthcare professional, he as a marketing guru. He presented first and gave a very compelling, evidence-based presentation, replete with case studies of why all the best companies in the world regularly reviewed their customers and their contribution to the bottom line. If a customer wasn't profitable, give them the flick!

I was getting increasingly nervy about what I had prepared to present and started to consider the implications of giving unprofitable customers the flick in the healthcare context! I had a Monty Python moment: No more Accident and Emergency Departments, Spinal Injury or Burns Units; a mission statement pursuing lumps, bumps and biopsies; and, only if they were profitable!

As a hospital CEO at the time, it reminded me of the 'Yes Minister' hospital without any patients; a shining example of efficiency and effectiveness... now that's a job I want. I quickly manipulated my presentation to answer the question: "Can Our Customers Afford Us?"

All jokes aside, it is clearly much better to identify the customers you want before you pursue them, if you have that choice. It is much easier to service customers who provide you with a return, than subsidize them by stealing resources from your profitable customers. And, it is much easier to select your customers upfront than to give them the flick later because they are losing you money or don't fit with your strategic objectives and direction.

Like all "rules" however, there are exceptions and there will be business you want to keep from a strategic standpoint, but it's nice to know which of your customers fit into this category and how much they are costing you. The damage to reputation alone in giving unprofitable customers the flick can undo much hard work over many years in a very short time.

What is a Bid, No-Bid Analysis?

This is usually a focused, facilitated discussion and analysis about whether a potential client fits with your strategy, direction and current capability.

It's about:

  • evaluating yourself (using metrics) against your competitors to ensure your considerable time and effort is not wasted
  • being realistic and ensuring you have the capability and capacity to meet the contract requirements. Can you give guarantees of performance which may need to be supported by insurance or bank guarantees, and
  • being honest with yourself and safeguarding your integrity; not just participating because you perceive there's a market expectation that you should be in the race.

Undertaking a Bid, No-Bid Analysis might mean you decide not to bid. This does not mean a lack of capability or willingness but a realistic assessment of your current capabilities that demonstrates your strength and recognition of your commitment and loyalty to current customers. It also means reserving your precious resources for future opportunities.

robRob Machin is a principal consultant for Tender Success who has successfully assisted a number of clients to undertake a Bid, No-Bid Analysis. Contact Tender Success to ensure your next response is a success.