Practicing for Digital Services: Procurement Holds the Power in Transactional Communications

Submitted by wmorgan on December 20, 2018
Will Morgan

In the course of day-to-day business practices, procurement’s growing influence has made request for proposal (RFP) engagements a fact of life. Procurement representatives are intent on using RFPs to standardize providers’ proposals, so they can better compare bidder prices. Unfortunately, procurement departments often have a limited perspective on the intricacies of creating, managing, and delivering transactional communications as well as a desire to keep prospective vendors at arm’s length from internal business owners. As a result, information about the true purpose of transactional communications is incomplete and the burden of financial risk now falls on the procurement rep’s selected vendor.

Procurement Policies Underutilize Providers’ Expanding Service Roster
Thanks to their overly rigid RFPs, procurement has become disconnected from the realities of customer communications work. Since procurement professionals generally do not understand the details of an individual job, their expectations of both products and providers have become homogenized. This ultimately produces a watered-down request because procurement departments force applicants to fill out RFPs in exactly the same way and disqualify those who deviate from the formula. Providers face difficulties in packaging their specific offerings, demonstrating how their unique capabilities can meet a prospect’s needs, and synergizing an enterprise’s desires within their own corporate culture. Because these guidelines are so strict, it has become nearly impossible for service providers to accurately represent their costs. To make matters worse, procurement units often expect their outsourcing vendors to match the lowest bid in each category with no regard for the various ways applicants may have bundled their offerings. This trend puts incumbents—which may include unaccounted costs in their proposals due to their in-depth knowledge of the real need—at a disadvantage against newcomers who will simply provide the requested services for the stated price. If a new provider wins the contract, it will often need to absorb additional costs left obscured by the imperfect RFP process. 

Bidding Up the Wrong Suite
Enterprises often restrict bidder access to business leadership until the final stages of the RFP process. At this point, many providers assert it’s too late to salvage the deal since it was flawed from conception. Rather than including C-suite executives in their RFP steering committees or empowering a single, qualified decision-maker to develop a cohesive communications strategy, enterprises spread the responsibility for individual channels across a half dozen business units. These restrictive RFP processes have forced providers to engage prospects before they field requests (perhaps even helping enterprises draft the document) or address inequities at renewal, highlighting newly adopted technologies and innovative solutions to justify a reevaluation of the price.

The RFP Price Vs. Value Challenge
Procurement departments are aggressively pursuing lower prices even as production costs (driven by consumer expectations for high quality, personalized, and secure communications) continue to climb. Fixed-cost pricing is becoming increasingly dangerous because the total number of impressions declines even as too many clients and prospects continue to attach a contract’s value to delivery instead of data analysis and informed composition. To their credit, providers attempt to demonstrate value by highlighting their unique capabilities and strategic investments but many enterprises—particularly those with the greatest volume of transactional communications—are only interested in transmitting their messages as cheaply as possible.
This makes it more difficult for providers to shift the value of their partnership away from submitting the lowest bid for the cost of delivery on any given channel and toward superior service offerings. Unfortunately, many enterprises consider services like message archiving, reporting, and analytics as the “table stakes” of a larger print outsourcing deal. As a result, they have become increasingly unwilling to pay for these “value-added” services.

What Can You Do?
To secure a prosperous and sustainable future, providers may do well to set their sights on a smaller quarry. The largest outsourcing deals are still heavily weighted toward print since most of the large enterprises that already manage digital delivery internally prefer to keep these functions in-house. In contrast, mid-sized organizations have fewer resources to handle their own digital delivery, so they are better prospects for comprehensive, multi-channel customer communications arrangements. Small and medium-sized enterprise prospects are generally more willing to allow engagement with business leaders and accept their print service provider as a valued partner in developing a cohesive customer communications strategy. 
Though providers should continue to refine and clearly define their expanded services, when planning for the long-term, they must also articulate the unique value of each communication channel. The actions that vendors and service providers take in the coming years will be critical for defining the future value of the customer communications market. Because digital communications are becoming more complex, and therefore costlier, even to the largest organizations are now producing them internally. If the value of these communications is not clearly articulated, enterprises will only expect the price per communications to decline from an already undervalued starting point.

Author’s Note: These insights come from Keypoint Intelligence – InfoTrends’ analysis as part of the study “Pricing for Digital: Exploring New Models for Transactional Communications.” InfoTrends conducted more than a dozen in-depth interviews with print service providers in North America to gain a deeper understanding of the primary pricing obstacles facing stakeholders in today’s changing market. In conjunction with this effort, we also surveyed 24 mid-tier providers, asking them to describe aspects of their current pricing models and detail how they calculate these offerings in their responses to requests for proposals (RFPs).

Will Morgan is a Senior Research Analyst at Keypoint Intelligence – InfoTrends. In this role, he supports market research and analysis in the Customer Communications market and Business Development Services, interacting with clients, facilitating consulting engagements, assisting with surveys as well as annual forecasts, and developing analysis products.