Proposals vs Quotation what is the difference?
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If you think that proposal and quotations are synonyms you are wrong. Both are formal offers but their usage is quite
different:
A client asking for a quotation is asking: how much will you charge me for such product or service? That
means: "I know what I need, just gimme your price".
A client asking for a proposal is saying: I have this problem, suggest me the best solution and tell me how
much it will cost.
From the sales point of view, the difference is enormous: bidding on quotations means bargaining. Bidding on
proposals gives you the possibility to fully exploit client's budget, if you convince her that your solution is the best
one.
Why quotations are over-used
Unhappily I have seen too many cases of quotations used in place of proposals. Why?
First, quotations are easier to prepare. Most quotations are simply a list of items, their unit price and quantities.
Proposals, on the other side, require to understand client needs and to outline the proposed solution.
But the main reason is that the buyer specifically requests a quotation. A typical example in IT industry is when
client needs an application he “thinks” will require 6 months effort. So some manager asks for a staffing quotation of
six months instead of an application development proposal.
The only good new is that, should project take 8 months the client will pay two extra months.
Risk apart, making money with bargain bidding is every day harder, thanks to global competition:
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A proposal dramatically changes the comparison:
So, what can you do?
Again, first of all, preparing a proposal is in fact more demanding than a simple quotation, but, once you learn the
process the overhead is minimal considering the competitive advantage.
Keep in mind that most proposals, today, shall be lightweight (forget those 300+ pages corporate documents used in
the seventies: nobody will read them today). Also, automated tools can produce effective proposals with little effort.
The critical issue is: how do you change buyer's mind? How to convince the buyer that he (she) does not need six
months of staffing but a working application?
Arguing is risky: you can simply loose your time but you can also irritate your prospect.
The best strategy is to use questions to let him (her) understand acquiring resources will not solve the problem.
You can ask, for example:
What are your goals?
How did you plan and estimate the project?
What is your data strategy?
Are your specifications 100% ready?
What will he do if this and that go wrong?
The buyer will soon discover that there are too many things she did not consider or simply forgot and, with little luck,
you will find the right moment to say something like: can I help by proposing you a complete solution?
Good luck!
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