Ep22: Chris Street – B2G Sales: How to Sell to Governments

ep-22-artworkChris Street is a value expert, an experienced analyst within the aerospace and defense sector. He can be found driving the implementation of Position-to-Win and Value-Based Pricing across Thales UK with occasional cameos in Paris. He earned his Business Studies at the University of Brighton. 

 

In this episode, Chris shares his expertise when it comes to Business to the Government  (B2G) procurement process. He will also give us an overview of the procurement process every government sector goes through and use that knowledge to gain an unfair advantage against competitors in a bid to win contracts. 

 

 

Why you have to check out today’s podcast:

  • Learn how the Business to the Government (B2G) procurement process happen to help you understand how to sell to governments
  • RFP: Cost Plus Pricing Model and Business Case-Based Pricing: Learn more about how value pricing model works when dealing with government
  • Negotiation in public procurement: Crafting alternate proposal and why government procurement teams do not sometimes consider it

 

“Always understand your competition, understand what makes them different, what makes them special, but then understand what value you’re bringing and what makes you special as well. If you don’t understand the competitive environment, you’ve got no way of being able to articulate why you’re different, what makes you special.”

– Chris Street

 

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Topic Covered 

01:27 – Chris sharing his career background 

04:10 – The best pricing value of a product to be sold to government or military 

04:58 – The request for quote process and the important details about it 

05:48 – How to figure out a competitors pricing model 

07:21 – How much profit margin are you willing to have to secure the government’s contract with them 

08:23 – Explaining the Business Case-Based approach 

09:40 – Discussing the Cost Plus Pricing approach and sole source bid 

10:01 – The advantages of going competitive rather than a sole source bid 

13:13 – Relevance of metrics in the CRM and RFM 

15:25 – Thoughts on “government or anybody writing RFP are not experts” 

18:00 – Procurement team power: B2B versus B2G 

19:45 – How many proposals to give when responding to RFP 

22:16 – What transpires after you win a contract with the government 

 

Key Takeaway: 

“Everyone thinks their own technical features are unique and amazing, but ultimately if your competitors are doing the same thing, you’ve got no differentiation, you’ve got no ability to grab someone at a premium. So my advice is, keep an eye on what those competitors are up to. Make sure that you’re staying one step ahead.” – Chris Street 

 

Connect with Chris Street:  

 

Connect with Mark Stiving 

 

Full Interview Transcript

(Note: This transcript was created using Temi, an AI transcription service.  Please forgive any transcription or grammatical errors.  We probably sounded better in real life.)

Chris Street: Always understand your competition, understand what makes them different, what makes them special, but then understand what value you’re bringing and what makes you special as well. If you don’t understand the competitive environment, you’ve got no way of being able to articulate why you’re different. What makes you special.

[Podcast Intro]

Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing, value and the tight relationship between them. I’m Mark Stiving and today our guest is Chris Street. Here are three things you want to know about Chris before we start. First off, he’s the Head of Marketing for Thales UK. For my American friends, that’s spelled Thales. He’s been in competitive intelligence and market intelligence almost his entire career and he’s really getting into teaching value-based pricing because he just ran a value-based pricing workshop a couple of weeks ago for people inside his company and he’s recorded his own podcast internally for Thales. Four of them, from what I understand. Welcome, Chris.

Chris Street: Thanks, Mark.

Mark Stiving: First time I have ever heard that. Hey, how did you get into pricing?

Chris Street: Well, I just fell into it, really. So I started my career at Lockheed Martin, so large American defense prime and I did that as part of my university course and started working in the competitive intelligence and market intelligence space. And one of the things that we did was pricing position to win. So understanding what our competitors were going to bring to the table, what our customers valued, and therefore what price we needed to charge to win. And that’s where I started out. And, and just reflecting back, I’d never realized that what I was doing was helping setting prices there, you know, it was just, we were bit to bit all the major prospects and that was 13 years ago and I’ve been doing that pretty much ever since.

Mark Stiving: Okay. It’s pretty interesting. I still see you. It’s interesting that you just realized you were in pricing most of your career. I see you on Linkedin a lot and you’re in different pricing groups and you’re, you seem to be heavily involved in pricing. So you know, you’ve been involved in pricing for a while at least.

Chris Street: Yeah, I guess, I guess the last few years it’s really stepped up. Uh, you know, we’re a large offense and security organization and I’ll spend a really wide array of markets. It’s one of the things I love about where I work now and, and we’re trying to move away from that cost plus business that we’ve traditionally been involved in. So trying to move to more value-based pricing approaches. And one of the things I’ve been trying to do is educate myself as much as I can on the subject. So join large groups and listen to your podcast every week and various other podcasts and, and just try and keep myself educated about what’s going on in the market.

Mark Stiving: Do you mean there are other pricing podcasts? I didn’t, I’m sorry. I didn’t mean that.

Chris Street: Yeah, I’m sorry. I’ve cheated on you, Mark.

Mark Stiving: That actually was a great lead into the main reason we’re going to have this conversation today. One of my mentoring clients, I never know what I’m going to get into when I start mentoring a client. And one of my clients is essentially a government contractor. And it was fascinating because I’m sitting there trying to figure out how do we do value, how do we figure out how much value there’s going to be for the product that they want to sell to the government or the US military. What ended up happening was I, when I coached companies that are B2B, it’s really easy. Here’s a product, how many dollars does it help make our customer. In the world of government, they don’t want to make money and I had such a hard time wrapping my arms around how do I determine willingness to pay for their customers. So I posted on one of the LinkedIn groups and you so nicely responded and said, Hey, I’ve got some thoughts. I’ve been doing this for many years. Let’s have a conversation about it.

Chris Street: Yeah. It is a challenge and it varies. So in the UK, for example, and in the US, the customer will tell you what they value because invariably if it’s a traditional procurement that sends out an assessment criteria that tell you what percentage of the marks are awarded to how fast it goes or how, how high can fly and they’ll then could potentially is on that. So you’ll know what they value most in the export market, it can be a bit trickier because some of the export customers, they don’t share that information with you, but generally whether it’s defense or healthcare in sort of the western nations, they will share that assessment criterion and they will tell you what’s important.

Mark Stiving: Chris, you’re saying that they share it with us through the request for proposal or request for quote process?
Chris Street: Yeah, generally. So they’ll send out a request for a proposal and say, this is what we need, this is how many we need and this is what we gotta do. And then this is how we’re going to score it. So you know, we’ll give you x percentage marks for price. And x percentage monks for the technical capability. And then it’s a balancing act, right? It’s about understanding how much value you’re bringing against that assessment criteria. Having to look and trying to work out how you think your competitors are going to score against that assessment criteria as well. And then run in the model to see how much you think you can charge for that. And that’s tricky, right? Because you’re trying, you’re playing with a lot of variables that are difficult to manage in terms of what are your customers or competitors’ technical solution and what are they going to price it at. And that’s where it starts to get really interesting.

Mark Stiving: And how do you figure out what you think your competitors are going to do?

Chris Street: Well that’s, I mean that’s, that’s what I get paid for. That’s the magic sauce.

Mark Stiving: So you don’t want to share with anybody. Okay. Yeah

Chris Street: I’m happy to share it because you know it’s out there. If you look hard enough, I mean there’s, there’s a couple of approaches you can take, right? You can look at where a similar product has been sold previously and how much for, whether the quantities were different or whether the technical capability was different. So maybe it was a scaled-back version or, or an upscale version. So you can see that. The other thing we look to do is build up a bottom-up cost model. So we say, okay, so this is what our competitor’s solution looks like. These are the key components that go into it. How much do those cost? How much are they going to put on to manage this contract? How much margin are they going to take, how much risk are they going to take? And that’s where you know, a bit of the art and science then becomes a real blend because you’re using your view as to whether you think this is, for example, strategically important for them and they’re gonna bid aggressively to secure that share of the market. Or whether this is business as usual, whether they’re the incumbent, and happy and, and they’re going to continue to try and make similar margins directly and rely on the fact that they’re in there. So that’s where we start to blend that, that whole arts and science of pricing.

Mark Stiving: And if I tied this back then to the cost plus we were talking about a minute ago, the real question that what I just heard you when we start to talk about strategic it is how much plus do I want to put on top of my costs?

Chris Street: Yeah. Or how much, I know, I guess is that 30 dirty phrase I’m going to use, but how much margin do we count to secure that business? You know sometimes with the large defense procurement programs, they only come around once every 10 years, every 15 years. So if you miss it, you’re out. And that’s a real challenge when you’re looking at, you know, the value that you bring because you might be bringing loads of value to the customer. If you’ve got a competitor who consistently undercuts you or you know wants to win this badly as well, there’s a real risk with, with plussing that up. Sometimes you need to just get in there and then grow to contract once you’re in there rather than try and make all your margin first time around.

Mark Stiving: Well that’s not an unusual strategy either. Is it? What if I bid at cost or even below cost because I know that there are going to be changed in the contract over time. Um, it’s like remodeling your kitchen. I hire a contractor and they’re really aggressive in the bid, but as soon as I want to change the countertops, it’s like, oh, those countertops are really expensive.

Chris Street: Yeah, absolutely. And, and that’s where having a business case based approach is really important. You know, if you look at all these things and all these opportunities on their own, then it’s very difficult to justify going in at a cost or below cost. I mean, that, that will be a real challenge for a lot of large businesses with shareholders. But if you can luckily over the lifetime of the contract, you, you value how much it’s going to grow or will you have metrics that show how much your contracts will grow over the life of the program in general, then you can start to build a business case around it and make some of those things a bit more compelling.

Mark Stiving: Yes. Okay. I normally despise the concept of cost plus. And the reason, the reason I do that is we’re not capturing value or not thinking about value. I get all that. And uh, the one response I once heard from somebody that said, cost plus makes sense is if you’re on a sole source bid to the government, they’re only going to buy cost plus. And it’s like, okay, get it, let’s try cost, let’s, let’s do a cost plus. Cause that’s the way we win the business. But here we are trying to bid on a new military project. And if I said don’t do cost plus, how would you do it?

Chris Street: So there’s a couple of things that I guess. So in the UK we have sole source procurement regulations. If you do get awarded a contract, sole source, the government will come and audit your books to ensure that you’re making the agreed level of margin on that program.

Mark Stiving: And so that’s a forced cost plus, right?

Chris Street: Absolutely. And that can be a challenge, right? Because sometimes you might be bringing loads of value, but you can’t capture it because you’re forced down this sole source. So sometimes it’s good to go competitive. Yeah. And when you do, you know there are risks associated with going competitive because you might lose, but if you can start early enough, influence the customer early enough, to include your differentiators in their core proposal. So this is what we want, an old look. It just so happens to pretty much mirror what our product looks like, the features it has and what it does. Then you’re onto a winner and you can capture a large percentage of the value that you bring. If someone else, assuming they’re pure differentiators, you know, assuming they are your differentiators rather than just the standard market capabilities. If someone else does that, if someone else gets in and shapes the proposal around their differentiators, pretty much impossible to capture how the any at the value that you’ll bring in you’re on the defensive already. You’re either trying to work out how you can shape your products and spends self funded R&D money to get your products into a shape where it can compete or you’re saying we’re going to have to go in low price because we don’t meet any of the technical criteria and therefore we’ve just got to try and hope we can undercut the competition but that’s just good business development. You know, getting in early, shape that customer requirement and then shape it to what makes you different, what makes you special and that then allows you to capture a load of that value that you bring.

Mark Stiving: I have heard it said that if you weren’t in there helping write the RFP, don’t bother bidding on the RFP. What do you say?
Chris Street: Yeah, I agree completely. If the first time you’re seeing it is when the RFP comes out, the first thing you know about it is when it’s posted up online saying, we need x number of these platforms or x number of these capabilities you probably lost already. Now that’s not to say that we still won’t have a pump on it, um, because you know, there’s only gonna be one of these coming around every few years. But yeah, that’s a really valid point. You’ve got to be in their shape in the requirement, because if you’re not, someone else will be, and then you’re fighting a rearguard action on that one.

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Mark Stiving: It would be fascinating, I don’t know if you’ve ever done this, but if you collected metrics on your win percentage on deals where it was in the CRM system three months or six months or a year before the RFP came out, or if it was in the CRM system the day you got the RFP, budget is very different.

Chris Street: Oh, I would agree. We don’t collect those sorts of metrics. I couldn’t disagree that that wouldn’t be, wouldn’t be being the case. You know, there’s a lot of companies that qualify hard and qualify early, right? So they say they look very hard and very early about what their chances of winning this is. And if they don’t think it’s any good or if it doesn’t hit the metrics that they’ve gotten and I just know that it straightaway, other companies will continue to pursue it in the hope that they’ll be able to change it. But you know, that’s, that’s one thing that I’ve learned over time is unless you’re a narrowly you, you’re really fighting against it. And it’s funny you said about, you know, being in their CRM system a year before, I mean in, in our, in our procurements they go on for years and years and years and I’ve been working on one program. The customer still hasn’t managed to buy something yet my whole career. So 13 years. Um, this program keeps coming up and going away, changing name coming back up again. They still haven’t quite got over the line with it yet.

Mark Stiving: Huh. Very interesting.

Chris Street: It’s like no short purchase cycles here, I’m afraid.

Mark Stiving: Yes. If I were to take this back to a B2B situation for a second, I’m going to address the RFPS and we had handed this RFP for a second. If I think back to a B2B situation, we’ve built a product. I want to go out and sell the product to a customer. I’m not customizing and it’s not a bid, but that customer doesn’t know my product very well. And if I don’t have a really in-depth conversation with the customer, they’ll never realize how much value they’re going to get from my product. The other hand, we as a company, we don’t know that customer’s business very well and there’s no way we could go tell them here’s how much value you get from our product just because we know the product. It really takes working together between the two organizations in order to say, here’s what the value really is, here’s how we’re going to capture that value. What that says to me is when I think of a government or anybody writing an RFP, they actually don’t know what they’re doing. They are not experts in what our capabilities are and what they should be asking for. Does that make sense to you?

Chris Street: Yeah, it really does. So you know quite often the way it works is the frontline commands will specify what they want. So we want a product that’s all. We want, a capability that does X, Y, and Z. They then pass it onto the procurement team who have to run a procurement in a fair and legal way. And one of the things that that means is they have to level the playing fields, right? So if anyone has an advantage, they’ve got to ensure that that is not so significant that no one else will bid for it. But these guys aren’t experts in the capability. They don’t know that because we can fly five miles an hour faster, that makes a significant difference. So the chances of the mission succeeding or otherwise, they won’t have that level of expertise. Whereas our guys who understand our products or capabilities, who are leading experts in their markets and their fields, they really get that and they really understand it. And one of the, one of the key things when you’re writing proposals for customers is to make them accessible. You know, this is all part of the selling process, right? Its value selling these to be able to articulate what your differentiators are, but make it in an accessible way that the procurement guy who’s assessing your bids when it comes in can market effectively and ensure that you get the maximum amount of marks for the value in that capability you bring in. Does that make sense?

Mark Stiving: Yeah, so in truth, what we’re doing is we’re reading the words that procurement person wrote and trying to say, yes, we do that and not worrying about is it really the right thing for the government or the solution or something.

Mark Stiving: Yeah. I mean if you, you know, if you’ve been in there early and being able to shape it and hope for, you’re just repeating the words back that they’ve heard already. But yeah, invariably, you know, there are some curveballs, some, some lack of understanding that occasionally happens. Things get lost in translation. You know, sometimes what the cost the frontline customer wants, they can’t afford, they don’t have the budget for. So then it’s up to the procurement teams to start stripping out capability. Sometimes that’s done in conjunction with the frontline commands. Sometimes it’s just done arbitrarily and say, okay, you want 60 you can only afford 40 so it’s, you know, you’re not dealing with the person generally who’s going to be using your system. Oh, you also, and I think that’s probably where it’s slightly different with B two B. I mean, yes, eventually you get involved in the, in the procurement organizations, but you’re not many steps removed from the guys that are actually going to be using your tool or capability. Whereas in the military who can be quite a number of steps removed by the time the thing actually gets ball from the guy who’s going to be used it when he’s when he’s stuck in a ditch or are on the sake.

Mark Stiving: Yeah. I would say in B2B procurement has very little power. They manage the process and in B2G it sounds like procurement has tons of power.

Chris Street: Yeah, they really do. And you know, we’ve seen it in the US a lot where program decision is made and what capability is going to be bought. A company appeals, another company appeals, the program gets stopped, it gets restarted again, or occasionally it gets allowed to continue because there are no grounds for the appeal. But every large military procurement that we see pretty much in the US now there’s some level of appeal. So to protect themselves, they’ve got to ensure that the procurement’s undertaking in a fair way and often sometimes that results in not the right result for the user or the taxpayer. But unfortunately that is, that’s the situation that we find ourselves in these large B2G procurements.

Mark Stiving: Yeah, it’s an attempt to make it fair. It’s an attempt to take all the corruption out of the process and as we add administration and process into it, we confuse things.

Chris Street: Yeah. Absolutely. And it’s not just in defense as well, you know, we work across rail transportation and anytime that you’re dealing with a large government supplier, it’s the same, you know, they have to make it fair, they have to ensure that they’re (inaudible) so that they can’t be seed. Yeah. If the procurement doesn’t go someone’s way or that they can actually end up with the capability that they want because you know, if you stop these large procurements, sometimes it could have taken you three or four years to get to that point. The thought of restarting that again is pretty unattractive for everyone.

Mark Stiving: Yeah. Slightly weird question. Do you ever give more than one proposal when you respond to an RFP? By the way, I often advise people to do three proposals, but I’m just, I’m just curious.

Chris Street: Yeah, so sometimes the customer will accept alternate proposals, so where you can propose to do something differently. Invariably though they’re so busy and they’re so time constrained because they’re running multiple procurements across multiple different sectors. They just want the thing that answers the question. So they just want a standard proposal and they don’t have the time or the capacity to deal with alternate proposals, which is a shame because when you get into those little snit proposals, that’s where you’re really delivering value in delivering innovation. Because you’re saying to the customer, this is what you’ve said you want, but we think we can do it like this and this is much better or is it allows you much more capability or you can have more of them. So for example, instead of using all your capex money and buying this upfront, what about leasing or what about a subscription model or what about, you know, we come and service it for you on the base so you don’t have to use your own guys to service the equipment. We have a couple of guys there already, so is that the alternate of proposals or where the innovation is, but invariably the customer is so focused on just getting over the line of completing that process, moving on to the next one that they don’t really have time to think about it. What you can do is once you’ve won, you can get in there and start to introduce innovation as you move through your contract and provide that as gain share. So any savings that you make, you know the customer gets a bit, we get a bit or any additional capability. Maybe you can look for a contract uplift, but invariably that’s only once you’re in, you’ve got your feet under the table and you’re delivering what you need to be delivering. You’re showing the customer, yeah, I can deliver what you asked for, but wouldn’t it be cool if we did this instead?

Mark Stiving: Yes. What you just described isn’t what I normally coach people on, but it has the same impact. I normally coach people that what if I were to give you or propose to you exactly what you wanted. I usually do a good, better, best, but one of the products that is a proposal that is way better than what you wanted to look at all these capabilities, all these things we could do and what the buyer is thinking oh, they have so much more ability. Maybe we could grow into that. Maybe we’ll have that someday.

Chris Street: Yes.

Mark Stiving: Yes. What you just described was essentially the same thing that said, look I get you have this much budget and you asked exactly for this and we’re going to deliver exactly this once we get the contract though we might be able to get you more for the same budget.

Chris Street: Yeah, absolutely. What the customer tends to… Well, what I found is that they tend to like delivery, they tend to like to see you deliver before they start… You start to introduce in their eyes risk and like doing something slightly different. But if you build up your strong customer relationships and you can build that into your business model, we’re going to grow it into this over time. You know a lot of these programs they are going on 10 15 20 30 years in some cases. So you’ve got a long time with the customer to introduce those innovative ideas and you know they will look for them as the environment changes. You know the fact that the military face today is different to what they face 10 years ago. So the products need to grow, the business models need to change and that can only be done sort of in these long term relationships. So it can be painful getting there. But once you’re in, you’re in for a long time.

Mark Stiving: Yeah. Wow. Chris, this has just been fascinating. Thank you so much for your time. Oh, I forgot the most important question. What’s one piece of pricing advice that you could give our listeners that you think would have a big impact on their business? And I’m okay if you say B2G business,

Chris Street: Sorry, I’m a competitive intelligence guy who does pricing on the side. So my, my thing is always to understand your competition, understand what makes them different, what makes them special, but then understand what value you’re bringing and what makes you special as well. If you don’t understand the competitive environment you’ve got no way of being able to articulate why you’re different, what makes you special. And I think that’s one thing that gets overlooked so often. We get so wrapped up in, it’s cool our product can do this. It’s cool that our product can do that. All companies do it. Everyone thinks their own technical features are unique and amazing, but ultimately if your competition is doing the same thing, you’ve got no differentiation, you’ve got no ability to grab someone at a premium. So my advice is, you know, keep an eye on what those competitors are up to. Make sure that you’re staying one step ahead.

Mark Stiving: Nice. And value-based pricing is all about how are we better than our competitors. So how do we get more money than they do?

Chris Street: Absolutely. Absolutely.

Mark Stiving: All right, thank you again. And if anyone wants to contact you, how can they do that?
Speaker 1: So LinkedIn is probably the best thing. So Chris Street, S-T-R-E-E-T. You’ll see me working for Thales. Please feel free to connect. I’m trying to learn about this subject as much as you guys. Great to share ideas and best practice.
Mark Stiving: We really appreciate you sharing your thoughts on B2G selling. This is, this has just been fascinating.
Chris Street: Yeah. Thanks for your time, Mark. I really loved it.

Mark Stiving: Yeah. All Right, episode 22 is finished. I cannot believe we’ve been doing this for 22 weeks. The weeks are just flying by probably because it’s so much fun to hear from people who care about pricing. I’ve got to say, my favorite part of today’s podcast was the alternative proposal that we talked about just at the end. What was your favorite part? Uh, please let us know in the comments or wherever you download and listen while you’re at it. Would you give us a five-star review? We would hugely appreciate it. Also, if your B2B company needs to better understand subscription, value, and pricing. Check out our new course, although I hate bragging. It is powerful. You may already know a lot about running a subscription business, but this course will give you valuable frameworks, new tactics, and even a pricing roadmap template. Learn more about the new course and find more resources at our website, Impactpricing.com. If you’d like to reach me, feel free to email me at mark@impactpricing.com. As always, don’t forget to listen next week to another episode of Impact Pricing. Now go make an impact.

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