When an enterprise is making a big purpose, they shop around. But unlike individuals, companies can’t fill up an online shopping cart or roam through the aisles of a store, comparing prices. Instead, they ask a few carefully selected vendors to submit documents detailing their products, pricing, and how their product can solve a business problem.
Two of the most common requests are Requests for Quotes (RFQ) and Requests for Proposals (RFP). Each request contains a list of questions or requirements for the vendors, who must respond by a deadline in order to be considered by the buyer.
These documents and their responses are incredibly important to closing a B2B deal. But what are they, and how do they differ?
What is an RFQ?
When you get your car fixed, the mechanic will typically give you a quote you must approve before he can start the work. A Request for Quote, also called an Invitation for Bid, is a formal way of asking for a quote.
This request is sent out late in the sales process, when a buyer is trying to understand the difference between vendors’ prices.
Although a RFQ includes some of the same information as an RFP, such as the details of the project or services required, an RFQ is more focused on price. An RFQ asks for a comprehensive breakdown of costs, including payment terms and any considerations that might influence the buyer to make a decision, like add-on pricing.
What is an RFP?
An RFP is a more detailed document, sent out by a buyer when they have a problem to solve or a project to complete, and are looking for a vendor to provide a solution. This document describes the requirements of the project and then invites vendors to submit proposals by a deadline.
The RFP asks each vendor to create a detailed proposal outlining how they will complete the project, including budget, the specs of the vendor’s products or services, a scope of work, a timeline for the tasks that will be performed, and any other information that will help the buyer make a decision. The RFP may also request due diligence materials, like a security questionnaire, to ensure that the vendors present minimum risk to the buyer.
Because they are complex documents, RFP responses can be quite long. Vendors may find themselves answering many pages of questions as well as creating tailored content that illustrates how their product can help solve the buyer’s business problems.
What is the difference between RFQs and RFPs?
In some ways RFQs and RFPs serve the same purpose: each one asks a vendor to submit documents that will help the buyer make a decision. They are, however, used in different circumstances.
An RFQ is often sent for a straightforward purchase of a standard or off the shelf product.If a buyer knows exactly what they need or if the product is not complicated, they may issue an RFQ to a few vendors with comparable products. An example of this might be a company ordering laptops with known system requirements.
RFPs are sent when a project is more complex and the vendors need to deliver solutions that may be designed specifically for the business problem at hand. RFPs are used when an organization needs to take many factors into consideration before making a decision. Another way of thinking about it is that RFQs are sent to get more information about financing, while an RFP contains more information about the product itself. RFPs may also be posted publicly rather than sent to a shortlist of vendors, drawing in bids from vendors the buyer may have no relationship with.
Responding to complex RFPs
RFPs are also time consuming. It can take hours to respond to one, which can be overwhelming for a company that responds to several RFPs a year. Fortunately, automation can help make response management simpler.
Ombud’s RFP automation software allows bid teams to automate content-centric activities in their sales processes. Our platform combines content collaboration, project management, and machine learning to streamline the creation of sales documents like RFP responses, security questionnaires, sales proposals, statements of work, and much more. Interested in learning more? Request a demo here.