In a typical sales cycle, the goal is to engage the customer in conversation, uncover a need, and conduct a requirements discovery exercise. If all goes well, the requirements discovery will produce a request for a proposal. This proposal will outline what you will do and how much it will cost.
However, often a customer will want you to submit a proposal before the requirements discovery exercise.
In this case, you face a problem. You don’t have enough information from the customer to accurately describe the work to be done. Consequently, you also don’t have the necessary information to estimate the cost. Until you have that information, you face the risk that your proposal will be inaccurate, that you will charge too little and agree to an unprofitable deal.
Justin Roff-Marsh suggests an alternative that gives you flexibility over the work and the price. Simultaneously it gives your customers more information early in their buying cycle.
He calls it the indicative proposal. In fact, asking for the indicative proposal is the purpose of the initial formal presentation you make to the customer.
Because if you gain the customer’s permission to send an indicative proposal, then you have the opportunity to ask any additional questions necessary to produce the indicative proposal.
What role does the indicative proposal play in the sales process? Roff-Marsh explains:
Now at this point I need to explain the notion and the value of an indicative proposal. There is often a bit of tussle early in sales people’s engagements with prospects. Prospects will request a proposal because they’re keen to get the sales person to commit to a number and understandably sales people are reluctant to make this commitment so early in the engagement. A nice compromise here is what we call an indicative proposal. An indicative proposal proposes the general direction of the solution and quotes a range of prices. Ideally this range should extend from below what your client expects a competitor to quote to above what you ultimately expect to charge. This range of prices will result from a set of parameters that are yet to be defined. You should advise what those parameters are in the indicative proposal and you should use this requirement for additional information as leverage to continue the discussion with your prospect.
The indicative proposal gives both you and the customer more information about each other. It sets up the next stage in the sales cycle, a detailed requirements discovery which leads to a specific proposal.