Making the move from tactical to strategic pricing negotiations

Whether your bureau contract is up for renewal, or you want to renegotiate a better deal mid-term, deepening your understanding of the key levers to successful contract negotiation can take you a long way towards one thing we all need more of: cost savings.

But what does it take to negotiate the best deal? One word: strategy.

A strategic approach isn’t focused on reacting to the moves the other side makes, but on strategically approaching a contract and maximising the cost savings potential of that deal.

This requires not only evidence-based insight, but transparency on what other businesses are paying for access to the same data.

The fact is, most organisations are flying blind when it comes to bureau data.

So, where do you start? Many levers (e.g. average industry price per search, comparing data sources and different bureaus) may be used to create a more strategic contract negotiation that is cost efficient, evidence-based, and sustainable. That’s why we always answer these key questions during the research phase: 

• What are other companies paying for access to the same data?
• What kind of savings can be achieved for your business? 
• What are the levers for negotiation?
• Could you use other search types to be more efficient?
• What is the competition charging?
• What other beneficial commercial terms are available?
• Do your SLA’s stand up to what is being offered elsewhere?

From tactical to strategic

To move from a tactical to a strategic perspective requires you to have a framework. Having a framework will help guide you and manage the process from start to finish. We advocate a data benchmarking framework which is highly effective in helping you move from a tactical to a strategic thinking perspective.

There are four key elements to the framework:

• Engage – Map out existing data sources and what you’re paying.
• Compare – Determine the precise gap between current pricing and that of other organisations. Including benchmarking service costs, licence, and maintenance fees for software and decision platforms.
• Recommend – Target pricing for each search and service based on the benchmarked findings for existing suppliers. Additional products or search types that will either enrich data or reduce costs. Include a shortlist of trusted recommendations from alternative information providers, if required.
• Negotiate – Maximise the decision-making process post presentations, and in each iteration of the negotiation. Including documenting key negotiation levers and further pricing evidence, as well as preferential commercial terms that have been offered to others by that supplier such as usage flexibility and stronger SLA’s.

This framework helps our consumer and commercial credit clients to both overcome the current cost pressures, and more importantly, create sustainable cost-savings over multi-year terms.

For a leading bank, we used this framework to review, benchmark, and help negotiate significant bureau data savings. Along with benchmarking its pricing against competitors and industry norms, we supported the successful negotiation to ensure the bank’s cost cutting measures were successful. The result? A 37% decrease in credit data expenditure.

The bottom line is that more procurement, credit, and finance teams are coming to realise that they need key insight to help with strategic pricing negotiations. We need to think more holistically and systematically beyond the contract, to benchmarking the entire market landscape, overall data quality, and strategic multi-year and multi-bureau deals.

Are you ready to talk about strategic pricing negotiations?

Helping the credit industry become more strategic with data pricing negotiations is something we do every day. Whether you’re looking to negotiate a contract up for renewal or renegotiate mid-term, we’d love to hear from you.