End of contract or mid-term: When does data contract renegotiation make sense?

End of contract or mid-term: When does data contract renegotiation make sense?

Time Stamp: May 18, 2023 10:37 AM
Source Node: 2667046

As much as we try to get everything right at the outset, sometimes it becomes necessary to renegotiate a contract. Maybe there’s been unforeseen challenges or shifts in the market that might mean you simply need to update the agreement.

With the challenges present in our economy, it’s possible that you’ll need to rework contracts with data suppliers. But navigating the renegotiation process successfully is key. 

In this article, we explore when contract renegotiation makes sense and top tips to help you to smoothly renegotiate to cut costs without compromising quality. 

Let’s get into it. 

Reasons to renegotiate a bureau contract 

Many businesses overlook reviewing their contracts because they assume the agreement is set in stone from year to year, but this is not the case. Instead, by renegotiating contracts mid-term, you could save many thousands or even millions over the life of the contract. 

Think about it. Credit providers may need to rework agreements for a variety of reasons. A few of the more general reasons include the following:

📊Circumstances have changed

Change is inevitable, and as your business’s overall shape evolves, so too will your needs. That means contracts might need to change to continue to be profitable. This could be:

  • New credit risk management technology or even changes in budgets. 

  • If you are not achieving minimum spend as usage is low (this might be due to changes in the market, competition, or even a forecasting issue).

  • When lenders move into a new market and want to benefit from reduced unit pricing by combining a new contract with an existing contract. 

  • Or, when a lender acquires another company that already uses bureau services – and contracts would benefit from merging. 

📇Changes in the Retail Price Index (RPI)

One thing we’ve noticed happening recently is that the bureaux are increasing the RPI for some lenders when others have received more favourable terms. 

❌There are flaws in the contract

Finally, the contract itself may have flaws that keep it from being as effective as it could be. It may unfairly balance power between the agreeing parties, or it may simply have unclear terms that make it hard to be flexible. As much as you may try to get things right the first time, you may still need to make some tweaks as time progresses.

You might also discover that you are being over-charged either through benchmarking or just by reading our content, yet you still have a number of years left on your contract. 

Now that you know when to renegotiate mid-term, let’s look at just some of the benefits you could enjoy.

The benefits of contract renegotiation

As we’ve seen, there are several key reasons why you might need to rework a contract. But most people tend to wait until contracts come up for renewal – rather than midterm. 

This can be a costly mistake. 

You could easily end up paying unnecessary costs for bureau data and searches. Higher than necessary marketing costs, which reduce potential new business. All while your competitors gain an edge. 

On the other hand, renegotiating contracts equals:

  • Bringing forward savings 💸

  • Reducing losses 📉

  • Enabling increased marketing (with lower soft search or quotation costs) 📈

  • Improved Cost per Acquisition (CPA) 💰

In summary, renegotiating contracts makes good business sense. You have nothing to lose and everything to gain. 

So how do you renegotiate? Let’s take a look at some top tips. 

Tips for renegotiating data contracts

The dynamics of renegotiating contracts can feel a bit tricky. That’s why it’s important to follow best practices during this process. 

1. Create a clear framework for negotiations

To progress as smoothly as possible, create a clear framework for your negotiations. Consider specific rules covering areas such as:

  • The people involved (consider risk and procurement teams and senior management (for escalation)

  • Data-backed evidence of competitor data quality and pricing 

  • A timeline for each stage of the process

And once you set these rules, make sure you stick to them. 

2. Weight up all the benefits

At the same time, it’s important to weigh up all the benefits of renegotiating too. Some benefits to renegotiation include:

3. Bring in external support

External specialists can help you create a win-win scenario. They’ll help you to map out the current market and use data benchmarks to understand current rates, plus any differences in data quality and accuracy. 

The key point here is: Don’t assume you have as good a price or flexibility as your competitors when it comes to bureau costs. Make sure you have a transparent view when negotiating. 

4. Know your alternatives

Finally, and linked to the above, you’ll need to put yourself in a strong negotiating position, which means knowing your alternatives. Most lenders we work with tend to stick with the same supplier/suppliers, but it increases your bargaining power when you know alternatives inside-out.

Easily renegotiate bureau contracts 

To sum up, contract negotiations can be frustrating and time-consuming –  when you don’t have the right insight and support. The good news is that by leveraging the right levers through data benchmarking and with the right experts on your side, contract negotiations really can be a breeze. 

In addition to the above best practices, there are a few final points to keep in mind throughout the negotiation process:

  • Cooperation is key: The goal is to create value and a fair mutual value exchange.

  • Build relationships: Focus on building relationships with your suppliers throughout the process. This helps facilitate any future discussions too. 

  • View contracts as living documents: Finally, we often find it helps to view contracts as living documents that need to be updated every so often. It’s also why we talk a lot about embedding flexibility into contracts. 

In summary, when done right, contract renegotiations act as a way to continuously improve business relationships, creating greater value for everyone.

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