The Ultimate Guide: How to Successfully Negotiate Better Terms with Agencies (2023)

The data landscape has never been more competitive, which is why it's critical for businesses to seize every opportunity to find the best data options at the best possible price.

And this is where contract negotiation comes into play. Negotiating contracts is an opportunity to reassess your budget and data needs - and you can do so in the medium term when your credit data contracts are no longer fit for purpose.

In this ultimate guide, we examine what successful agency negotiations look like...

Two key results of a successful negotiation

These are two key benefits of successful contract negotiations and renegotiations:

1) Provide credit risk programs with the best quality data

It's getting harder and harder to get a reliable record - and that could mean you can't trust the information being shared within your lending organization. For credit risk in particular, maintaining a high-quality, harmonized data stream is essential for accurate accessibility assessments, AML6 and additional fraud checks, GDPR compliance, and more.

2) Make sure you're not paying 25-40% more than your competitors

When it comes to pricing, purchasing and credit risk teams face another challenge.

There are many reasons for significant price changes (on average we see fluctuations of 25-40%) and they focus on a lack of transparency - credit data is a very complicated niche market with no published prices.

While agencies can benefit from this, they are also looking to increase customer retention through large and complex corporate transactions that may at first appear heavily discounted. But without careful negotiation and planning, those agreements can easily become ineffective — especially in these uncertain times.

👉Read our definitive guideThis is how you get Schufa data at the best price

Why negotiating loan data contracts can be a challenge

Purchasing and credit risk teams face five common challenges when trying to obtain the cheapest, highest quality credit risk data:

1) Lack of Transparency -Very complicated niche market with no published prices.

2) Products difficult to compare -So many different products (including custom solutions) make it almost impossible to compare them individually. Or argue with commodity prices.

3) can often only compete with quotas from their own previous years -And not what others are now paying for the same data package/footprint. So if they paid 25-40% more than market value in 2017, a 10% reduction in 2020 sounds like a good deal.

4) Moving Costs -Changing the credit agency can be expensive. This allows rating agencies to maintain high prices.

5) Strong relationship with internal stakeholders of the office -Acquisitions can be difficult when risk managers have close relationships with CRAs and don't want to disrupt the relationship. This cannot result in any leverage on the price.

Contracts are often based on the volume of research required, so foresight is essential. But more than ever, this model is not economical for credit providers. Transparency and flexibility in contracts are fundamental.

What you can do to negotiate the best price and quality dates

There are some important things you can do now:

● See the big picture by comparing your data quality and pricing to different types of peer groups

● See how your data price compares to the rest of the market

● Check medium-term data contracts

● Renegotiate with your existing supplier

●Consider alternative vendors or switch to a dual office approach for more flexibility and create a champion challenge scenario

5 key elements for a successful data contract negotiation

To turn this into actionable steps, we've compiled our top 5 tips for cost savings and better credit risk data:

1. Prepare for a balance of power

Information is power. Sellers typically take much longer to prepare than to acquire, and typically have better knowledge of the market.

Here are some ways you can...

2. Build leverage with benchmarks

oneEffective data benchmarkingThe exercise eliminates underspending, optimizes cost savings, and provides access to new data sources. You can see how your price, quality, and accuracy vary across industries, sectors, and competitors. And clearly understand the difference between what you pay.

3. Create alternatives

The balance of power in negotiations always shifts when there are alternatives. By creating a shortlist of outside vendors, you gain the power you need to get out of an awkward deal.

4. Understand GDPR compliance

IfICO continues its investigationFor data brokers, GDPR compliance is another important factor to consider. How confident are you that your data providers are GDPR compliant? And do you have access to strong alternatives should you need them?

📚Additional Reading:Lenders: Do you trust your data sources?

5. Careful negotiation

Many providers have attempted to increase customer loyalty through large and complex enterprise contracts that at first glance may appear heavily discounted. But without careful negotiation and planning, these agreements can easily become ineffective.

👉Learn more here:Change in the balance of power in the negotiation of data contracts

Why now is the time to renegotiate data contracts... or switch credit data providers

Since the start of the pandemic, shifts in consumer lending behavior, risk appetite and economic uncertainty have led to a decline in account openings and new lending. The knock-on effect is that some agency contracts are no longer fit for purpose. Procurement teams struggle to adapt quickly.

Interestingly, however, we are beginning to see some agencies offering forward-thinking contracts with future flexibility built in from the start.

But how can procurement teams take advantage of these enhanced capabilities in existing contracts and negotiate new contracts now?

The key is making sure you know what options are available and negotiating the right price for the modules, rather than volume discounts - as this remains unclear.

Therefore we recommend the preparation:

Be aware of your options.This knowledge enables procurement and credit risk teams to negotiate and ask the current bureau for the flexibility it offers competitors. This is key to future-proofing the lender's strategy andprevents a supplier blockon historical systems and datasets.

Create modules as needed.And use this to get the right price for each module, rather than relying on a maximum term discount and volume/spend commitment - which is something many credit providers are currently catching up with.

🔎 Top Tip:Don't be afraid to ask, even if it's in the middle of the semester. When usage is low due to fewer queries and spend is wasted (since you signed minimal commitments that go unused due to unexpected weather), we've seen bureaus help: refunds are available.

👉See how Purplepatch complements sourcing teams.

The Ultimate Guide: How to Successfully Negotiate Better Terms with Agencies (1)

Future-proof credit risk with flexibility

The past year has seen a huge drop in searches and new account openings as people save money by working from home and not being able to go out.

Uncertainty remains and therefore forecasting volumes is risky.

Some risk models may not work in the new world, meaning flexibility is key. Therefore, both forecasting and underwriting a term of normal duration is challenging. And if you don't have visibility into the flexibility in the contracts others are getting, you may have to commit to high volumes to get discounts, or suffer unnecessarily high prices for lower volume commitments.

👉Learn more about:How procurement and credit risk teams can build future flexibility into data contracts

Case Study: Data Contract Negotiations in Action

Global banking needs:

We recently partnered with a world-class global banking group that wanted to refresh their existing CRA but needed built-in flexibility and a cross-office approach – without impacting pricing.

We conduct a thorough analysis of the renewal prices on offer and identify areas of price inflation. This evidence and the target price were shared with the procurement team to assist in the negotiations.

Successful conclusion of the contract negotiation:

Significant reductions have been realized, including reduced product fees and the flexibility to adjust spending commitments on a quarterly basis.

It also enabled a cross-office approach, which also benefited from higher discounts.

Redefining the lender/bureau relationship

Redefining supplier relationships has become imperative for companies to rebalance the power equation.

And you shouldn't feel like you have to wait for a contract extension to get a better deal. There are ways to successfully negotiate cost savings and get the quality data you need now for your credit risk programs.

That's why we recommend these five things to regain bargaining power: prepare for a power balance, look at a comparison of what you're paying versus industry norms, make a list of alternatives, understand compliance GDPR and, above all, negotiate carefully.

don't fight alone

We work fairly and impartially with a wide range of customers and suppliers and negotiate hundreds of agreements. By overcoming many of the pitfalls faced by credit and purchasing professionals,PurplePatchensures that relationships are underpinned by clear mutual benefits for both parties.

We're so confident in their money-savings that the services are delivered using a sharing economy approach.

👉Read our flip book:Top reasons to work with PurplePatch on your next data agency deal.

The Ultimate Guide: How to Successfully Negotiate Better Terms with Agencies (2)

Find out more about working with PurplePatch for free in your next contract negotiation

We make sure lenders get the best data and at a fair price - on average we save lenders 25-40% in costs alone, which equates to millions.

See how we support you:

●Experience in deciphering the same competing products, supporting the commodity argument and offering alternatives.

●Ability to split prices across product combinations.

● FREE comparative pricing data that compares your current price to what you charge others with the same footprint. This will identify areas of inflation or give you confidence that rates are good.

● A toolkit for informed and successful negotiations (even if you stay with the same agency) - to avoid disrupting relationships or incurring the costs of switching to a competitor.

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