We’ve all been there.
Amid the daily deluge of emails, meetings and fire drills, it arrives with the subtlety of a buzzing bumble bee at a springtime picnic: a vendor’s unsolicited contract renewal.
And while it’s tempting to swat at the surprise distraction with a quick sign-off, what we might just be doing is signing-away. Savings, that is. Perhaps thousands of dollars; maybe even hundreds of thousands.
So, is renewing the appropriate response? Not immediately. Consider reviewing – instead.
To Renew or Review, that is the Question
Contract renewals can be easy, and they’re cherished by service providers. From a client perspective – and perhaps unfortunately – they typically involve a cursory review, a signature, and a continuation of the status quo, for the most part. A visible and measurable improvement in service or savings is icing on the cake, often enough to satisfy the relationship owner and perhaps their boss, too. With so many business distractions in the banking industry, it’s easy to rationalize the new savings over the time investment of a review. While progress compared to the existing contract can be seen as a bellwether event, getting a market-competitive deal is the true benchmark. And truth be known, a provider’s first offer is usually not their best.
Conversely, reviews require rigor, and represent disruption over acceptance. They’re an investment, and signify a willingness to seek potential change, be it the process or the provider. Reviews can mean overcoming internal and external resistance; overturning a mindset of “the way we’ve always done it”; and not succumbing to the temptation of rubberstamping a legacy agreement.
Service providers present an unsolicited renewal for a very basic reason: it’s to their advantage. With contracts often ranging from 3 – 7 years, the prime time for offering the unsolicited renewal is near the midpoint of the current agreement’s tenure. That’s generally beyond a contract owner’s costly early-termination period, and before they consider looking elsewhere due to declining market prices – especially if technology-based services are involved. An analogous situation is the ballplayer who’s on the rise; ascending, as they call it. His current team would love nothing better than to wrap him up contractually before opponents take too much notice or other market forces drive up his value.
However, contract owners can be those market forces in the increasingly competitive business services climate. They’re the disrupters who either know the market or can access industry specialists who do. They see the potential benefits of change, and have a willingness to either validate or call out an unsolicited vendor offer.
Assessing the Landscape
For subscribers of services including debit/credit card processing, ATM’s, online banking, telecom, or consumer credit reporting, a new contract renewal approach can be helpful.
If you’re a contract administrator who’s now tempted to be more disrupter than rubber-stamper – and who can see the potential for the long-term gain – consider these questions when deciding whether to handle a review internally or externally:
• Do I or my team have the time to re-focus on the specifics of this service?
• Should we instead connect with an expert who handles this routinely?
• Are our efforts better focused on our customers and strategy?
• Do we have the necessary expertise for a thorough evaluation?
• Honestly, are we more administrators than negotiators?
• Who can help? How would we find them? Are they experienced, and what is their success rate or cost?
Hardly different than hiring a realtor or retirement planner for your household, the decision to seek outside help requires some soul-searching. It can mean accepting that contract renewals are hardly a D.I.Y – Do It Yourself – exercise, especially in an increasingly complex and competitive business environment where the stakes are high.
Expectations and Deliverables
Moving beyond the consideration phase involves both quantification and qualification of the rewards. The ultimate result, of course, is greater value, the gap that occurs when new benefits exceed new costs. And in a best-case scenario, more benefits and lower overall costs.
The effort to find an expert on industry-specific contract renewals can take several paths. Online searches, industry events, publications and peer referrals can all come into play. Whatever the method, your selected provider should have a track record of bottom-line success and current references.
Here’s what to expect when engaging a contract renewal expert:
• Expertise of the industry, competitors and existing relationships to be leveraged to your advantage.
• A broad view beyond price to include service, support and conditional items
• Someone who can challenge the norms of the current provider, even locating a resource who can deliver new services sought by customers
• Saves the client time, cuts through clutter, helping to inform them without overwhelming them
• Performs as a third-party negotiator, providing focus without bias or preference
• Provides a scope of services and a realistic timeline for completion
• Compensation contingent upon savings, risk-free and satisfaction guaranteed
The rewards of a successful contract renewal can be numerous, and well beyond the traditional grab and go, sign-off/sign-away method that incumbent providers often covet. Standard renewals – when players on both sides are overly comfortable with one another – can even be accompanied by an erosion of service.
Instead, contract owners should raise the bar through a review to acquire:
• More value than before, and relative to industry peers
• Unexpected savings from a multi-product or multi-layer assessment
• Improved service quality and dependability
• Immediate savings – even retroactive as applicable – if an incumbent provider is retained
• Marketing, training and implementation support for new or enhanced services
• An increased sense of provider appreciation
All things considered, enlisting the help of a contract renewal expert has many potential benefits. It’s already highly-challenging to keep things rolling smoothly day to day. It’s quite another to have a handle on the pace of change within a service or a category.
When it comes to renewing a contract in the banking industry – especially if the offer is unsolicited – it can be especially helpful, and even highly appropriate, to recall the words of Benjamin Franklin, who is credited with coining the phrase, “Haste makes waste.”