Suppose one of your members/customers try to use her or his debit card and it doesn’t work. They’re angry and upset though they’ll usually understand if it only happens once.
Now suppose it happens again. Your member/customer has now been angered or embarrassed twice —and guess who they blame? Loss of services can translate to loss of confidence in your institution and that can cause a loss of business.
If your contract doesn’t have a meaningful service level (uptime) agreement or if there are no performance requirements in place to rectify a problem, you may have no way whatsoever to make the vendor fix the debit card problem to your standards or fix it in a timely manner. The vendor could even charge you to fix its mistake.
Vendor performance is your performance
Just about everything you provide to your members/customers outside of your brick-and-mortar locations comes from or through a vendor. But your members/customers feel they’re communicating directly with you.
Here are just some of the services members/customers evaluate in judging their satisfaction with your institution’s performance:
- System uptime reliability
- Internet and mobile banking
- Online account opening
- Online lending
- Treasury and cash management systems
- Customer Relationship Management systems
With so much dependent on your vendor’s performance, how can you ensure you’ll receive the service you expect? Are you negotiating for vendor performance improvement? The Maple Street pros have developed a guide to help you.
Four steps to negotiating for better performance
1) Define what you expect before you start selection and negotiation
If you’re not specifically defining, upfront, what you want from a vendor, how will you ever know if you’re getting what you expected?
For example, if you state you want “good service,” what does this entail? It’s not quantifiable and you can’t prove or disprove it. Plus, without definition, how does the vendor know what you expect and what they have to deliver? The answer is to define the results you want in specific terms, much like SMART goals (specific, measurable, achievable, relevant, and time-bound).
Here are examples of specifically defined results in the context of a card processing contract:
- Maintain 100 percent availability of card processing services to client’s members/customers
- Service includes year over year member card growth of _____
- Service includes year over year sales volume growth of _____
- Service includes year over year interest income growth of _____
- Year over year reduction of delinquency and charge off ratios of _____
- Reduce card-related fraud expense by (% or $ amount) per year without severe restriction of transactions
- Provide client’s members/customers new and replacement debit cards within _____days of order
- Response and problem resolution targets
2) Get specific in your RFP
In order of importance, here are the four specific questions you should be in asking in the RFP.
- List your specific requirements in your RFP – Be precise about what you want and make the list as long as you want it to be. Ask how the vendor will help you achieve your requirements and what the vendor’s contractual commitment is (it should be fun to do, to see your vendor’s face when you ask them to show where that is in the contract).
- Require the vendor to tell you what you have to do – Understand what you have to do with the vendor’s product or service to get the results you desire. It’s never as easy or as simple as the salesperson tells you. We find at least half of the vendor issues clients have relate to clients not understanding or doing their part in the process.
- Ask how the vendor can help you measure results – It’s critical that you have a means to measure and evaluate how the vendor is performing versus the expectations defined and agreed to.
- Relationship contracting: what will the vendor do if you don’t get desired results? – It’s essential that you and the vendor are on the same page when it comes to getting results. We recommend meeting with the vendor and agreeing on mutual goals and how performance will be improved if necessary. Maple Street’s Performance Addendum includes ways to measure performance and establish scheduled meetings for review.
3) Grade vendors objectively
Objectivity in the review process will reveal which vendor is the right choice for you – not just the vendor you liked better all along. Build a simple spreadsheet before vendors make their presentations and track how they score.
This is the fairest way to evaluate vendors. There may be some “intangibles” that are important, like trust, but coupling intangibles with objectivity drives the best results.
Here are the steps to grading vendors objectively:
- Build a simple spreadsheet that list your requirements
- Check boxes DURING vendor presentations when what you heard is fresh in your mind
- Note which vendors tell you how to achieve your results
- List tasks you have to do to get results
- Cumulate the vendor’s score and compare notes
- Credit vendors that’ll help you measure
- Credit vendors that’ll work with you to achieve results
4) “Show me where it is in the contract”
There’s a rule of contract law called the parol evidence rule that states any promises made before the contract is signed that aren’t expressed in the final contract DO NOT EXIST. Courts assume the final contract is the “deal” and any other promises made before the contract was executed were resolved in the language of the contract.
Consider each of the following points and ask the vendor to show you where the language is that states these things are included in the contract (chances are, many of these promises don’t show up in the contract):
- Where’s the contractual commitment to provide data?
- What’s the promise regarding the SLA or uptime? There has to be a penalty included for poor performance
- What problem escalation processes are included regarding how issues will be resolved? Consider relationship contracting that can resolve these issues
- Make sure there are no exclusive remedies (exclusive remedy provisions restrict available remedies to those set out in the contract and exclude you from seeking other types of remedies for that action)
At Maple Street, our professional negotiators are experts in negotiating for better performance and we’ll run the table in negotiating the best prices as well. We understand the importance of results, so you’ll never have to pay for negotiation services upfront. You won’t pay a dime until we win.