In value-added services (VAS) supplier negotiations, information is the ultimate leverage. A comprehensive business intelligence (BI) strategy equips your decision-makers with the knowledge to uncover negotiating opportunities for minor margin optimisations in your provider agreements and routing to achieve significant revenue improvements at scale.

In a mature VAS market, enterprise businesses need every advantage to grow. Every business has a wide distribution network and multiple VAS offerings. Each opportunity to increase your competitiveness is crucial, which is why BI matters, as it can help you find and win otherwise invisible margins. 

The invisible margin problem

Invisible margins are a recoverable revenue gap caused by small but frequent operational inefficiencies, such as failing to recognise sub-optimal volume routing because information is not readily available.

Leading VAS businesses are constantly walking a tightrope of efficiency. For example, if the commission per transaction between your VAS business and its provider is incorrectly weighted, you could miss income opportunities as it scales to millions of payments.

Or if your provider's systems are failing more often than you were aware. These failures may cause consumers to go elsewhere, and cause you to lose revenue that you could have realised if you had routed to a more reliable supplier.

The structural barrier

Managing a robust VAS business brings complexity that makes it difficult to identify these invisible margins. Working at a massive scale with multiple offerings and providers, run by different teams, creates division and data silos.

In these conditions, when you want to access relevant information, you need to make individual requests to each team. Then the data must be collated and refined to provide value. By the time the information reaches your desk, it is outdated and no longer actionable.

Data used in this way falls more closely to reporting, which cannot inform an evolving strategy. BI enables you to be proactive and forecast where the market will be, while reporting helps refine processes. In a competitive market, both have value, but BI is crucial for identifying new opportunities to grow revenue.

Business intelligence as negotiation leverage

VAS organisations have multiple provider integrations to maximise service availability and coverage, which makes it complicated to implement BI. However, this collection of relationships also creates an opportunity to use BI to optimise revenue. BI can help you understand the value of your provider relationships and leverage data to ensure you have the best possible commercial agreement.

To optimise your commercial relationships, your BI solution must give you insight into provider performance, including system uptime and transaction failure rates. Visibility into providers lets you see whether they meet the requirements set out in your commercial contracts. If they are failing to meet your service-level agreements, you have the means to hold them accountable. Additionally, you also have leverage to renegotiate the terms of your business relationship.

Effective BI is critical to maximising transaction success and consequently revenue. Firstly, it allows you to see and anticipate when transactions will spike. Secondly, you will also see how each provider performs at normal and extreme volumes. With this understanding, you can allocate your volume to the best supplier at that moment.

What good VAS BI needs

To provide actionable information that’s relevant to a VAS business, a BI system should meet the following requirements.

Accuracy

Using incorrect information is often worse than not leveraging BI in the first place. If your data is skewed or omits key information, you can draw dangerous conclusions that could lead to spending money in the wrong place.

Misinformation can be particularly harmful during supplier negotiations. Incorrect data could cause you to overestimate their capabilities and allocate volume they cannot handle. In contrast, inaccurate data could also lead you to underappreciate a partnership and lose revenue opportunities by not using them appropriately.

Detailed analytics

Your decision-makers need to understand how your VAS business is performing overall; however, lower-level data can mask key performance metrics.

Additionally, understanding how different channels perform across geographic areas, or, for retailers, how different storefronts perform, is critical for determining how best to market and position your VAS suite to your consumers.

Speed

In a highly competitive VAS market, businesses need to move quickly to act on opportunities and respond to market changes. Moreover, seeing exactly when suppliers are not meeting their SLAs allows you to shift your volume allocation to optimise revenue and consumer satisfaction. For your BI solution to be effective, a near-real-time feed is critical.

Comparative analytics

Knowing what is happening now is important, but understanding what happened last year compared to today is critical in developing a strategy.

Assessing provider performance over a long period can ensure a full understanding of the value they bring to your business and provide leverage during contract negotiations.

Furthermore, if you know how certain providers perform during peak periods, you can ensure maximum transaction success by allocating volumes to the right providers.

Collaborate with industry experts

By providing enterprise-tier VAS software to leading banks and retailers, Electrum has insights into what information business leaders should leverage to compete in a mature VAS market. Get in touch if you’d like to discuss your VAS BI strategy with us.