In a world where there seems to be an endless option of tools, functions and software, it is easy to feel slightly confused and overwhelmed. But don’t despair. Let us help you figure out what CPQ really is and how it can benefit you and your business.
CPQ stands for Configure Price Quote, and it is a digital sales tool that helps sales associates efficiently create complex quotes for their customers. CPQ is used for creating offers for products where you need to adjust (Configure) and set the price (Price) every time you create a new quote (Quote).
The CPQ software has been used by larger manufacturing companies for a while, but in recent years, interest amongst smaller companies in various industries has taken off. I.e. SaaS-companies, or consulting firms, that have a volume- or user-based pricing and offer several different options, resulting in an endless number of combinations that can be offered to the customer.
Several CRM-suppliers have started to integrate limited CPQ functionality by offering the option of choosing products and volumes and then creating a business opportunity in the CRM. But to calculate a correct price and create the quote, tools such as Excel or Powerpoint, or similar tools, are used. Numbers are often copied and pasted between the tools increasing the risk of human error.
Configure in CPQ refers to the process of customizing products or services based on customer requirements, ensuring accurate and tailored solutions.
- CPQ enables sales reps to configure products and services based on customer needs.
- Configuration is done by accurately capturing desired features and components.
- Customization options for each component are specified by the company.
- Predefined rules determine bundling of components, combination of features, and complementary items.
- CPQ allows the inclusion of accessories for specific components.
- Additional customization options can be provided for certain options.
Price in CPQ involves the functionality that allows businesses to accurately calculate the cost of personalized products or services, considering factors such as customer specifications, desired margins, and pricing strategies, ensuring accurate and aligned pricing.
- CPQ software enables quick updates to pricing models by adjusting parameters like discounts or markups.
- Pricing rules can be established based on the company's business model.
- Automates price determinations for complex pricing models (tiered, subscription, volume, bundled).
- Pricing component includes setting base prices, discounts, and markups for components, customer segments, and product options.
- Margin management and internal approval flows to ensure that you always stick to the desired margins.
Quote in CPQ involves generating personalized pricing proposals for customers by incorporating product configurations, pricing calculations, discounts, and terms, streamlining the process of delivering accurate and customized quotes just within your company's brand and guidelines.
- CPQ software supports dynamic pictures and text, tailored to the configured solution.
- Pictures and text can dynamically change based on the selected configuration.
- Text can be pre-written yet adjustable or static, depending on predefined rules.
- The layout of quotes aligns with the company's branding guidelines.
- Dynamic elements enhance the visual representation of the configured solution.
What goes into a quote and how it is designed is usually a decision that includes multiple stakeholders in an organization.
The CSO focuses on creating a trustworthy, clear and compelling quote to encourage the customer to pick your offer instead of competing offers. Your CMO ensures the design aligns with the company's branding.
Your CFO needs the pricing to be correct and to be in line with the company’s rules on margins and billing options. Your CRO evaluates the effectiveness of the CPQ tool in driving revenue growth.
Your IT manager ensures smooth implementation, high adoption and seamless integration. Least but not last your product managers provide input on product configurations and options.
In order to successfully implement a CPQ tool, it is vital to engage and collaborate with these roles from the outset to ensure a comprehensive and effective solution.
Integrating the CPQ software with your business tools (ERP), client database (CRM) and e-signing tool is necessary for creating an efficient workflow for your sales team. By automatically collecting information on product, pricing and the customer from other systems, the sellers can instead focus their time on creating a customized quote. Simply having to spend less time on administration.
According to Gartner, the CPQ category is growing and estimated to grow with 20% per year in the coming years. An obvious sign that current users find the software to be of great value and that CPQ is spreading to more industries and companies of all sizes.
If you are curious to see how a CPQ software can help you, let us know and we would be happy to go over how it can be of value for your organization.
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