Let’s start with the easy part – unpacking the acronym. C is for “configure,” P is for “price” and Q is for “quote.” Behind each letter is a lot of business details, of course, but the basic idea is this: CPQ software accelerates the quoting process by enabling sales teams to quickly configure, price and quote the perfect solution for any customer in minutes.
In other words, CPQ solutions increase sales productivity while accelerating sales velocity.
Does that matter? You bet it does. Success in the digital economy hinges on a sales experience that is quick, easy and perfectly personalized. That’s what a CPQ solution delivers.
And here’s how it works.
Many companies now create optional combinations for even the simplest products. Fast food restaurants offer apps where customers can tweak their sandwiches down to the pickles and mayo. Why? Because customers want to customize their products and experiences.
We all want to leverage control over our purchases and no one wants to wait to get their fully customized sandwich.
In the B2B context, sales teams selling complex products that require configuration need a way to quickly configure the right product offerings to smartly meet a customer’s needs. Sounds easy enough, but many configurations are so complex it can take years of training before a sales expert can deliver them error-free and on time.
If you can’t quickly pass along the personalized product configurations customers demand, you lose business in a fierce and competitive market. The game rapidly moves on without you.
CPQ tools optimize and accelerate the configuration process by helping sales people create complex, zero-error configurations in minutes. Yes, no errors. Even junior reps with a single day of experience can sell products like a pro.
But CPQ doesn’t stop there. Some CPQ solutions infuse AI insights during this process, enabling sales reps to recommend product add-ons that perfectly fit an individual customer’s needs.
When anyone on your sales team can effectively configure any product for any customer, you not only win more deals, but can also lean on AI to bundle the right products or services so each deal is fully maximized.
Additional Tip: The best CPQ solutions go beyond simple configurators to include easy-to-navigate catalogs with guided selling to help sales teams find the right products for customers. World-class CPQ solutions also offer advanced ways to help sales people visualize those catalogs in 2D/3D, or even augmented/virtual reality. That’s a powerful view. And customers notice.
You could once price lemonade at your corner stand for 25 cents because, well, everyone else was doing it, too. Kids from around the block would pay a quarter, and so would the CEO of the Fortune 500 company who stopped to honor your entrepreneurship. And quench her thirst.
That’s the old approach to pricing. Static. One-size-fits-all.
The digital economy works differently. Customers are singular, their industries are unique and their market demands are constantly changing. Sales people now need to deliver pricing that accounts for every nuance.
What does a downturn in oil mean for a plane ticket price? How about a sudden surplus? What could a spate of bad weather or a scarcity of fertilizer mean for produce prices?
Salespeople need to know how to price and discount when the deal demands it. They need to know how to incorporate customer buying patterns and market data that impacts willingness-to-pay. Of course, no one has the luxury of time to research the perfect price, and delays in customer quote requests mean one thing: lost deals.
That’s where AI-based CPQ tools produce even better results than CPQ tools without AI.
CPQ software helps each salesperson price a product or configuration for any customer. Infused with AI-based price optimization technology, CPQ tools become smart quoting engines.
With AI-packed price optimization tracking a million variables, salespeople can deliver perfect product prices for individual customers in real time. Split second personalization means major gains in profit.
Additional Tip: As you look at CPQ software with AI-based pricing optimization, focus on those that provide transparency on how price recommendations are derived. This will help fast-track the adoption of pricing recommendations.
Once CPQ software has done all the heavy-lifting of configuring and pricing a product or service, the deal still isn’t sealed. Your sales team must now deliver a professional, personalized quote that perfectly illustrates all the awesome details.
And the clock is ticking.
Most B2B customers are now doing their own research and requesting quotes from several vendors. They expect fast responses to their requests and it’s 50 percent more likely that the vendor who responds first wins. You’ve got to get yours right. And get it in now.
But the quoting process can be time-consuming, especially if you’re creating a large quote for a customer with many products and configuration options. CPQ solutions with powerful performance-quote engines make it easy for you to navigate the details and administer changes. You’ll be able to import RFPs directly into your quote and make mass modifications as needed.
Once you’ve completed the quote, your CPQ software automates its delivery in a professional, streamlined way.
Additional Tip: If you have a large catalog of products or configurations, you’ll want to make sure your CPQ solution can handle the creation and management of large quotes. Many CPQ solutions with native architectures (built for only one type of CRM) limit the number of products you can add to a quote. Invest in a hybrid CPQ solution that can handle thousands of line items without performance degradation.
But Does Your Company Really Need CPQ?
- If your sales team is sluggish to a quote or price request and your cross-sell game isn’t fully up to speed, you need CPQ.
- If your product portfolio is bursting at the seams, making it difficult to connect the right items with the right customers, you need CPQ.
- If complex product configurations mean only some of the sales team can accurately create them quickly, (you guessed it) you need CPQ.
- If your otherwise awesome sales team loses profits by over-discounting products, you need CPQ.
- If a single customer is talking to multiple reps and receiving different quotes, you DEFINITELY need CPQ.
- If customer quotes are hidden on the individual laptops of sales reps, please get CPQ as fast as possible. If your quotes aren’t perfectly error-free and still sent in Excel (nothing against Microsoft!), you need CPQ.
Measuring The Impact of CPQ. What's up With The Metrics?
Once you start making strategic changes to your sales process, begin tracking ROI based on the improvements you've made. To effectively measure the overall impact, you'll need to start considering the following metrics in your calculations:
- Response times: How quickly your sales team should respond to customer requests for quotes and how quickly they actually respond.
- Churn rate: Your churn rate helps you monitor how often you lose customers. This metric is important because it can let you know if you are struggling or failing to keep accounts you've previously won.
- The number of quotes created by sales: As you leverage CPQ solutions, you should see the number of generated quotes increase by each salesperson.
- Quote-to-win ratio: By using machine learning technologies to help you gain a decisive advantage in sales through improved personalization, your quote-to-win ratio can increase.
- Revenue growth and revenue expansion with customers: Since your existing customers have a lot of growth opportunities to offer your organization, you need to carefully track their sales.
- Profitability impact: Look carefully at how profitable your organization is for deals you are closing. This metric will be a direct reflection of how effectively your sales team adopts price optimization recommendations.
- eCommerce revenue: Your eCommerce revenue can help you evaluate your ROI from investing in your digital experience as an organization.
The value of CPQ for sales teams is clear. Once your organization begins putting it to work, you may be amazed at how much faster your sales process is and how closely aligned your offer recommendations are with what your customers actually want. Invest in an AI-based CPQ solution to help harness the power of machine learning to increase revenue and profitability results for your organization.
Are The Business Benefits of CPQ Truly Worth it? (You Can Probably Guess The Answer)
Even in our ultra-connected digital economy, there are still sizable gaps between your sales team and their goals.
Manual processes speedbump the sales cycle and lose paying customers. The absurd complexity of configuring products for individual needs can stump your most seasoned experts. And no sales rep can read a customer’s mind.
But AI-based CPQ software can read their data, and it can equip each rep to configure, price and quote with granular customer insight and the highest levels of professionalism, all while optimizing each deal on every channel you use to go to market.
That’s a lot of leverage. That’s a lot of power. That’s the advantage of CPQ.