In the current customization-centric market, accommodating customers’ specific needs and providing at least a base level of personalization has become paramount. With the onset of the Covid-19 pandemic, businesses worldwide saw a shift in the way customers were buying, as well as in customer expectations. Transactions are happening faster than ever before, and convenience is priority. It’s important to intuit all that customers may need or want while also moving the transaction to close quickly in order to retain customers. That’s why configure, price, quote, or CPQ, comes in.
What makes this level of intuition and customization possible for manufacturers is CPQ solutions, which streamlines the way companies generate accurate quotes for complex goods and/or services. In this article, we’ll cover the 9 most impactful benefits of CPQ.
A Brief Overview of CPQ
With its inception in the 1980s, a configuration system, or “configurator”, was employed to manage customer choice in specifications, ensuring that there would be no conflicts with enterprise resource planning (ERP). Forty years later, CPQ not only manages conflicts, but it has altered the way manufacturers sell and evolved into an entirely new and more dominant species. No longer relegated to back-office duties, CPQs now provide businesses with the means of simplifying complex configurations and generating accurate quotes, while simultaneously providing customers with a personalized and streamlined buying experience.
In fact, CPQ systems are used by retail consumers every day. For example, the Starbucks app lets you customize, or configure, a drink, determine the price using an algorithm that calculates your add-ons, and gives you a full quote that includes when and where your purchase can be picked up. When the employees no longer have to wait on customers to decide what to order, it gives the employees more time to focus on making drinks, which turns into more orders due to faster service.
9 Benefits of CPQ
Customers get exactly what they want, and the company builds its business. The benefits of CPQ are many no matter the industry or size of enterprise.
1. Sell Faster
Faster selling cycles bring higher generation of revenue. They also allow sales teams more time to focus on building customer rapport and advance new ideas. CPQ enables this through a reduction in wasted time.
Sales deals are composed of the time your sales team is working with the customer plus administrative tasks. The relationship between sales professionals and clients shouldn’t be replaced by CPQ solutions. However, administrative task time between sales calls and meetings can be significantly reduced. Studies show that CPQ can shorten a sales cycle by a third, taking a sale from 4.68 months to 3.42 months.
By fully utilizing the benefits of CPQ, your salespeople can minimize the time wasted on internal processes and condense each element in the sales process leading to faster deals.
CPQ is able to create this reduction in a few ways:
- It provides your sales team with direct and error-proof processes to configure and price the proposed products or services.
- Salespeople are able to see the overall impact of pricing changes and are able to notify managers immediately if approval is needed. Waiting for approval not only wastes the time of your sales team, but it can also deter your client.
- Provides the option to generate client-facing quotes and contracts with the press of a button. This helps to guarantee accuracy, and it also builds trust through transparency.
It’s necessary to keep in mind that customers have their own processes for buying. They may require various steps or approvals before they can commit to a purchase. Losing momentum causes a deal to slow down by taking too long to respond to a customer’s question or a request for a quote. Your delayed response could mean that their attention or intentions have changed. By the time you are able to connect again, they may not be in a position to make a purchase. Or worse, they may have turned to one of your competitors.
This is why having CPQ to help keep momentum is of the utmost importance.
2. CPQ Benefits Order Accuracy
Mistakes can be costly. CPQ can provide error-free orders.
The CPQ system’s configuration engine serves to ensure that users can only generate a valid configuration, list of parts, or service description. Configuration rules limit the choices that can be made, guaranteeing that mistakes cannot be made.
Next, the rules of the pricing element of CPQ ensure that all critical information is captured, regardless of the deal type. To streamline the process, all customer information can be integrated with a CRM system. Billing terms can be specified and prices established.
Even more importantly, discounts can be tracked and approved according to business rules. Similarly, expedited delivery or customer-specific terms can be verified and approved before the finalized quote is delivered to the customer.
All of this information will be captured and compiled in accurate, well-designed documents, including contracts, proposals, quotes, invoices, and more. Information is automatically presented in a structured, easily interpreted format. If your enterprise’s systems are integrated, minimal manual entry will be necessary, again emphasizing the extraction of human error.
When orders are generated inaccurately, further mistakes are made. The impact of one failed deal can reverberate throughout the profit margins because if you lose a customer, you lose their future deals, as well as their recommendations.
If your systems are integrated, an inaccurate order may fail as soon as it enters into the ordering system. Most ordering systems have controls over what can be entered, and if the order generated doesn’t meet these qualifications, the system will shut the order down. However, if the order gets beyond the initial phase, this could cause problems with the order and maybe even the system.
Worse yet, inaccurate orders could pass through validation in the ordering system and may be completed and delivered before anyone realizes that a problem exists. The issue may be miniscule, but it’s your goal to make sure that the customer gets exactly what they expected.
These kinds of issues cost time and money. They mean missed shipment dates and, in some cases, disrupted service level agreements (SLAs). Time will be spent finding the error and then fixing it. Then, eventually, someone will have to explain the error to the customer, which reflects badly on the salesperson and the company. The compound effects on the company’s reputation and credibility can be severe.
One of the greatest CPQ benefits is the well-defined business rules because all these problems can be avoided.
Accuracy is a CPQ benefit thanks to guided selling, which automates the process of analyzing your customers’ needs with easily understandable questions. The system assesses the answers to these questions and presents suitable choices to the seller. Especially when options of products or services are extensive, guided selling makes accurate and logical connections between what a customer needs and what a company offers.
Guided selling helps simplify available choices. When regulation and control are critical, guided selling requires your salespeople to follow due process, ask relevant questions, and only present valid options to the customer. After the process is completed, there is a record of why a customer was sold a specific product or service to use in regards to future orders. Therefore, it isn’t up to a member of your sales team to remember configurations or regulations because the system can.
This customer-centric compiled data allows you to onboard new sales team members faster because they don’t have to spend time committing part numbers and SKUs to memory. The likelihood of a sales representative proposing the wrong product also diminishes. Training time can be reduced because the sales team will learn about the products while selling through the guided selling process.
An important benefit of CPQ’s guided selling is that it helps your sales team demonstrate distinctions from the competition. Megan Totka, chief editor of ChamberofCommerce.com, explains, “There is always something that makes your business stand apart from others. Focus and advocate for those differentiators – this is one of many ways to attract new business.” CPQ helps your company to stand out against the rest.
3. Maximize Profit Margins
To maximize margins, companies must control how their sales team allocates revenue, especially in relation to the organization’s cost base. Regardless of how prices are set, CPQ can increase profit margins.
CPQ will ensure pricing is up to date. Instead of spreadsheets or physical pricelists, the information will be consolidated so that all sales agents are referring to the same accurate information. Previously issued quotes can be easily updated.
Quotes will also be accurate due to the system completing calculations. If your sales representatives are given clearance to offer discounts, you can trust that the percentages are accurate because the system will be keeping track of discounts and totals, leaving no room for human error. This is especially helpful with complex deals.
Temporary promotions, currency fluctuation, and customer-specific pricing can all significantly impact your profit margin when not implemented well. CPQ offers processes for all these scenarios to keep deals accurate and on track.
In general, the guesswork and stress are taken out of the process because your sales team isn’t caught waiting for pricing approval. The CPQ solution provides managers with the information and analysis they need to make decisions quickly.
In addition, the system stores this data for later analysis. Centrally stored data on requested pricing, approvals, and gains are invaluable over time. Analysis of this data allows companies to see what price levels and discounts are benefiting the company. This information is stored safely for authorized individuals only.
4. CPQ Improves Deal Approval Process
For various reasons, deal approval can be a long, arduous process. CPQ eliminates delays and streamlines transactions.
Approvals generally mean one or more triggers require authorization. Manual approaches take time and aren’t consistent. With one system containing the quote and the set of integrated triggers, managers are notified electronically to give authorization.
Organized Access to Required Information
After being notified, managers have access to information about the specific item they’re being asked to approve and contextual information about the deal itself. The system presents a user-specific view of critical information and/or vital data elements in an email notification.
Approval Process Visibility
Waiting for approvals can slow momentum on a deal. While trying to keep customers engaged and interested, sales representatives are left wondering if managers even received the request.
This isn’t the case with CPQ because it handles parallel and serial approval chains while also providing visibility of the deal’s progress to team members. Likewise, the system updates when a deal is approved or rejected to avoid wasting time.
CPQ is beneficial beyond dealing with customers; it extends to audit and compliance, too. A robust audit trail is provided, including who made the decision, when they made it, and why it was made. Having these records prepared and organized in one system leads to passing an audit.
Audits are an unavoidable part of industry. With a cloud CPQ system, audits are made easy because every request, decision, and sale of products or services has been documented along the way. All approvals are attributed to an individual, and they are time stamped and rationalized at the time of the approval. An auditor is presented with the entire history of a pricing decision, from a request to a signed deal, and all the way to reported revenue. Passing an audit is much simpler when all this information is securely saved in the cloud and available only to preauthorized users.
5. Maximize Sales Opportunities
Presenting accurate and strategic prompts and information to a salesperson at just the right moment opens up amazing selling opportunities. According to Aberdeen Group, CPQ software has the ability to increase quote productivity by 33% and generate more quotes than the competition by 49%.
Cross Selling and Up Selling
Product marketing departments can easily specify configuration rules to pull up other product or service recommendations that complement the initially selected product. In doing so, a salesperson can offer them to the customer and add to their quote. These corresponding products can often be higher margin items that will unlock additional profit. This can be likened to the strategy Amazon employs: after you select a product to add to your cart, the website shows you things that customers who have purchased the same product also added.
Smart deal management tools offer historical pricing trend data to assist sellers in deciding what price to propose. CPQ has the ability to present this information in a highly visual and organized way so that a sales representative can more easily determine whether to push for a higher price or offer a discount.
Increasing Performance Objectives
Sales commission systems can be linked into CPQ to help a sales rep amplify individual earning opportunities. If compensation plans are well designed to motivate the right behaviors, then this can lead to enhanced sales performance, resulting in happier sales reps and management.
The true CPQ benefit is that it provides your sales team with the crucial data it needs to succeed. With knowledge of customer needs, historical buying data, and product connections, CPQ can help maximize the revenue, profit, and chance of success in any deal your company enters into.
6. Subscription Management with CPQ
Many companies have found the power in subscription-based business models. They benefit the customer by providing a discounted rate. Simultaneously, they benefit the company by ensuring the continued partnership between buyer and seller. Cable and internet companies, Amazon, and Chewy are examples of companies that have seen success in this model.
Managing subscription-based business models is a powerful capability that extends the benefit of CPQ. For businesses that use features such as subscription pricing, recurring licenses, support agreements, or modular solutions, CPQ offers opportunities for managing renewals and provides up-sell and cross-sell opportunities to enhance the customer buying experience as well as revenue and profit.
Using subscription management, companies can utilize knowledge of what services a customer has and their contract status so that sales representatives can offer them appropriate products, services, or contracts. The CPQ system calculates any pricing adjustment and issues the correct instructions to any connected supporting systems so that they can change or delete the move, add, change, and disconnect (MACD) records.
An added benefit of working with an asset-based ordering (ABO) system is the ability to manage all these transactions in a customer-facing system that can assess how to offer a customer the right deal at the right price. For best results, the CPQ solution will allow ABO to draw information from sources such as an asset database, CRM, or ERP tools.
7. CPQ Offers Reduced Administration
A sales representative’s attention is ideally on the customer, not on the administrative part of the job. Unfortunately, though, according to studies, over 70% of a sales representative’s time can be spent on administrative tasks. CPQ systems make this part of the job more manageable while also saving time.
First, CPQ integrates with Customer Relationship Management (CRM) systems, allowing for all account information, names, addresses, etc. to be passed seamlessly between systems. After a deal is in a CPQ system, the products, prices, and status of the deal automatically sync with the CRM, reducing errors.
Sales forecasting also becomes a more streamlined process. By putting the details of a deal into the CPQ tool and seeking advanced approvals for non-standard elements, the deal becomes more collaborative and productive. If the customer requirements change during the life cycle of a deal, all systems get updated and managers can engage if necessary.
Quote and Proposal Creation
Another time saver is found in quote or proposal creation. A huge benefit of CPQ is the professional, organized documentation of a deal. The time taken to create an accurate proposal can be reduced from perhaps days to mere minutes. Instead, a sales representative can spend their time creating a personalized cover letter to continue building customer rapport instead of studying product details or searching for prices.
Automated approvals are also a tremendous time saver. Instead of chasing answers, CPQ provides the benefit of having a transparent and automated approval mechanism that can emphasize when approvals are slowing the momentum of deals. When implemented correctly, the system provides the added benefit of developing a culture of support for salespeople.
Finally, CPQ streamlines the processing of orders. Instead of having to complete this manually, CPQ can send the information to an integrated ERP or order management system that can provide all the information that the downstream systems require.
Overall, the streamlining of administrative tasks and moving them away from frontline sales is beneficial to an enterprise. It offers sales representatives more time to do the job they have been hired to do.
8. Improve Professional Appearance
When competing with other companies, it helps to keep up a professional appearance. This extends to quotes and proposals. They should be well-designed and appropriately branded. These things take time away from building customer relationships, but not worrying about appearance could deter a prospective customer. Outdated or low-resolution images or logos, unorganized layouts, and misspellings can have customers questioning their dealings with a company.
Fortunately, CPQ software has a comprehensive document composition tool for creating templates that can easily generate quotes or proposals that are tailored to the customers and their needs. Conditional elements can be switched on and pricing summaries can be brought in directly. Areas of the proposal can be fully editable so sales representatives can add personal touches like cover letters, executive summaries, and more. Representatives are able to demonstrate their own style, relationship, and personal knowledge of a customer.
Professionalism, personal details, and precision are offered with proposals via CPQ software.
9. CPQ Benefits Insights Through Analytics
The amount of data that runs through a CPQ system is immeasurable: customer information and buying history, selling prices, material costs, product and part quantities, approvals, and more. The automated analysis of that information greatly benefits an organization.
The insights can provide influence on future pricing decisions, discount limits, and future products to offer. Simple reporting allows any stored attributes to be reported in a tabular manner and then presented for analysis. Presentation of the data can be done in a number of highly visual ways so that managers or sales teams can see highs and lows in the sales processes. Being competitive in pricing is necessitated by competition.
Alberto Cavallo, of the National Bureau of Economic Research, reported that the frequency of price changes at multi-channel retailers increased from 15 percent per month in 2008–10 to almost 30 percent in 2014–17.
CPQ helps companies maintain profits in an ever-fluctuating market.
Companies can also use the data inside a CPQ system to make their processes more efficient. For example, the CPQ tool can track the amount of time a deal spends with different approvers or in different stages of its lifecycle, so that, going forward, the company can remove bottlenecks.
CPQ Benefits: The Bottom Line
The bottom line is that CPQ is beneficial thanks to its simplicity. It can streamline the buying process for everyone involved. A well-designed CPQ system minimizes inefficiencies by providing every department with accurate and necessary information to work at peak performance.
For sales teams, simplification with CPQ looks like:
- The elimination of inaccurate product selections before they cause problems for customers or back-office teams
- Limiting of options to what is available for a specific customer at that moment
- Delivery of product training information when a sales rep is considering options
For finance teams, simplification with CPQ looks like:
- The visualization of the ramifications of each deal for deal approvers and pricing analysts
- Deal management tools deliver insights and comparisons within the historical context of the deal in addition to future predictions within the same setup
- A clarified approval process is available for inspections to find inaccuracies or for auditing purposes.
For IT departments, simplification with CPQ looks like:
- The withholding of sensitive data from spawning spreadsheets, instead stored securely in a central, controllable system, thereby reducing the risk of data breaches and inaccuracies
- Quick and easy implementation without additional infrastructure
CPQ systems allow you to take a thorough and accurate look at your company’s products, services, and workflows in order to get proposals into your customers’ hands before the competition can. From top to bottom, CPQ serves your company by ensuring your customers are provided with accuracy and professionalism.
To give your sales team the tools it needs to minimize errors, quicken the approval process, and sell faster, you need to make sure sales reps have CPQ. The tried-and-true Oracle CPQ boasts a 95% customer retention rate and unmatched customer satisfaction. If you’re interested in statistics like these, it may be time to consider utilizing the benefits of CPQ.