CPQ, or Configure, Price, Quote Software is a sales tool for companies to provide accurate pricing across any given scenario. CPQ applications take into account optional features, customizations, quantities, and discounts, allowing sales reps to quote prices with accuracy.
What is CPQ software? The acronym CPQ refers to the specific stages in providing a customer with a quote. Configure refers to the options available. Most B2B situations offer a solution for their business partner. Tailoring the product to specific business needs is essential to providing the right solutions. Price addresses the cost and any applicable discounts. Quote indicates presenting the client with the proposed price.
For decades, companies have used word processing or spreadsheet programs to provide clients and prospective clients with quotes. Time consuming and cumbersome, the traditional method to providing a quote most likely involve the following steps (depending on the complexity of the order):
Discovery: Sales reps start by figuring out what products are best for a given customer and what configuration of those products is necessary.
Configuration: Sales reps look up the pricing by consulting pricing spreadsheets or documents to determine the base price of those products.
Customization: They must determine which discounts the client is eligible for and manually apply them, hoping not to make any errors along the way.
Review: After the initial quote is drafted, the customer and sales staff are often required to wait through a review period, especially if a particularly large discount is requested or if the configurations are customized and need design approval before ordering. Often, the process is delayed at this point.
Approval: Once approval is granted, the actual quote is finally created in a word processing or spreadsheet program so the quote can be sent to the customer.
Aside from being labor-intensive, the traditional model poses several problems. Inaccurate or incomplete information is a major setback to companies. Incomplete information makes it hard to close the deal because of the back-and-forth required to correct the orders.In fields where competition is fierce, providing timely quotes can make or break a sale.
If customers don’t have all the information about the available choices, your company could be missing out on additional add-ons and options, which are easy sources of revenue had the customer been informed of the possibilities at the time of the order. Of course, if pricing is incorrect, many companies feel forced to take the loss, hurting commissions and the bottom line. Unapproved discounts are another problem with manual price quoting systems. Given the ability to discount, salespeople tend to give larger deductions to close the sale, further eroding the bottom line. All of these problems with outdated quoting methods equate to lost time and money. If your company is still providing quotes with Word or Excel, it might be time to consider modernizing the process.
Modernizing your cash to quote process means streamlining the processes and reducing error. Human error comes into play when quotes are provided manually. And, sales staff are prone to give more generous discounts when quotes aren’t governed by pre-set rules.CPQ software can eliminate many, if not all, of the pain points of providing accurate quotes.With CPQ software, the options are programmed into the system governed by a set of “rules.” For example, product X isn’t available in red and always needs to be ordered in conjunction with option Y, or the discount for Z can’t be above 20%.
Price quoting software eliminates errors by automatically pulling in product data, calculating pricing, and accurately displaying product configurations. With the preprogrammed rules, a sales rep can quickly generate a quote, email it to the client, and can even include an e-signature to close the deal in just a few clicks. On average, companies who use a CPQ tool experience a shorter sales cycle,which is due to the software accounting for any possible pricing scenario, eliminating the need for approvals in pricing, since the approval rules are built directly into the system.
When the quoting process is simple and streamlined, the sales process is easier for the sales staff and the customer. CPQ software can also produce quote documents to match your company’s branding guidelines, making a polished and professional impression on your customer.
The importance of a smooth sales process--especially at closing--is vital. The importance of keeping the process easy for the customer is essential and CPQ can smooth out potential bumps in the process: “Peter Ostrow, principal analyst of sales effectiveness at Aberdeen Group, notes that keeping friction to a minimum at a sale’s closing stages is crucial and holds that companies that integrate CPQ into their CRM platforms perform better than those that don’t,” writes Oren Smilansky in CRM Magazine. By providing your company with modern pricing tools, the quoting process can move quickly with fewer errors, which translates into a bigger bottom line.
Could your business benefit from an updated Configure Price Quote system? Several factors need to be taken into consideration when figuring out the potential ROI on CPQ software. First, determine the number of proposals and of those, find the number of proposals that become orders. Next, calculate the percentage of quotes your company has done in the past quarter or year that have had errors. As you start to track this data, you will start to get an understanding of the average cost per quote error in lost sales and wasted time.
Research your company’s average cost per order error as well. How many times are prices quoted inaccurately, causing your company to lose money? Are discounts given too generously? Are your salespeople missing upsell opportunities that could have provided larger sales? As you begin to add up errors in price and discounts, as well as missed opportunities, you might find that CPQ applications make sense for your business.
CPQ solutions are a top sales optimization tool. In their 2016 study, CSO reports that CPQ systems “not only help increase configuration accuracy, but they are helping to increase the average deal size, decrease the length of the sales cycle, improve margins, and more.” In the same study, CSO found that 33.7% of the companies surveyed found noticeable/significant results in their sales as a result of using CPQ.
t’s important to note that individual case studies found that without selling the value of CPQ software to the sales force and giving the needed support during implementation and training, companies found results fell short of expectations. However, with necessary support and training, CPQ applications produced the desired results.
CPQ software will increase your company’s bottom line if you’re willing to provide the training and support your staff needs as they modernize their configure-price-quote processes. Most companies that have adopted a CRM program to track the customer journey through the sales process have realized the benefits of modernizing their quoting process as well. CPQ software provides the automation necessary to show customized and complex configurations, accurate prices, and efficient quotes. CPQ software saves time, eliminates errors in pricing, and reminds sales staff of possible options. CPQ streamlines the quoting process, allowing sales staff to quickly provide quotes, therefore minimizing friction at closing. Taken together, the advantages of implementing CPQ software mean a bigger bottom line for your company.
Now there’s a fast, easy way to streamline configuration, pricing, and quote generation. Contact sales to see if Salesforce Quote-to-Cash is the solution for you.
Questions? Our reps have answers. 1-800-667-6389