In this article by Thrudur Starradottir, Consultant at Vendavo, explore the power of CPQ software to revolutionize your sales process. Learn what CPQ is, how it works, and the unparalleled benefits that sophisticated CPQ software can bring to your business.
What is CPQ?
Configure Price Quote (CPQ) is software that simplifies the process of generating customer quotes and makes them more effective. Developed to streamline your sales pipeline, CPQ software is often an extension to your existing Customer Relationship Management (CRM) platform, giving the software access to key details on your customers.
CPQ software collates these details and uses them to determine the best way to configure products for each customer, what the optimal price is, and automatically generates a quote. Using the software offers various benefits over doing the task manually.
CPQ is built on 3 building blocks, Configure, Price and Quote.
Configure
The initial configure stage is when sales teams tailor their products or services to best accommodate the customer’s needs and preferences. Here, sales reps customize a product offering that’s most aligned and compatible with the business. In addition to handling complex product configurations, CPQ systems are often equipped with guided selling tools that lead reps through a series of questions to determine the optimal product fit.
Price
Once appropriately configured, a CPQ’s price capabilities are intended to systematically calculate the cost based on the selected product(s). Where it shines is accounting for customer-specific pricing agreements and budgets, applying relevant discounts and promotions, and handling complex variables like foreign exchange rates, volume pricing, and subscription models. Dynamic pricing tools enable sales teams to generate accurate prices quicker, reducing the risk of errors while minimizing administrative overhead.
Quote
The final step in the Configure, Price, Quote pivots to producing a tangible quote document, which outlines all the configured products, relevant terms and conditions, and any additional information needed. This customer-ready sales deliverable serves as a crucial touchpoint in the sales process. CPQ software streamlines the ability to create professional, accurate, and quicker sales quotes, helping your business close deals faster and more efficiently.
Salespeople only spend approximately 39% of their time doing what they’re best at – selling. The rest of their time is spent on administrative tasks like generating quotes. This is, obviously, a less-than-optimal use of their time.
The configure, price, quote process can be very time-consuming – time that could otherwise be spent on more productive tasks like closing sales. Manual processes can also be vulnerable to human error.
What is a CPQ Software Solution?
CPQ systems simplify the process of generating customer quotes and makes them more effective. CPQ systems are particularly useful for businesses that sell customized or configurable products, as they can help ensure that the products are built to the customer’s exact specifications and that the prices quoted are accurate and competitive. CPQ software can also help sales teams manage pricing and discounting, track sales performance, and improve the overall efficiency of their sales processes. Overall, CPQ systems can provide significant benefits to businesses by reducing the time and resources required to create quotes, increasing sales effectiveness, and improving customer satisfaction through faster and more accurate delivery of quotes and proposals.
What Systems Does CPQ Integrate With?
CPQ software is usually an extension to your existing Customer Relationship Management platform, giving the software access to key details on your customers.
In addition, CPQ systems have the potential to integrate with other systems, such as CRM, ERP, and e-commerce platforms. This integration enables businesses to automate their entire sales cycle, from lead generation to order fulfillment. CPQ solutions can also be integrated with pricing optimization software, which allows businesses to create dynamic pricing models that are optimized for maximum profitability.
By integrating CPQ software and strategies with other systems, businesses can improve their operational efficiency, reduce errors, and improve their overall customer experience. Additionally, integration can provide a single source of truth for all sales data, allowing businesses to make more informed decisions based on real-time insights.
Vendavo Intelligent CPQ software helps you increase sales productivity and win rates while delivering an improved customer experience. Companies that use the CPQ system have seen reduced quote iterations, customer churn decreases, and increased win rates.
Win more deals and more profitability with Vendavo Intelligent CPQ.
The CPQ Process
The CPQ process is a systematic framework designed to help organizations efficiently sell complex and highly customizable products or services at scale. In a related guide on how to build a CPQ process, we break down the seven steps behind this framework, as summarized below.
- Evaluate your sales process
Document and evaluate your existing sales process to identify bottlenecks and areas for improvement. Examine and scrutinize each steps’ relevance. This assessment examines whether your sales process is operating efficiently. - Assess CPQ capabilities
Research CPQ solutions that align with your business needs, focusing on essential tools, preferred functionalities, and user-friendliness. Early on, it helps to consult experts for their insights on the proper CPQ deployment. - Configure your products
Use CPQ tools to select appropriate features and options for products and services. This ensures offers meet customer requirements while minimizing errors. It also accelerates the turnaround time to deliver a quote faster. - Align CPQ strategies with your sales processes
Customize CPQ strategies to fit your organization’s specific needs, focusing on core selling functions. This alignment ensures the CPQ system works in cohesion with your existing sales processes. - Determine a rule-based pricing strategy
Implement automatic pricing calculations based on factors like costs, promotions, and competitor pricing. This equips sales teams with data to help optimize pricing strategies and improve margins. - Automate your quoting and approval workflow
Generate professional quotes and automate quote creation and approval process. This streamlines workflow, minimizes delays, and improves customer experience. - Embrace contract and change management
Manage contract administration within the CPQ system, including subscriptions and renewals. Develop a change management strategy to ensure smooth implementation and effective use of the new CPQ process.
Recognize that implementing a new CPQ process represents a significant organizational change and that’s often met with resistance. But when carried out appropriately and strategically, a well-oiled CPQ process can accelerate sales and boost overall customer experiences.
CPQ Best Practices
Implementing CPQ software is an in-depth process that demands meticulous planning and execution. To ensure a successful deployment that maximizes the platform’s benefits, businesses should adhere to a set of CPQ best practices while being mindful of common pitfalls to avoid.
Agnostic and Flexible Solutions
A fundamental best practice in CPQ implementation is choosing an agnostic and flexible solution. This means selecting a CPQ system that can easily adapt to new selling capabilities and channels as they emerge. An agnostic CPQ solution ensures that your sales processes remain efficient and effective, even as the market evolves and new technologies are introduced. Flexibility allows for customization and scalability, ensuring that the solution can grow and change with your business needs.
Real-Time Pricing Automation
Real-time pricing automation is crucial for providing accurate and up-to-date pricing and product information during the quoting process. A CPQ system with robust pricing models should be capable of handling multi-currency transactions, cross-selling opportunities, and should include a flexible rules engine to accommodate complex pricing scenarios. This ensures that sales representatives can generate quotes quickly and accurately, reducing the risk of errors and improving customer satisfaction.
AI-Powered Sales Recommendations
Leveraging AI technology in CPQ systems can significantly enhance the sales process by increasing deal sizes, reducing the workload on sales teams, and providing better customer experiences. AI-powered sales recommendations can help sales representatives identify upselling and cross-selling opportunities, suggest optimal product configurations, and predict customer preferences. This not only streamlines the sales process but also helps deliver personalized customer experiences.
Multi-Organizational Quoting
For businesses with multiple divisions, choosing CPQ software that supports multi-organizational quoting is important. This feature allows sales representatives from different divisions to source products, configure solutions, and provide buyers with a single, consolidated proposal. It simplifies the quoting process for complex organizations and ensures a cohesive customer experience across different business units.
Extensibility Through Simple API
Extensibility is another critical factor to consider when selecting a CPQ solution. A CPQ system that offers simple API integration with existing CRM, ERP, and other systems can significantly enhance efficiency and data accuracy. This seamless integration ensures that all relevant systems are updated in real-time, reducing manual data entry and the potential for errors.
Easy-to-Use, Intuitive Administration
The usability of a CPQ system is paramount for its successful adoption and utilization. Choosing software that’s intuitive and requires minimal training can greatly reduce the learning curve for sales teams and administrators. An easy-to-use CPQ system ensures that sales representatives can quickly become proficient in generating accurate and professional quotes, thereby improving productivity.
Programmatic Document Generation
Finally, opting for a CPQ solution that offers programmatic document generation capabilities is essential for creating professional, complete, and accurate proposals efficiently. This feature allows sales teams to generate customized proposals quickly, ensuring that all necessary information is included and presented in a professional format.
Avoiding Common Pitfalls
Conversely, businesses should be wary of the pitfalls that can undermine the effectiveness of a CPQ implementation. These include selecting a non-agnostic and inflexible solution, relying on manual or non-automated pricing processes, and not utilizing AI technology or using it improperly. Avoiding these pitfalls is crucial for ensuring that the CPQ system delivers its intended benefits and supports the organization’s sales objectives.
How CPQ Works – An Example
To paint the picture of how Configure, Price, Quote (CPQ) actually works, I will use an example. The company using this CPQ solution is a manufacturer of heavy trucks that operates globally. They have multiple sales teams, of different sizes, working regionally.
When CPQ software is available to their sales teams, the sales reps can open the software on any device. When they start engaging with a customer, they can find their customer and start to create a quote directly. Depending on the choice of integration, the customer data can be pulled directly from the CRM, or it can exist in CPQ. Any key attributes of the customer, channel, organization, segment, size, etc. that could have an impact on either the products or prices they might get, are made available in the data.
The CPQ will then guide the sales rep through the product selection. Here things can be controlled in large part through the data. If products should be made available only for a specific type of customer, the data can be set up accordingly. The guide can accurately take the sales rep through finding the products and provide any further information necessary to the user.
Once all products have been added as a configuration, the sales rep will get the appropriate prices for the selected products. The price structure can be complicated, and can depend on combinations made within the quote, customer attributes of the customer, and so on. Having the prices available in the system makes it clear what the suggested target price is, and can even include the approved minimum and maximum prices for the products. The sales rep can here negotiate the details of the quote with the customer until a common agreement has been reached. The quote can then be generated with any other terms and conditions that may apply, and sent over to the customer.
Benefits of CPQ Software
As your company expands , the task of catering to your customer’s unique needs becomes increasingly complex. Sales reps face the challenge of enavigating a wealth of information to generate the most effective quotes. To address this issue, businesses can turn to Configure, Price, Quote (CPQ) software like Vendavo Intelligent CPQ.
CPQ software works with vast databases, collating the relevant data in a fraction of the time and removing the potential for human error. The software will also have access to up-to-date pricing and other variables, helping to generate optimal quotes for individual clients at any particular time.
Other benefits of using CPQ software include:
- Execute your pricing strategy: CPQ tools provide better pricing guidance for sales reps, ensuring they adhere to established pricing strategies. It sets clear structures for discounts and target prices, enabling effective execution of pricing policies.
- Consistent pricing and discount control: With multiple sales reps interacting with numerous customers, maintaining consistent pricing can be challenging. CPQ software ensures uniformity in pricing and discounts across all quotes, reducing discrepancies.
- Error elimination: Manual processes are prone to human error, which can result in lost sales opportunities or margins. CPQ software helps reduce or eliminate these errors, enhancing accuracy in the quoting process.
- Reduce time-to-quote: Utilizing a CPQ in the sales process improves efficiency by providing teams a single source of data. This streamlining allows reps to focus more on selling rather than administrative tasks, ultimately leading to quicker quote generation.
- Multi-currency support: CPQ software ensures accurate currency conversions and pricing for international customers. It simplifies transactions involving multiple currencies by providing access to current exchange rates.
- Contract pricing: Pricing out contracts can be complex to assemble for various factors. CPQ tools quickly compile relevant details to generate optimal contract prices, benefiting all parties involved.
- Advanced discounts: Sales tools offer instant access to data to calculate discounts and promotions for both sellers and buyers. This capability can boost revenue and improve convrates for prospects.
- Single source of truth: CPQ platforms consolidate data from various sources into one system, making it easier to manage quotes. This centralization reduces the risk of human error and mitigate the hidden cost of pricing errors.
- Better user interface: Modern CPQ systems offer intuitive interfaces that align with user expectations shaped by B2C setter user shopping experiences. An easy-to-navigate quoting process enhances user efficiency and satisfaction.
- Increase operational efficiency: By automating data collation, sales reps can spend more time building relationships with customers rather than gathering information. CPQs also accelerate onboarding of new reps by reducing the need for extensive product knowledge.
- Save time and money: CPQ platforms work to rapidly compile and distill essential information, minimizing the time customers wait for quotes. This efficiency not only saves time but also reduces operational costs associated with prolonged quote generation.
By leveraging CPQ software, businesses can streamline their sales processes, reduce errors, and improve customer satisfaction.
Grab a coffee and watch the Vendavo Intelligent CPQ solution demo
Signs Your Organization Needs CPQ
Below are some of the most telling signs that your organization needs to adopt intelligent CPQ software.
- Need Help Managing Thousands of Products
Managing thousands of products is likely to be very time-consuming. So mistakes become more likely the more products you have. CPQ software will overcome these issues for you. - Sales Team Lacks Updated Information
Does your sales team lack the up-to-date information they need to work effectively with their customers and generate optimal quotes? CPQ software will provide them with the information they need, whenever they need it. - Global Scale
Are you operating on a global scale with many customers in different locations? CPQ software will help you manage such a large customer base, and help generate accurate quotes in your customers’ currency. - Quick and Accurate Pricing
Are you finding it difficult to provide quick and accurate pricing for your customers? CPQ software will generate accurately priced quotes for you in a fraction of the time it would otherwise take.
There are numerous reasons why your organization should adopt CPQ software. It helps you generate optimally priced quotes that increase your revenue. It also becomes easier for you to manage a large client base, with human error eliminated. And quotes can be sent to customers much more swiftly, improving their experience. Perhaps most beneficial of all? That your skilled salespeople can put their skills to work where they matter most.
CPQ for Industries
CPQ solutions offer a versatile, high-return investment for wide range of industries. At Vendavo, we craft CPQ strategies to meet the unique needs and challenges of many different industries, including:
- Chemicals: This industry deals with complex product configurations and stringent regulatory requirements. CPQ helps configure products, ensure compliance, and provide accurate pricing based on factors like raw material costs and market conditions.
- Industrial manufacturing: Manufacturers of industrial components and machinery often face detailed product requirements and customizations. CPQ streamlines the configuration process, ensure compatibility of components, and provide precise pricing, helping manufacturers meet customer specifications.
- Automotive: The automotive industry involves a sophisticated array of customizable options and configurations. CPQ solutions useful for both manufacturers and dealerships, assisting in managing product options, generating prices, and assembling timely quotes.
- Aftermarket: Aftermarket distributors handle a wide variety of products and need to manage complex pricing structures and discounts. CPQ software helps standardize pricing, manage discounts, and generate consistent quotes, improving efficiency and customer service.
- Energy and utilities: The energy sector, including utilities and renewable energy providers, deals with large-scale projects and pricing models. CPQ handles the configuration of services and equipment, ensure precise pricing, and provide quick, detailed quotes.
- Food and beverage: The food and beverage industry requires precise management of product configurations, batch sizes, and pricing. CPQ software helps optimize these processes, ensuring error-free quotes and compliance with industry regulations.
- Aerospace and defense: Aerospace and defense companies deal with highly sophisticated and regulated products. CPQ solutions assist in managing intricate configurations, ensuring compliance, and providing accurate pricing and quotes for government and commercial contracts.
- Healthcare and medical devices: The medical device industry requires strict adherence to regulatory standards and precise product configurations. CPQ software helps manage these complexities by providing precise configurations, pricing, and quotes, ensuring compliance and customer satisfaction.
Wih the help of Vendavo’s expertise in providing tailored CPQ solutions, businesses in these sectors can earn an edge in achieving their strategic goals.
CRM with CPQ
Combining CRM systems with CPQ software creates a powerful connection that can significantly enhance a company’s sales processes and customer interactions. While CRM excels at managing customer data, tracking interactions, and nurturing leads, CPQ solutions specialize in streamlining the complex processes of product configuration, pricing, and quote generation. When combined, these technologies create a comprehensive, end-to-end sales ecosystem.
The CRM-CPQ integration allows for a seamless flow of information between customer management and quote generation processes. This integration eliminates the need for sales representatives to switch between different systems or manually transfer data, thereby reducing the potential for errors and saving valuable time.
Integrating CRM with CPQ provides enhanced visibility across the entire sales cycle. Sales managers can track the progress of deals from initial contact through to quote generation and final sale, all within a single, unified system.
From a data analysis perspective, the CRM-CPQ integration provides a goldmine of insights. Companies can analyze trends in product configurations, pricing strategies, and quote-to-order conversion rates, all contextualized with customer data from the CRM.
Top CPQ Capabilities
A modern CPQ strategy should improve every aspect of the product configuration management process, leading to shorter sales quoting cycles and better ROI for every quote. Not just today, but long into the future.
The following five capabilities will help ensure the CPQ you put in place today can continue to meet your needs as your business continues to grow and evolve:
1. Easy-to-use intuitive administration – Your CPQ software should be simple to use and require minimal training to master.
2. Extensibility through simple API – Your CPQ software should be flexible and easily integrate with your CRM, ERP, and other systems.
3. Programmatic document generation – A modern CPQ strategy should have document generation capabilities that make it quick and easy for your sales team to create professional, complete, and accurate proposals – so they can get back to landing more deals, at better margins.
4. Real-time pricing automation – Your CPQ should include a pricing tool that provides accurate, real-time pricing and product information during the quoting process, including multi-currency transactions and cross-sell. The rules engine should be flexible and adaptable. And it should be able to handle things like product groupings, discount constraints, and role-based pricing.
5. Multi-organizational quoting – Your CPQ software should share product catalogs. With multi-organizational quoting, a sales rep from one division can source products from multiple divisions, configure everything quickly and accurately, and provide the buyer with a single, consolidated proposal.
6. Agnostic and flexible – B2B sellers will need to think through the technology requirements that will power emerging new selling capabilities and channels. You’ll need to recognize the difference between flexible, agnostic CPQ solutions that will serve them well in all channels, and other systems that will put limits on your abilities.
You can learn more about the top capabilities to look for in a CPQ here.
Choosing a CPQ solution
When it comes to choosing a CPQ solution for your distribution or manufacturing business, it’s critical to approach the decision-making process with care and thoroughness. Selecting the right CPQ can significantly impact your company’s efficiency, profitability, and customer experience.
To ensure you make an informed choice, we recommend that you consult trusted industry analysts like Gartner, Forrester, IDC, and others. These analysts provide comprehensive evaluations of CPQ solutions, offering valuable insights into their capabilities, market presence, and customer feedback. Their reports can serve as a guide to understanding the strengths and weaknesses of various CPQ vendors.
Discover why Gartner named Vendavo a “Visionary” in the 2022 Gartner Magic Quadrant for CPQ.
While evaluating different CPQ vendors, it’s essential to assess your unique business requirements like your industry, product complexity, sales process, and integration needs. Look for a CPQ that can seamlessly adapt to your specific business workflows and enhance your sales effectiveness.
One CPQ that consistently stands out in the market is Vendavo Intelligent CPQ. It has gained recognition for its advanced features, intuitive user interface, and proven track record of driving sales efficiency and profitability for manufacturers and distributors. By leveraging intelligent pricing guidance, product configuration capabilities, and streamlined quote generation, Vendavo Intelligent CPQ enables businesses to optimize their pricing strategies and deliver exceptional customer experiences.
How Vendavo Customers Drive Success with Intelligent CPQ
The value you see after implementing Configure, Price, Quote software will differ depending on your industry and your organization’s unique objectives for CPQ. From reduced Time-To-Quote, to generally more accurate pricing and quoting, and better control and visibility of the price getting, CPQ has plenty of benefits to offer you. Hundreds of manufacturers and distributors have seen success with Vendavo Intelligent CPQ. Here are just three of their stories:
How Dynapac Drove Faster Proposals and Higher Margins
Dynapac, a leading supplier of soil compaction and paving equipment, wanted to centrally manage pricing and reduce unnecessary discounts for its aftermarket parts and capital equipment. Dynapac implemented Vendavo’s Pricepoint and Intelligent CPQ solutions. Their road construction equipment is expensive and complicated to spec and quote, but Intelligent CPQ puts all options and pricing in one central location that their sales and account management teams can access. As a result, Dynapac estimates that they’ve cut quote time in half on average.
Complex Quotes Under 2 Hours for Silverpoint Homes
Silverpoint Homes, one of the country’s largest modular home retailers uses Vendavo Intelligent CPQ to quote faster, easier, and more profitably. With Vendavo Intelligent CPQ, complex quotes that once took days to create are now ready in two hours. Transparency has improved, margin variations were reduced and customers enjoy a better overall experience.
How Dell Optimized Pricing
Dell is a $60 billion company with a massive product portfolio. The majority of the business is commercial, direct B2B business. Dell wanted to shorten their time to quote, get more effective with their pricing, and align their sales compensation with the right price setting. With Vendavo Intelligent CPQ, Dell is able to send 90% of their quotes out in under four hours.
Are you looking for similar results as Dynapac, Silverpoint Homes, and Dell? By assessing the financial impact of implementing a CPQ solution, you can make informed decisions about the potential benefits.
To help you calculate the ROI specifically for your organization, Vendavo offers a user-friendly ROI calculator. This tool takes into account various factors such as increased sales productivity, reduced quoting errors, and improved pricing accuracy.
By inputting your specific metrics, the calculator provides an estimate of the ROI you can expect from implementing Vendavo’s CPQ solution. Use Vendavo’s ROI calculator to gain valuable insights into the potential financial gains of your CPQ investment.
Summary and Key Takeaways
You could see unparalleled value by implementing a CPQ system in your organization. I highly encourage you to start looking at and mapping out the sales process. Chances are, there is great room for improvement where a CPQ solution might be the right fit.
If you want to get the full value of a good pricing strategy, where the appropriate price is set, you must also have the process and systems in place to get the right price from your customers. This is achieved by helping and guiding your sales teams and optimizing the quoting process.
- CPQ (Configure, Price, Quote) software automates and streamlines sales processes, helping sales teams create accurate quotes and proposals for complex products and services.
- Benefits of CPQ software include reduced time-to-quote, improved sales team efficiency, better onboarding of new sales reps, centralized data management, execution of pricing strategies, enhanced user interface, and more
- Top CPQ capabilities to consider include easy-to-use administration, seamless integration with CRM and other systems, programmatic document generation, real-time pricing automation, and multi-organizational quoting. You can read more about top capabilities here.
- When choosing a CPQ solution, consult trusted industry analysts like Gartner and Forrester for evaluations and insights into different vendors.
- Vendavo Intelligent CPQ is recognized for its advanced features, intuitive user interface, and proven track record in driving sales efficiency and profitability for manufacturers and distributors.
Quantify the value of CPQ for your business in 6 simple questions with our CPQ ROI calculator