If you have your finger on the pulse of sales technology trends, you’ve likely detected a strong, steady heartbeat around the topic of sales efficiency and effectiveness.
In particular, organizations are lately taking a closer look at systems that can defibrillate sales processes, allowing them to decrease sales cycle times, increase productivity, reduce order errors, and scale their businesses internally, nationally, or globally. Furthermore, companies are looking for solutions that can integrate with what they already have running, and streamline internal systems rather than over-complicate them.
In looking at those trends, the term “configure-price-quote” (CPQ) has emerged as one of the ways companies are finding tremendous results in the above initiatives. Consider the pages that follow to be a crash course on what configure-price-quote (CPQ) is, why it’s becoming increasingly critical in the competitive landscape, and how you can determine if it’s something your organization should be looking into implementing.
From “Sales Organizations Need a Swift Technology Kick” by Mark Smith
The 5 Ws of Configure-Price-Quote (CPQ)
CPQ (configure, price, quote) is a term commonly used for the process leading up to generating a sales proposal for companies offering complex product and service combinations.
CPQ software helps companies configure complicated product offerings, price them in such a way that the correct discounting and bundling rules apply to products or sets of products, and create fast, accurate quotes based on that information. CPQ software ideally can bridge the gap between front and back end systems, and take companies from lead to order, or all the way from lead to cash.
What does each stage in the CPQ process entail?
The term “CPQ” sometimes gets used interchangeably with other terms. Here are a few examples of common CPQ misnomers and how they’re different:
Imagine a large, high tech company that offers 7,000+ product lines that can be configured into millions of possible combinations for its customers. The company updates its products, pricing, and packaging 200-300 times a week. The ever-churning sea of SKUs makes it difficult for the company to keep track of and sunset products in their product lines, and sales reps are forced to cut through the complexity by relying primarily on familiar combinations they’ve sold before, but aren’t necessarily the best choice.
The company above is a prime example of the type of organization that would benefit from configure-price-quote (CPQ) technology. For example:
Large companies or companies experiencing increasing levels of internal, channel, or global growth see implementing a configure-price-quote (CPQ) solution as a key way to scale their business and maintain growth without sacrificing customer satisfaction and retention.
Internal growth
As companies grow, they tend to add new sales, finance, and legal personnel, all who could potentially be performing configure-price-quote (CPQ) functions in disparate systems. Ultimately lack of connection between these systems leads to sales cycle lag time, quote and order errors, lack of visibility into various aspects of a deal, and issuing unapproved or out-of-date pricing or discounts.
Additionally, as organizations add sales reps or account executives to their sales teams, the new employees need to easily access product and pricing information in order to construct deals—a process that can be incredibly time—consuming and distract sales reps from their true priorities: spending time winning new accounts and maintaining relationships with existing customers.
Channel growth
Each degree of separation a company moves beyond its four walls means increased opportunity for error and confusion. Companies that need to expand beyond typical direct sales channels in order to continue positive growth momentum in their physical and online presence will find CPQ to be an invaluable tool, particularly as they venture into partner, reseller, and e-commerce territory.
Global expansion
Growing on a global level and penetrating global markets can become a cumbersome process without comprehensive sales solutions that can scale and be effectively phased in. We’ve already seen how lack of connection between configuration, pricing, and quoting internally can create problems and decelerate deals. Take into account other geographies, currencies, channels, and sales habits that could be entirely different, and the ability to make critical sales decisions and close deals quickly diminishes significantly.
There is a veritable laundry list of benefits for companies that utilize CPQ to its fullest potential.
Using spreadsheets to maintain a company’s pricing and product catalog works well up to a certain point, but as a company and its product lines expand, the company will encounter unique sales challenges (not to mention the general problem of sheer scalability) that can’t be properly managed using spreadsheets.
Companies ready for CPQ typically find that continuing to use spreadsheets would blind them to upsell and cross-sell opportunities, institutionalize errors, unnecessarily extend the time it takes to get a deal done, prevent share of information available in the cloud, and ultimately hinder company growth as they reach the threshold of spreadsheet usability. According to one expert, spreadsheets are “ the most over-utilized, non-enterprise tool out there.”
For more on this topic, check out our guide “When Excel Stops Excelling: Why the Sales Spreadsheet Should be Put out of Its Misery.”
If there are manual configure-price-quote (CPQ) processes bridging your CRM and ERP systems, the likelihood of error increases. In fact, errors in data and formulas within manual or homegrown systems can quickly move from irritating to devastating, costing some companies millions of dollars. Additionally, the amount of time dedicated to re-working quotes or completely re-doing incorrect orders that started with sales errors is costly to any organization, forcing those involved in the sales process to shift their focus from working on new business to performing damage control. Move beyond internal frustrations, and these errors tend to create an even bigger problem: dissatisfied customers who are reluctant to continue giving you their business.
Lack of visibility into correct pricing becomes a problem that grows exponentially with your number of sales reps, channels, and geographies. Without accurate, up-to-date numbers (and an apparatus to quickly alter and update pricing rules or constraints), sales reps and channel partners can end up offering expired discounts or promotions, or apply discounts to the wrong products.
So glad you asked!
Selectica Guided Selling takes patented sales configuration technology that has been processing billions of dollars in transactions for Fortune 500 companies for over a decade, adds a web front-end and a constraint-modeling environment, and puts the entire offering in the cloud, enabling a much broader set of companies to enjoy similar benefits. For more information on how Selectica can help you overcome sales complexity, visit www.selectica.com.
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