The appeal of configure-price-quote (CPQ) solutions spans across businesses of all sizes that experience complexity in configuring product and service options, keeping pricing up-to-date, and creating accurate quotes for customers.
This software has not only made businesses sit up to take a closer look, but has also caught the attention of analysts like Gartner, who agree that CPQ is on the rise as a critical means of increasing business efficiency and effectiveness. In fact, a recent Gartner report made the strategic planning assumption that by 2014 comprehensive, integrated automation of CPQ processes will help companies grow sales by 10% more than their current growth rate.
Naturally, this type of growth percentage is appealing to all companies. Yet not all CPQ solutions are created equal. Some are meant to cater to a more specific portion of the process (such as quoting) while others are meant to handle unlimited configure-price-quote complexity, particularly for global enterprises with thousands of SKUs, multiple channels, frequent pricing updates, and quoting lag-time due to lack of visibility. Because of the difference in scope, certain types of CPQ software apply to enterprises, and certain types apply to SMBs.
Let’s take a look at some of the ways CPQ differs between enterprise businesses and SMBs, and examine the types of solutions that are right for each.
We hear “enterprise” so much that it has become murky in meaning. Enterprise businesses with a need for CPQ software typically have these characteristics:
Enterprise companies—more often than not—are typically defined by size, namely 1000 employees or more.
As mentioned before, enterprise companies that turn to CPQ solutions typically experience sales complexity in a number of areas including:
Companies operating at an enterprise level have a distinct need to remain agile, meaning to easily and quickly make changes to products, product lines, pricing, and business rules that guide the sales process. Tools typically used to guide configure-price-quote processes, such as spreadsheets, don’t provide the level of visibility necessary to keep business moving, not to mention to maintain up-to-the-minute, accurate information. To remain agile, these organizations need a congfigure-price-quote (CPQ) tool that not only has comprehensive functionality, but also ease-of-maintenance to minimize time constraints on IT.
Enterprise companies are less concerned with issues such as scalability, and instead focus on improving sales efficiency and effectiveness. In focusing on that, inevitably these companies take a hard look at revenue—and the areas in the sales process where deals stall out or bottleneck.
Before taking a look at the features that are most compelling to enterprise businesses interested in CPQ software, let’s look first at some goals they might hope to accomplish by implementing this type of system.
It’s been said before that you “make a customer, not a sale.” Truly, businesses now more than ever are invested in maintaining positive customer-company relationships, and putting the foundation for those relationships soundly in place from the first interaction, on. CPQ software allows this to happen from the inside out (as sales teams configure flawless deals that perfectly suit each individual customer) and often from the outside in (as customers can in some cases configure their own combinations on the front end, all the while with company-appropriated guardrails in place on the back-end to guide the process).
Furthermore, the more time sales teams can spend out of price sheets and product catalogs and in front of the customer, the more deals they can close and more revenue they can produce. Plain and simple, CPQ software allows salespeople to spend more time with customers, improves order accuracy, increases enterprise responsiveness, and allows salespeople to respond to customer requests quickly.
In any business, once the early customers are successful, the goal is to keep the momentum going. To ensure that sales keep flowing steadily, companies are finding that the more information they can put in their salespeople’s and channel partners’ hands, the better. Say a salesperson wants to offer a 40% discount on an item, but is unsure if this would be an approved amount. As that salesperson checks with the head of sales to see if it’s possible and then alters the deal according to the resulting input, sales momentum halts. Simultaneously, if a salesperson wants to circumvent this lengthy process to pull in a deal, he might offer the discount, but at the risk of diminishing company margins.
By putting CPQ software in place, you establish guardrails that automatically govern the process, freeing up executive time and empowering sales reps to continue moving business along quickly and in the best interest of customer and company.
Think of CPQ software as a big, strategic, revenue-boosting bridge between CRM and ERP systems. CRM systems are designed to make businesses more efficient in pipeline management, reporting, and deal tracking. ERP systems, conversely, are intended to handle details pertaining to the order itself. There isn’t adequate connective tissue between these systems, however, to navigate an entire deal from opportunity to order to cash, and because of that, deals can stall, revenue slips through the cracks, and customers potentially lose patience with a company. Companies that invest in CPQ software end up doing more than streamlining their sales processes; they typically end up solving problems with:
Vendors who offer enterprise-level CPQ software understand the complexity that large businesses encounter, and have tailored their solutions to address those needs. A few standout requirements top the list for companies looking for these companies seeking configure-price-quote solutions:
If an organization is experiencing sales complexity in all the areas we’ve outlined already, you can bet they will require a system that can be everything they want it to be (and more). This boils down to a system that is able to configure products and the overall sale in a highly detailed manner, and be able to adjust to an organization’s business needs as they morph and change.
CPQ systems that are truly able to service an enterprise organization should offer discounting at a line-item or quote level, configuration at a line-item level, role-based visibility into pricing and discounting, and advanced capabilities to enforce rules guided bundling, pricing, discounting, promotions, and margins.
One of the biggest fears companies face in implementing CPQ solutions is the maintenance of their business rules. CPQ solutions that don’t include an easy way to set, change, delete, and monitor rules or constraints create a huge time investment for IT, and few organizations have the luxury to set their IT on such a time-consuming (and ongoing!) directive. For this reason, best-in-class CPQ solutions include rule-modeling interfaces that are easy enough for a majority of business users to administer, and also offer the flexibility to include fields or items in the system that would require a more advanced coding knowledge if required.
Companies who use configure-price-quote (CPQ) software—particularly systems that use constraints instead of rules—find that their business can run extremely efficiently with fewer hours spent wrapped up in the details. In fact, some Fortune 500 companies can (and do) manage their entire complex sales process with just 2 dozen rule patterns in place by using this type of software. And reclaimed IT time is just one of the benefits; other very tangible benefits include dramatically lower total cost of ownership, and an enormous leg up in business agility.
Because CPQ serves as the bridge between CRM and ERP systems, it needs to integrate seamlessly with both, as well as other line-of-business systems including CLM, eSignature, and content management systems. When CPQ is included in the family of systems used to run your businesses, you should find that it’s nearly impossible for human error to interfere with the sales process, there is no need for re-keying information in each system, and that readily-visible workflows can be set and seen at any time.
Because of the overwhelmingly mobile nature of business today, enterprise companies now express a strong preference for SaaS solutions that can be accessed by a variety of mobile devices via single sign-on. The reason is simple: the fewer hindrances to getting a deal done, the faster companies can reach revenue.
If for businesses it’s all about integration, for users it’s all about adoption. It’s critical to hedge your bets on users accepting and making the most of new software by introducing a solution that looks and feels familiar, performs all necessary tasks, and starts manifesting its value quickly.
SMBs can see the problems that enterprise businesses aim to solve with CPQ software, and oftentimes their problems seem to correlate almost exactly. No matter the size of the business, sales teams can relate to the discomfort that accompanies a quote with errors, a lack of connection between CRM, ERP, and inventory, and ultimately customers that could go from satisfied to dissatisfied when any of those pieces fail.
SMBs usually find that their CPQ goals can be effectively met by one or more of these methods:
Never underestimate the power of the spreadsheet! Many companies have built spreadsheets that are practically “unbreakable” to manage their sales processes very successfully. In many of those companies, deploying “industrial-strength” CPQ would be unnecessary and ultimately add more complexity to the CPQ process (think about trying to dig a small hole with a trencher when all you really need is a shovel).
Even in automated CPQ systems, there are features that allow salespeople, partners, or customers to manually browse through the product catalog and options (rather than having a “recommendation engine” or product configurator put pieces together for them). When businesses need to consider moving to automated CPQ is when they find themselves in need of a system that can perform needs analysis, configure options from thousands of products, and keep track of current bundles and pricing that may vary based on such factors as channel or geography.
Sometimes companies will create their own system to manage CPQ processes. The benefit to doing this is that you likely get a system that addresses your company-specific problems. Homegrown systems can be viewed as a step above spreadsheets and a step below industry-standard automated CPQ, although for a company experiencing significant sales complexity, it would be difficult for a homegrown system to catch up to configure-price-quote tools on the market today, which are designed to cater to complexity beyond what is feasible to address in-house. Leverage the technology that has been funded and matured by large, global companies in the world.
Looking for more information on CPQ software? Here are three ways you can find it:
Get your search for the perfect CPQ solution up and running with plenty of resources, like the ones below, to familiarize yourself and your team with the software.
CPQ 101: The basics of configure-price-quote software
This guide gives you the “5-W’s” on CPQ software, including what it is, who needs it, and why companies are clamoring to get it. Read the guide now »
Getting to ‘Cash’ in Quote-to-Cash: The definitive quote-to-cash process flow guide
According to Aberdeen, “enterprises lose 9% of their revenue due to regulatory penalties, missed deadlines, lost sales, maverick pricing and transactional errors.” Don’t be part of the statistic! This guide will give you a heads up to pitfalls in the quote-to-cash process, and share how CPQ software helps circumvent them. Read the guide now »
When Excel Stops Excelling: Why the Sales Spreadsheet Should be Put out of Its Misery
Companies have come to rely on spreadsheets to manage sales processes, but even spreadsheets have their breaking point! If you’ve found that your sales processes have become too complex for our friend the spreadsheet to handle, consider this guide your ticket to a new, more effective system. Read the guide now »
Analysts like Gartner and Ventana Research frequently weigh in on topics of sales effectiveness and efficiency, including covering the benefits of implementing CPQ, guided selling, and contract management. For more insight into sales force automation tools and what they can do for your organization, have a look at their recent report “How to Analyze Your Sales Processes on Efficiency Versus Effectiveness.”
We’re happy to chat with you about how Selectica Guided Selling is already at work for Fortune 1000 companies, and about CPQ in general. For more information on how Selectica can help you overcome sales complexity, visit www.selectica.com.
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