What Every Business Should Know About CPQ?

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What is CPQ

If you work in sales, you know that your work with customers doesn’t end with them deciding to purchase your product or service.

The intensifying competition has led to customers demanding specialized and highly customized products.

While buyers have every reason to celebrate, sellers are left to deal with the problem of pricing their products correctly.

Companies dealing in a single product will not have this problem, but nearly everybody deals in multiple products, and not a single one.

This is where CPQ comes in.

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What is CPQ?

CPQ refers to ‘Configure, Price, Quote’. It is a software solution sellers use to generate precise quotes for products that are complex but can be configured.

The aim of a CPQ system is to make your sales cycle more productive and effective.

The software eliminates the risk of inaccurate quotes sales teams have a greater chance of forming meaningful relationships with customers and offering them positive purchase experiences.

The software is designed to enable sales teams to generate accurate quotes almost instantly.

Product pricing is automated for products that can be customized as per client requirements.

Sales teams get real-time data that help them to move prospects through the sales pipeline and induce them to buy, rather than waste time calculating quotes while they are pitching a product.

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How Does CPQ Software Work?

Businesses usually deploy CPQ software to boost productivity and velocity in sales.

Let’s break down the CPQ process into three stages to understand how exactly the software works:

Configure

Configure

This refers to configuring your products or services.

Businesses offer tailored products, experiences, and solutions, catering to the individual requirements of every customer, and this complicates the work of sellers.

The software configures complex product or service offerings that fit the customer’s requirements.

It also identifies opportunities for cross-selling and upselling that the sales agent may have missed.

Implementing this software solution takes away the human error risk factor, and gives more time to your sales teams to build strong relationships with customers.

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Price

Price is the ‘P’ in CPQ.

When solutions are complex, pricing becomes all the more complicated.

When you offer customized products, you cannot have a pre-decided price before the product is configured.

If sales agents price products at prices that are not optimal, they stand to lose business and increase turnaround times too.

The CPQ software leverages AI to identify customer purchase patterns and market research to discern the price the customers are ready to pay.

Basically, the software ensures that you offer a price that is both reasonable and personalized to your customers without compromising on profitability.

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Quote

Quote

Once the software has configured your product and determined the price. You need to send a final and detailed quote to your customer, which is free from errors.

Prospects normally ask for quotes from multiple vendors, which means you need to respond quickly.

Configuration and accurate pricing can be pretty complicated, making speed difficult to achieve.

This is exactly where CPQ software comes to the rescue.

You have seen now what is CPQ process.

Keep in mind that not only can CPQ generate custom quotes for your customers.

It also lets sales agents review quotes before sending them to customers.

So that they can note down or alter required details at the last minute.

How are CPQs Leveraged in Today’s Business Model?

Now that you know what is CPQ software, let us see how businesses enjoy its benefits.

Today, the majority of companies have multiple product models.

They offer an extended base with multiple options and features for every single product.

This is mostly due to the change in approach to production, like DevOps.

More innovation has come in, and companies are leaner and more agile.

When companies use CPQ, the software pinpoints the products to sell depending on a number of customer requirements.

Sophisticated CPQ software is also capable of considering economic factors, competition, and market pricing to deliver personalized quotes to individual.

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Benefits of CPQ Software

Benefits of CPQ software

The overarching benefit of deploying CPQ tools in your sales department is streamlining the process and automation.

This frees your sales agents from cumbersome tasks and allows them more time to engage with customers and build meaningful relationships with them.

It removes the necessity of sales agents ploughing through mountains of paperwork or digital spreadsheets searching for information about the customer, and manually calculating and generating quotes.

The CPQ sales software automatically handles all the possible configurations, and figures out the pricing, and discounts where relevant, enabling your sales team to deliver unambiguous quotes up-front and instantly.

In addition to these, there are other benefits as well, which are listed below:

Accurate Quota Creation

Several customers will be those who just ask for quotes from you so that they can compare prices that they have been quoted by other companies.

Therefore, you need to be accurate and extremely efficient.

A huge advantage with sales tools is that you can grant access to everyone in your company that needs them, and they can get real-time updates.

If you want to be able to generate precise quotes for your customers quickly, this is essential.

Apart from the sales department, customer service, finance, and other teams can also be included in the process to ensure that the quote is as precise as possible.

You need to send a quote to the customer that adheres to compliance regulations, and which is competitive yet profitable.

Thanks to CPQ software, you can team up with other relevant departments and deliver the most accurate quote in the first instance itself.

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Integration

While it is necessary to include various departments in the quote creation to achieve efficiency and accuracy, it can lead to customer information being parked in silos.

Fortunately, CPQ software has a feature that enables integration with tools used by the different departments – CRM, for example.

This helps everyone who is a part of the process to access the guidelines and communicate with one another.

Quotes go through several stages:

  • Receipt of customer order
  • Sending invoice to the customer
  • Receipt of payment
  • Order fulfillment

This is ample proof that many departments apart from Sales are involved, and several tools in addition to CPQ are used.

When you deploy a CPQ solution capable of integrating with the tools you currently use, like ERP software for example – you can improve the workflow between sales and Ops, and deliver a positive experience to your customers.

More Efficient Sales

More Efficient Sales

Any sales executive would love to give all of their time to their customers.

However, they have to go through numerous processes and tasks related to selling that don’t include customers.

In fact, nearly three-fourths of a sales agent’s time is taken up by administrative activities.

This means they get very little time to prospect and engage with customers.

When you implement CPQ in your business, your sales agents will be freed of mundane admin work, and concentrate on enhancing customer engagement.

There are some more benefits you can gain from implementing CPQ in your organization:

  • Your sales agents can respond quickly with precise quotes for customers who request them
  • You will reduce your churn rate or the rate at which you lose customers
  • You can generate and send more quotes to target customers than before
  • Get more return on your investment on every sale that you make
  • Enjoy more revenue flow and cost-saving

On the whole, CPQ solutions save time and money for sales departments and the business in general.

With the software lifting the burden of the CPQ process, the sales agents and their managers can concentrate on building a systematic and standardized sales process.

They can perform more value-adding tasks like choosing the best practices, assessing the sales process they follow currently, and recognizing elements and activities that need improvement.

This will help you significantly in reducing the costs related to selling, and enhance your revenue flows.

ALSO READ: Different Ways to Improve the Procurement Process?

Does My Business Need a CPQ System?

So now that we have seen what is a CPQ system, we come to the question of whether or not your business really needs it.

Today most businesses already have software solutions like CRM, BI, ERP, and so on.

Can they afford another one?

Do they really need that additional software?

After all, there is expense involved, and there will be some disruption in the implementation phase, and immediately after.

So, to answer this question, first, ask yourself the following questions:

  • Do I have multiple complex products with difficult pricing structures?
  • Are my sales agents able to generate accurate and efficient quotes for these products?
  • Is my sales team taking too much time to generate quotes for customers and increasing turnaround time?
  • Am I offering unnecessary discounts and losing revenue?
  • Are customer quotes available only with the sales agent who generated them?

Even if you answered Yes to just one of these questions, it is essential that you start looking for a reliable CPQ solution.

If the thought of implementing yet another software solution in your organization is daunting, there are tracking tools that help you manage your tools and keep track of what you spend on them.

How to Choose a CPQ for your Organization?

How to choose a CPQ for your organization

There are a few more questions to ask – but these are for the software vendor.

  • Can your CPQ software integrate with my current software tools like ERP and CRM? If you can do it, can you explain how it would work and the efficiency level it would have?
  • Is your software cloud-driven and accessible by mobile?
  • Does your CPQ solution leverage artificial intelligence and data analytics?

Select a CPQ that can answer yes to all three questions, and you should be good to go.

ALSO READ: Guide on ERP in Production Planning

Conclusion

Remember, CPQ is not an essential software for every business, but it is vital for those businesses dealing in customized, complicated product or service offerings, and have complex pricing models.

Why not take advantage of software that can not only make your job easier, but also help you serve customers better and increase your revenues?

At Tranquil, we have flexible solutions that can help your company automate and streamline your sales and other processes to enhance overall productivity, improve workflows, and boost profitability. If you are not sure about implementing this software in your business, why not see it for yourself? Do schedule a demo with us at a time of your convenience, and we will show you how it works. Our experts will be on hand, and happy to answer any queries you may have.