CPQ - Configure, Price, Quote

Configure Price Quote - Solutions, Software and Proposals

Showing posts with label analytics. Show all posts
Showing posts with label analytics. Show all posts

Five common pricing mistakes a CPQ solution will address

Pricing is difficult and also very sensitive. Changes in pricing is one of the most effective way to level overall profit.

This list of pricing mistakes can be used to build a good business case for a CPQ (Configure-Price-Quote) investment.

Weak controls on discounting


It’s not uncommon that sales representatives are given a lot of freedom when it comes to negotiating the price. This means what the profit per deal is very dependent on the person executing the sales.

Discounts are often given without a controlled won/loss analysis and are more based on gut feeling. This means that prices will vary very randomly.

Without analysis and a proper approval process these issues will not go away. This is something a CPQ solution will address.

Inadequate systems for tracking competitor selling prices and market share


It’s difficult to understand the completion and most companies don’t put any effort into analyzing the lost deals.

With a CPQ solution it’s possible to benchmark the won and lost deals in a very structured way. It’s possible to find what key features of the product that correlates with won deals and also what features that are typical for lost deals.

Cost-plus pricing


Cost plus pricing is still very common in the manufacturing industry. The problem with this approach is that it assumes that the customer value is dependent on the production cost. Everybody knows that this is not the case.

A CPQ solution can price on factors that are actually valued by the customer and at the same time ensure that margin.

Price increases poorly executed


There is a problem when price increases can’t be motivated. If we’re not providing any new customer value, why should I pay a higher price?

It’s essential to plan ahead and do price increases as your product improves. If your new engine will cut fuel consumption there is no problem to pay a higher price.

That’s why price increase should be coordinated with product development. This means that timing is essential. Do the math and plan ahead. This is a process that a CPQ solution should support.

Worldwide price inconsistencies


In a global market it’s no longer possible to have inconsistent pricing.

By introducing a central storage for local price it’s possible to understand and correct price inconsistencies. A CPQ solution normally connects the global and the local prices. This means that a CPQ solution introduces the possibility to have governance for local pricing.

How CPQ analytics can improve product development

One interesting aspect of an implemented CPQ solution is the possibility to analyze sales in a new way.

Traditional sales statistics answers the question what has been sold. This is somewhat interesting but normally it doesn’t bring very much new insight to the table.

With clever BI-tools (like Tableau or QlikView) it’s possible to slice the data in a way that will give you a better understanding on what’s tending and who is really doing profitable sales. But this still doesn’t answer the big question… With ordinary sales statistics one can tell WHAT is selling, but it doesn’t answer the question WHY?

A CPQ solution makes it possible to keep track of all quotations. This opens up for analysis where one can compare successful quotes with the less successful. This type of analysis will give concrete measures on what products that has been offered and make it possible to compare it what has actually been sold.

The analysis gives the possibility to reduce the product portfolio based on what has been part of actual quotations and if it has been sold. This gives a rating per sub-component whether a certain product is providing adequate value on the market.

The analysis also answers the question where there is possibility for new business. By understanding the type of deals that are refused by customers gives great input for product development.

This video (found on the Tacton Youtube-channel) introduces the concept of CPQ analysis.

CPQ analytics

Understanding the principal drivers for successful sales is essential when developing new products for a fast changing competitive market. This extends the understanding of important key differentiators and the effects by geography and segment.

Using big data from your CPQ solution unlocks analysis capabilities for data exploration. This enables analysis to understand customer segments, pricing and key business drivers. In the end the CPQ data can drive a more optimized and targeted product offering.

What’s really interesting is to see the link between customer need, product selection and likeliness to win the deal. This is the core idea of CPQ analytic, that the logs from the CPQ solution contains underlying cause for successful selling.

To analyze the perceived value there must be a link between three main components:

• What's in the product portfolio?

• What products offerings wins business?

• What value does the solutions deliver?

If you want to know more about CPQ analytics, stay tuned (subscribe to our newsletter).