Why use CPQ?

As the product portfolio grows many companies choose to use a CPQ system. A typical CPQ-user works for a company that offers a very wide range of products or services. The sales representatives (and to be honest usually others in the staff as well) have a hard time managing product prices and product dependencies. The products sold often have many options with critical technical/commercial dependencies.

CPQ software is useful by companies that need to quickly calculate prices. If a sales representative needs to quickly prepare a quote for a customer, the CPQ software automatically sums up all important information. This means that the representative can produce the quote and come back to the customer far quicker. Time is an important differential factor for all companies, regardless of whether the company works in faster or slower markets. Speed ​​is always important.

Global companies, large and small, use CPQ to quickly and effectively send pricing information to partners and customers. This means that customers can get the information right when they need it.

CPQ software is an effective way to unify how the products are presented to the customer. By using an automated tool for quote documents product can be presented in a consistent way and critical information is never missed due to human errors.

Studies show that the companies that respond the fastest have the greatest chance of finally winning the deal. This means that the speed offered by a CPQ system can have a major impact on the company's bottom line results.

In the past only large corporations could afford to use CPQ, but nowadays we see a big expansion of CPQ in small and medium sized business.

8 secrets for a successful CPQ project

1. Focus on solving concrete problems 

Always start with a concrete product and set a goal to get the product live in a production environment. With today's SaaS-CPQ-solutions, efficient product modeling/pricing tools and a straightforward system configuration, it is not at all impossible to launch a first product within a month or two.

2. Be aware of the limitations of CPQ

In the field of psychology, the Dunning–Kruger effect is a cognitive bias in which people mistakenly assess their knowledge in a specific field is greater than it is. It is related to the cognitive bias of illusory superiority and comes from the inability of people to recognize their lack of ability. Without the self-awareness people cannot objectively evaluate their competence or incompetence.

When you try to launch a CPQ-system, it is easy to fall into this trap. To describe the logic that limits how the product can and may be sold in a general way is somewhat cumbersome. Here it is important to understand what you need to understand before you start with product logic. Then the way to a working CPQ will be as straight as it can now be.

3. Listen to everyone involved – and to the customers

For some, external assistance may be required to ensure that the CPQ system provides useful results. Ideally, if you kick-start a project with a whiteboard meeting where all the key people involved spend an afternoon figuring out details and documenting the requirements you have.

4. Take on industry expertise

More and more companies have begun to realize that CPQ is not a miracle cure in itself. Many companies that start working with CPQ assume that "we have a lot of product data – plug in a CPQ and let it tell us something interesting".
Here we see that we as consultants have an important role to play in moderating, questioning and provide industry best practices.

5. Realize the value of tests in reality

By making a rapid first version of your CPQ-system you’ll get a quick take part in multicultural, multilingual and even intergenerational insights and learn from them. By going live quickly and exposing the CPQs ability of the organization, you can quickly make customizations that make the system several hundred percent better.

6. Be aware of the "black box-problem"

Trust is another subject that CPQ is forced to face when it comes out in reality – something that is known as the black box problem. How can this be overcome? An important part is not to complicate things more than that they can be explained.
Often it is domino effects in product logic/price models that gives weird (but accurate) effects. Here it is important to be well prepared to explain and describe the logic in an educational way.

7. Establish clear measurements

Having clear operational measures for your CPQ-project is important to prove that it works – and deserves continued support. But many companies do not give this aspect sufficient attention in their CPQ projects.
This is a problem with emerging new technologies such as CPQ. The result is likely to be CPQ projects that are bridges to nowhere, pilots that are not scaled up and projects without any business value. Therefore, we do not make pilots. We make sure to go directly to production and in this way are the goals we set up linked to the company sales. It makes it very easy to judge what works and not.

8. Look inward

Where do you find people who can both understand CPQ and the requirements from the business? It is not an easy task. There is a clear lack of CPQ skills.
One often overlooked method to bring down skills shortages is to look internally to find people who can take CPQ trainings. This way you can work so that there are people who have both CPQ and industry expertise. This is a very important part of our deliveries. We see no long-term benefit of the system if it cannot be managed internally. Our role should only be consultative once we have released the first product.

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.

Configure Price Quote software - the key benefits

Configure Price Quote software shortens the sales processes by automating the configuration, pricing and quoting of complex products, services and bundles.

“configure price quote” software is getting attention from global companies looking to reduce errors and streamline sales of complex product. Configure price quote software will serve as a consistent front-office interface with all necessary integration to existing back-office systems.

CPQ (“configure price quote”) is more and more becoming a critical advantage in several industry verticals. Fast and accurate quotation processes is no longer something to strive for – it’s now a critical factor in the competitive landscape.

The primary benefits with Configure Price Quote software include:

  • Guided and automation sales process supporting your customers through important selection including configuration, quoting and ordering.
  • Central pricing processes for establishing, maintaining and publishing pricing for products, services and combination bundles.
  • Workflow for quoting including creation, management and negotiation of sales quotes.

Guided and automated sales process

  • Increased deal size by simplifying cross-sell, up-sell and solution bundles. Service contracts and other related services are quoted together with the product ensuring returning revenue for a longer period of time.
  • Reduced costs and increased customer satisfaction as incorrect orders are dramatically reduced.
  • Increased sales productivity when repetitive, time consuming manual work is eliminated.

Central pricing process

  • Pricing consistency and automatic pricing changes instantly available in all sales channels.
  • Defined structure for pricing to decrease the maintenance due to changing market conditions.
  • Pricing models based on customer segments with analytics feedback for continuous improvements. Built in dashboards for sales and pricing governance.

Workflow for quotations

  • Significant time savings to create, negotiate and convert quotes into orders.
  • Increased visibility and traceability in the quoting process.
  • Support for channel and partners sales for complex products.