What is a CPQ process?

Definition

CPQ stands for Configure, Price, Quote. The CPQ process includes selecting components (configure), handling prices and discounts (price) and generating various documentation (quote, technical specifications, 2D- and 3D-drawings).

The CPQ process has a long history with manufactures of complex products, but with the introduction of SaaS (software as a service) the market is currently expanding into service offerings and less complex products.

The CPQ process

- supports a simple way to select valid product combinations with respect to product rules and limitations

- prices the product according to bundling and discounts (manual or automatic)

- creates an accurate and persuasive quote documents based on configuration and pricing information information

CPQ software connects front and back end systems and automates the lead-to-cash process.

What is a CPQ process?

What’s normally included in the CPQ process? Is it all automated and in what way is it adoptable and flexible?

Configure (the C in the CPQ process)

The overall problem is that complex products often have limitations in the way a product can be configured. This can be physical limitations how options can be combined. It’s also very common that there are sales/marketing reasons for limiting availability of certain product combinations. 

A modern CPQ process simplifies the interaction by asking high-level questions about requirements. This is often referred to as guided selling.

The magic bullet when it comes to the CPQ process is the ease of maintenance. The time it takes to do updates as the product portfolio evolves is the real differentiator between a “good” and a “not so good” CPQ process.

Price (the P in CPQ process)

The pricing can, if you let it, be just as complex as the product itself. Manufacturing costs, geographies, competitive situation, and local protocols all comes into play with a clever pricing strategy.

More and more companies are currently moving to a more value-based pricing. What value does your superior product offer deliver to a specific customer? This requires some heavy lifting when it comes to analysis but once that’s in place the CPQ process can really leverage the bottom-line profit and still keep customers loyal to your brand.

Price adjustments is also an important part of the pricing step in the CPQ process. This can be set up to be automatic but should also offer flexibility and advice for sales tactics.

Quote (the Q in the CPQ process)

Once the product is configured and prices correctly, respecting both product limitations and pricing rules, the result is presented in one or more documents. These documents describe the product and is often personalized to resonate with various stakeholders it should be presented to.

The documents generated in the CPQ process describe the product an includes texts, illustrations, data sheets and sometimes drawings, all customized for each offer generated. 

The level of details can be personalized, and document generation should be fully automated.

Configure Price Quote Software


CPQ is normally a cloud-based software that helps sales teams to automate their quotation routines and manage interactions with clients.

Configuration

The C in CPQ stands for configuration. This means keeping track of all the logic that goes into a complex product. Certain options are required, others can not be combined.
The number of permutations is normally enormous. Even simple products often have millions of possible ways of combining a product. This means that the maintenance-effort required to keep the product logic up to date is one of the most important factors when evaluating the configuration engine.

Pricing

The P in CPQ stands for pricing. The next set of logic to master is the rules and constraints regarding prices and discounts. Certain items come cheaper as a bundle, some item are alliable for bigger discount while other can not be discounted at all.
This means that workflow and organizational hierarchies are needed to do pricing effectively. Keeping track of prices and the possibility to escalate the sales opportunities to management is all part of pricing.
Support for different pricing models, pricelists and purchasing agreements are essential in pricing.

Quotation

The Q in CPQ stands for quotation. Texts, specifications and images all come together in an advanced template that dynamically adjusts the quotation for each customer.
The ease of use and flexibility of the document generation is a very important factor when evaluating how the quotation can meet your business needs.

For a global company it’s often a requirement that both configuration and quotation must natively support multiple languages.

Vendors

According to analysts the leading vendors in CPQ are Apttus, Oracle, Salesforce and SAP. Niche players in manufacturing are PROS, FPX and Tacton. 

What is CPQ?

Definition

CPQ is an acronym for Configure, Price, Quote. CPQ is used to describe the process of selecting components (configure), handling pricing (price) and generating documentation (quote). CPQ software is primarily used for complex products, services or a combination of the two.

CPQ solutions
  • supports a simple way to select valid product combinations with respect to product rules and limitations
  • price the product correctly according to bundling and discounts
  • creates an accurate and persuasive quote based on this information
CPQ software connects front and back end systems and automates the lead-to-cash process.

What is a CPQ process?

What’s included in a CPQ process? Is it all automated and in what way is it adoptable and flexible?

Configure: All complex products have limitations to how modules or sub-components can be combined. The user normally specifies key features and main products, a configurator handles all limitations and itty-bitty details.

Price: Manufacturing costs, geographies, competitive situation, and local protocols - the pricing can be just as complex as the product itself. The price adjustments should both be automatic but also offer flexibility and advice for sales tactics.

Quote: Documents describing a complex product includes texts, illustrations, data sheets, drawings. All specific for each offer generated. The level of details should be flexible and document generation should be fully automated.