CPQ Software 2021: Comprehensive Guide

A software solution designed to assist businesses in Configuring, Pricing, and creating Quotes is called a CPQ Software.

CPQ Software draws upon information on all the product and service options offered by an organization, applies relevant business rules in all their complexity, and synthesizes these to:

• Configure solutions that are highly optimized to each customer’s business needs,

• Draw up accurate Pricing based on the finalized configuration,

In human terms, a CPQ software protects its users from the effect of combinatorial explosion arising from the sheer variety of options in the company’s products and services, and their configurable terms and business rules. Complex product details, pricing, discounting, commercial terms, other business rules - CPQ Software makes all of these available instantly to all parts of the organization alike, helps configure them into valid, optimized combinations, and helps create comprehensive quote documents. This kind of instant support vastly simplifies salespersons’ lives. They can respond very quickly to prospects with their organization’s best solution configurations at the best pricing and delivery terms, no matter how complex the prospect’s requirement or the proposed solution may be. The agility and accuracy that the Software lends its users pay off in terms of customer satisfaction even before the sale is made and could last right through the whole relationship.

CPQ Software enables your internal sales team with sales-related information and its accurate configuration. The same advantage can be made available to all your sales channels using its differential rights feature. This ensures that each channel can access only those details and terms that are applicable to it. Your organization can control not only product configuration but also pricing and discounting, delivery terms, post-sale support terms, etc. for each channel. The Software empowers you to set the rules initially, but more importantly, it makes observing trends and course-correction much easier. Naturally, this information can readily feed into future strategies as well.

Many B2C businesses use the retail version of CPQ Software that allows retail customers to configure their desired combination of product and service features into the solution that they would like to purchase. B2C CPQ typically includes a visualizer so that the prospective customer can see what their chosen configuration would look like. Retail marketplaces like Amazon, automotive retail websites, luxury goods portals, garment, and accessory portals are some examples.

CPQ Software is available as on-premise and cloud-based applications, the latter dominating late innovations in this area.

Streamline CPQ Process

The solution configurations that CPQ Software proposes, the pricing details, and the final quote are comprehensive as the software includes in its consideration all the relevant product and pricing information. This helps to streamline the CPQ process. Most of the CPQ software incorporate industry best practices.

Increase in Sales

CPQ Software enables accurate, quick sales. Hence salespersons can handle more deals. It also makes it more likely that they would close deals.

CPQ Software produces configuration recommendations that incorporate all relevant information. So, recommendation engines for cross- and upselling allied solutions would be natural add-ons.

With the ability to produce more comprehensive, very accurate, extra-quick quotes, with the added advantage of recommendations for additional sale opportunities, sales cycles are faster and sale volumes are larger. Customer satisfaction too is boosted, and this seeds a virtuous feedback cycle of repeated business.

Higher Pricing Power

Pricing power, especially for highly competitive, mature markets, is determined by the perceived quality of sale. Customers value the promptness, completeness, and pleasantness of their purchase experience in addition to how the product/solution performs against their requirements. A good CPQ Software used intelligently can lend significant pricing power.

Dynamic Responsiveness to Business Changes

The platform makes it possible to instantly change any product, pricing, and policy information, and updates thus made are instantly effective organization-wide.

Improved Customer Satisfaction

CPQ process is one of the key contributing factors to Total Customer Satisfaction. Organizations with complex product/solution offerings and pricing structure often struggle with their CPQ process and it results in bad customer experiences which in turn negatively impact customer satisfaction. Adopting a CPQ software greatly streamlines this process, reduces errors thereby greatly increasing customer satisfaction.

Industries that benefit from CPQ Software

CPQ Software originated in complex B2B manufacturing industries like aviation, where the sheer variety of components were beginning to overwhelm manual capacities, just as computing technology was maturing enough to take on some of the load. B2B industries with complex BOMs continue to be heavy users of CPQ Software.

Not limiting the power of this platform to internal teams, B2B customers also have been benefiting from the ability to directly configure their purchases on vendors’ CPQ platforms.

B2C customers also are now accustomed to the freedom of putting together their preferred version of the products on offer through B2C instances of CPQ software. It has become commonplace to pick out your choice of colors, accessories, and other specifications on company websites of consumer products from automobiles to gourmet coffee.

Users of CPQ Software

Especially in the B2B context, it is the salesperson’s job to put together a good product configuration, work out the best pricing, and draw up a quote document to present to the customer, but sales teams are not the only users of such a versatile software product as a CPQ platform.

CPQ works best when engineering, manufacturing, marketing, product management, and finance buy into it, and so, staff from all these departments are potential users at some point, although sales staff are likely to be the most frequent users.

In customer-facing CPQ implementations, the customer is a user too. In those cases, the user experience must be paid special attention, including its coherence with the brand’s identity.

CPQ Software plays an important role in solving several key business problems.

Problem#1 - Pricing and Quote process are prone to human error

Businesses struggle with accuracy issues in product configuration and pricing data. These errors lead to bad customer experience. CPQ Software helps to eliminate human errors. The Software handles data complexity competently and the deliverables it creates are accurate.

Probem#2 - CPQ process is time-consuming

CPQ process is time-consuming and often incurs due to delays in reviews and approvals. Without software, the greater the variety of available options the slower the decision-making. Approvals and reconsiderations across the organization, and the sheer labor of drafting the documents, all make the CPQ process time-consuming without software. CPQ Software cuts down process time drastically.

Problem#3 - Pricing and Quote Proces are siloed

Configuration and Visualization

Configuration is a core function of CPQ Software. At its simplest, configuration draws upon product data to configure the best-fit solution per client requirements. More complex configuration modules will incorporate other relevant data such as the history of similar deals, client profiles, etc. The use of artificial intelligence allows for a particularly complex, pointedly targeted configuration. Visualization, more popularly used in B2C CPQ Software, is a dynamic feature that allows the prospective customer to actually see a 2D or 3D visual representation of the product they have configured.

Guided Selling

Especially relevant to B2C deployments of CPQ Software, guided selling refers to helping the consumers narrow down to the configuration that is the most appropriate fit to their requirements. Getting this right requires that the recommendations are not made too early so as to leave the consumer feeling boxed in, and yet are proposed soon enough to prevent feeling overwhelmed by choice. Guided selling can be used by sales reps too to zero in on the best configuration for a particular client.

Automated Pricing and Discounting

CPQ Software can process complex pricing information and discounting rules to accurately calculate pricing options for the selected configuration. Some solutions can incorporate differential pricing and discounting locks as applicable to whichever channels/ direct sellers are logged in. With inbuilt AI capability, the software can include insights from historical data and contextual peculiarities into pricing and discounting.

Catalog Management

To access details about the company’s products/components, the Software can sync into an existing platform’s catalog database or provide its own catalog management support. Many offerings can also support rules on component bundling and exclusions, and of course, corresponding pricing and delivery specifications.

Recommendation Engine

Many CPQ solutions can make competent recommendations for cross-selling to the same audience, and/or selling a higher configuration that would be a more suitable solution for the prospect’s requirement than the one first considered. This enables sales reps to do more cross-selling and upselling.

CRM and ERP Integration

The ability to integrate the software into the company’s existing enterprise platforms transforms its potential value to the company. This overcomes the siloed problems enterprises face in their CPQ process. Many CPQ software come with out of the box integrations with popular ERP and CRM software.

Mobility Support

Sales personnel are significantly more empowered if they can utilize the full suite of features of the CPQ Software while on the move. The ability to support remote access and its usability through mobile platforms such as smartphones is an important feature.

Reporting and Audit

CPQ Software deals with data pertaining to the actual transactions where the value the company offers to its customers is transferred to the customer and its monetary value is realized by the company - clearly, prime strategic data. The facility to audit this data, perform analyses, and produce reports - these are featured in most advanced versions of CPQ Software.

Artificial Intelligence in CPQ Software

The forte of Artificial Intelligence is its ability to parse through huge amounts of disparate data to pluck insights out of them, which it can weave into actionable recommendations. Sure enough, vendors of CPQ Software are actively incorporating AI capabilities into the various modules of the software, especially, in configuration, guided selling, upselling and cross-selling, dynamic pricing, and such ergonomics as voice-activated workflows.

AI scores over conventional rules-based algorithms in such areas as pricing, as machine learning evolves more and more capable methods of optimizing price as it encounters larger quantities and a variety of relevant data. Such datasets as product costs, deal history, competitive landscape, client profile, sale context, etc. come into active play, with no leakages whatsoever, such that the pricing arrived at each time is actually better nuanced and more optimal than the previous instances.

Likewise, AI performs very well in configuration and selling guidance too, be it to recommend upselling opportunities on the current deal or for cross-selling other solutions. Highly aligned to customer requirements - expressed or tacit - as the recommended solutions are likely to be, customers appreciate the efficiency involved.

Choosing the right CPQ Software for your business and implementing it well can have far-reaching positive implications well beyond the Sales function. CPQ would very much be a core component of your sales stack, but can also prove itself an indispensable cog of your enterprise system.

As discussed above, CPQ Software is available in a wide spectrum of applicability. So, fundamental questions about your own business environment and requirements should be the first ones to get answered:

• What size is your business?

• How many products/solutions do you offer?

• In how many combinations?

• Through which channels?

• What variety of pricing and discounting rules apply?

• Do you operate across several political and geographical boundaries, and if so, how many regulatory regimes apply?

Then, examine how you will use the software:

• Do you want to use this software to address the whole spectrum of sales outlaid above, or only a portion of it? Why, and how will it work?

• Do you want to use the software internally or have it face customers?

• Do you want to own and host it entirely in-house, or would you prefer the more popular SaaS option?

More on the software and its vendor:

• Does the vendor offer AI-based insights and recommendations, and how robust are they?

• Is mobility support offered?

• Does the solution integrate easily and thoroughly with your other enterprise platforms, especially CRM and ERP?

• How customizable is the solution to your specific requirements?

• Does the software scale as well as you grow?

• What manner of support is offered post-purchase?

It would make sense to request demos and, where possible, use live use cases. It is also advisable to use professional assessment tools to complete this evaluation in adequate detail before plunging into the purchase.

Challenges in adopting CPQ Software

As with any other enterprise software, the smooth adoption of CPQ Software too is contingent on being cognizant of the following so that likely pitfalls are averted.

Requirement Assessment

An incomplete understanding of one’s business environment can lead to inadequate requirement documentation, which in turn, can lead to the purchase and implementation of a suboptimal solution. To avoid this, it would make sense to acquire professional assistance to map requirements.

Effective Cross Functionality

Although CPQ Software primarily automates significant sales function activities, it will succeed in its enormous potential only if its pan-organizational character is understood and planned for. The IT department’s technical involvement is obvious. CPQ works best when engineering, manufacturing, marketing, product management, and finance buy into it too.. Ensuring this kind of cross-functional effort usually involves a top-down approach in strategizing and operationalizing CPQ Software deployment.

Data Currency

Setting up new software would be pointless if processes aren’t in place to maintain and update its access to all relevant data, and responsibilities to ensure that this is done systematically haven’t been assigned. Bumpy integration with other enterprise software can have the same effect. While these problems are not peculiar to CPQ Software, the potential value that software of this sort can deliver would be grossly undermined by such lapses.

Team Readiness

Training and practice are key to getting the team to really milk the software’s promise. Too often, this is done half-heartedly, and the results are commensurately disappointing.