Despite the current uncertainties, the economy is still relatively buoyant and the days of recession are a distant memory for most. However, now could be the time to make strategic investments in operational efficiency to reap the benefits in case there is another potential downturn.
Many industry leaders use Configure Price Quote (CPQ) software to inject speed and accuracy into their sales engines – could this software be the answer if you are experiencing a sales slowdown or just want to improve your bottom line?
The popularity of Configure Price Quote software clearly illustrates the very particular nature of price-setting, the need to accomplish sales or contracts quickly, with the added benefits of opportunities to cross-sell and upsell. It can be applicable in B2C sale interactions, but is more commonly adopted in B2B situations.
- The Configure or configuration element essentially refers to all the products or services that you want to include in the quote.
- The Price element takes over once you have selected the required items. It is the pricing engine that ensures the correct prices are displayed for the combination of items selected. You may have set up certain bundle rules or discount structures based on the combination of parts selected. This element minimisesany pricing errors.
- Quote is the final piece of the jigsaw. It takes the selected items and the assigned prices, then presents them in a professional formatted manner for your customer.
CPQ software allows everyone in your organisation to work with the same information: sales staff can be granted real-time access to quotations in seconds. Tasks such as quotation approvals are easy and quick - and can be carried out from any connected computer. Quotes can be created, revised and copied all with a few clicks.
This makes your staff more efficient, and gives them more time to talk with your customers and close deals, rather than spending valuable time building quotations. An automated quoting process can make all the difference when it comes to increasing sales conversions.
An Analysis of Configure Price Quote Software
CPQ software is a type of sales enablement software that helps companies define the price of goods across a constantly changing spectrum of variables – with complete accuracy. CPQ software aggregates these variables, which allows companies to configure products or services in the most optimal way (i.e. upsells, bundling etc.), price them according to costs, competition and local economic factors, and quote a customer the absolute best price possible in accordance with all of the above factors.
The words "configure, price, quote" illustrate that these software products can help with all three of these core operations for setting and controlling prices – and CPQ software can assist businesses to keep prices more in line with current market conditions.
A CPQ application can be thought of as an automated or guided sales quote generator. It is especially helpful for sales teams that sell customisable products and services and/or have a complex method to determine pricing.
Related sales software categories include sales proposal automation, e-signature, and contract management. All such tools are designed to make the sales process faster, smoother, and easier to audit. The software can also power a self-service customer portal (as used in eCommerce operations) and will figure out when a certain discount or lower price may be appropriate.
Companies have constantly to walk a fine line between profit margin and market share. The popularity of CPQ software clearly illustrates the very particular nature of price-setting and vendors selling this type of software will advertise their products as helping businesses to set the right price at the right time – and to accomplish sales or contracts more quickly.
Why Use Configure Price Quote Software?
It can be difficult to manage pricing if your business offers a very wide range of products or services. In particular, it's tough to keep track of external factors, such as any special offers from competitors, and work out how these should affect the pricing of your own products.
CPQ software automatically pulls together all the important information, allowing salespeople to produce the quote and get back to the customer as soon as possible without increasing the potential for error.
For businesses that operate in fast-paced markets, speed is of the essence. Because pricing data is more streamlined, workflow is streamlined too, time is saved and more sales can be made.
Many global businesses use CPQ because it allows them to quickly and efficiently send out pricing data to hundreds of stores. The result is that a head office knows that every store contains goods that are appropriately priced, without having to spend time manually calculating the right price for every item.
Opportunities to upsell and bundle are captured more frequently and CPQ can also help to identify prices that could potentially lose the company money, so they can be corrected as soon as possible.
Do You Need Configure Price Quote software?
A company that is having trouble managing thousands of products due to discontinued items or discounts, or a sales team that feels it does not have the updated information it needs to provide proper sales quotes are both indicators that CPQ software would be a sound investment.
Also, companies that are operating on a global scale and need to provide quick and accurate pricing data to dozens or even hundreds of stores may find CPQ software very effective at managing pricing discrepancies, cutting back on sales quotes that actually lose the company money.
Traditional or Cloud-based Configure Price Quote solution?
The ideal customer of CPQ software is either a large company or a company that is rapidly growing. For them it makes more sense to select a cloud-based software option because not only will it save their IT department from taking on time-consuming installations and upgrades, it will allow that same company to work from anywhere, on any device, at any time, and all for a monthly subscription.
CPQ as Product Configurator
CPQ tools are sometimes called product configurators because they help to automate the process of checking whether certain customised requests are possible - and how much they will cost. Some CPQ applications, such as those used by telecom and insurance companies, are primarily focused on pricing and availability.
These do need to consider many variables, such as customer demographics and bundle selections, but their main goal is to navigate a complex pricing structure that includes a lot of discounts and exceptions. Other CPQ software products focus on product configuration.
The price of the configured product is relevant, but the main challenge is navigating compatibility and availability concerns for different options and services.In this case, the product configurator is at the forefront, and the primary goal is to record the customer’s specifications.
What is Generally Included in Configure Price Quote Software?
- Interfaces for price sheets, cloud-based hosting and easy features for handling and storing data.
- Detailed analytics that will help businesses to set current prices and to project future demand
- Quote sharing/sending: salespeople can share quotes and quote details with customers, via email, a customer portal, a personalised URL, or some other means.
- Credit approvals: some CPQ software allows customers to input credit information, which can be checked and approved or declined. Credit score may factor into the quote.
- E-signature: includes electronic signature functionality so that proposals can be approved and signed digitally – or may integrate with e-signature software.
- Product configuration: allows users to configure products and services by selecting bundles, constraints, options, preferences, etc.
- Configuration options: supports a robust, comprehensive level of detail around configuration options, including product features, services, quantity, etc. Options take into account availability and compatibility of selections.
- Pricing rules: determines prices based on rules and hierarchies. Rules may consider customer demographics, availability, and/or product configuration.
- Price adjustment: sales users can adjust or override prices, based on coupons, discounts, markups, etc.
- Purchase history and open contracts: provides information about a customer’s previous purchases and current purchase/service agreements, which may factor into new sales or need to be modified to account for new sales.
- Guided selling/Sales portal: provides salespeople with tips, recommendations, or question sequences to help with product configuration and quoting, and/or to assist with cross-sell and upsell opportunities.
- Self-service CPQ: includes an interface for customers to select product options and generate their own quotes, particularly relevant to eCommerce.
- Reporting & Analytics: users can report on and analyse CPQ processes. Metrics may include quoting cycle time, proposal acceptance rates, revenue, etc.
- Proposals: allows users to generate/automate sales proposals. Alternatively CPQ software may integrate with proposal automation software.
- Excel integration: CPQ software integrates with Excel so that quotes can be generated on spreadsheets using underlying CPQ rules.
- CRM integration: some CPQ software integrates to the company’s CRM to update customer records.
- Attachments: PDFs, contracts, videos, etc can be attached to quotes and/or proposals.
- Renewal management: most CPQ software includes features for managing renewals and subscription payments. Alternatively, it may integrate with other software (such as contract management) that covers renewal alerts etc.
What Are the Benefits of Using Configure Price Quote Software?
Your sales team will spend more time selling
The average sales person spends 45% of his or her day on inefficient tasks, yet a simple 5% increase in selling time can increase company revenue by 20%. By integrating with your CRM software, CPQ software automates many time-consuming tasks. Your salespeople will spend less time in the office and more time out in the field generating leads and cultivating new business.
Create winning proposals
Proposals must persuade your potential customers with a clear and convincing message. CPQ software can automatically include all data sheets, case studies, and other critical content relevant to your proposal and the prospect's industry. This will save your sales reps time, eliminate human error, and inspire key decision makers to sign up to your proposals.
Feel confident in your prices
The more complex your offerings, the more variables will affect your pricing quotes - especially when product bundles and volume discounts come into play. Relevant pricing information is often spread across many places and may not reflect your most recent pricing structures.
CPQ pricing tools ensure that your salespeople can access current pricing information all in one place. This will ensure that you feel confident about your proposals, that they honour your margins and drive profits.
Eliminate errors
Mistakes are almost inevitable when your salespeople manually configure proposals or place orders, which can significantly detract from your bottom line. On average, a spreadsheet will contain one error for every twenty cells that have data.
CPQ software has been proven to eliminate 40% of human error because it allows the establishment of rules to automatically prevent incompatible orders and generate better, more accurate quotes.
CPQ software makes collaborative selling much easier because it allows you to easily enforce your business rules, including pricing and discount information. It takes the worry away and automatically does all the checks to ensure the correct combination of items are quoted.
Increase your deal sizes
At various stages in the configure cycle it can present opportunities to upsell or cross-sell. Therefore it gives you the opportunity to increase your average deal size, which is good for your bottom line and business growth.
Streamline and speed up the quote-to-order process
No need for back and forth email trails and calls between your office and salesforce, to double- check what products can be sold together and what the price should be. CPQ streamlines the process and allows a quicker turnaround of complex quotes. The result will be a professionally produced, formatted document to impress your customers.
Not only will this increase your chances of winning an order as you can get back to customers quickly, but it also frees up the time of your salesforce to do more selling, which supports business growth. The average sales person spends 45% of his or her day on inefficient tasks, yet a simple 5% increase in selling time can increase company revenue by 20%.
Knowledge Retention and Productivity
CPQ software helps institutionalize sales knowledge, which can be beneficial for training purposes, especially in situations where pricing and configuration are complex.
Create a good impression
The business proposals that your salespeople create directly influences how customers perceive your brand/company, but it's difficult to ensure that each person generates proposals in the same format. CPQ software standardizes your sales proposals, giving you control over not only what is quoted, but also the proposals' appearance. Your reps will make a cohesive, professional impression that enhances your brand.
Gain additional revenue
Most companies gain 80% of their revenue from 20% of their customers, so the greatest profit potential lies in penetrating the most profitable accounts. This is increasingly difficult to achieve as post-recessionary budgets tighten. CPQ software makes automated up-sell and cross-sell suggestions, enabling your salespeople to quickly increase the average quote and order size.
Shorten the sales cycle
CPQ software significantly diminishes workload by automating even the most complex proposal administration, approval processes, and discounting guidelines. Open quotes can be automatically tracked and approval requests are generated when quotes exceed certain threshholds. Quotes can be produced very quickly. A 15% decrease in your sales cycle can yield a 30% increase in revenue.
Encourage valuable traffic to your website
CPQ software better serves today's buyer who may not want to interact with your sales team until much later in the buying cycle, if at all. CPQ makes your internal sales capabilities external in the cloud, so your customers can generate their own quotes and place orders with the click of a mouse. This means less overheads, higher customer retention - and higher profits.
Build profitable relationships with your partner channels
Today's industry leaders are more than twice as likely to leverage channel partners in their sales strategies (32% versus 14%). These symbiotic relationships decrease selling costs and increase market share, margins, and corporate revenues.
To optimise these channel relationships, you need to make it easier and more profitable for your channel sellers to represent your solutions rather than your competitors'. CPQ software makes collaborative selling much easier because it allows you to easily distribute and enforce your business rules, including pricing and discount information.
Your partners enjoy the automated advantages of productivity, margin preservation and increased revenues whilst allowing you to capture and track critical data to achieve a clear view into your channel-sales pipeline.
ROI
CPQ automation tools make your quoting process simpler, faster, and cheaper. It reduces sales cycle bottlenecks, enabling your sales team to present exactly the right product mix at the right time and cost to the right customer. CPQ software ensures enhanced proposal quality, higher customer retention, and shorter sales cycles. The ROI will be recognised in a very short space of time.
Conclusion
If you're not sure whether your business needs Configure Price Quote software, talk to your salespeople. Do they regularly run into problems with developing accurate quotes in the time frame expected by the customer? Do those problems prevent them from doing their jobs efficiently - or even lose the company significant amounts of money?
If you want smarter pricing, here's what CPQ Software can deliver:
- Accurate configured proposals
- Real time pricing information
- Deal size increases because it reveals upsell and cross-sell opportunities
- A streamlined your sales process and a quicker turnaround of complex quotes
- Confidence in your proposals, that they honour your margins and drive profits
- Identified prices that could potentially lose your company money, allowing them to be instantly corrected
- Give more time for your salesforce to get out there and sell!
- Professionally produced and formatted quotes
- An increase in quotation volumes
- A lower cost per quotation for your company
- Valuable insights into customer behaviour and market trends
- The ability to send quotes to customers faster than the competition
A 2010 Aberdeen Group study showed, Configure Price Quote empowered organisations optimised their bid-to-win effectiveness twice as much as non-CPQ users. On average, CPQ users improved their year-over-year sales cycles by 40%.
When you have a single, consistent view of your quotations, every part of your business will benefit.
Related
Why Use Configure Price Quote (CPQ) Software?
What is Configure Price Quote?
To Cross Sell or to Up-sell That is the Question
What Can A Pricing Solution Do for Your Business?
11 Disadvantages of Using Excel to Manage Your Pricing
3 Reasons Why You Need Configure Price Quote Software
How CPQ Software Will Free You From Spreadsheet Hell
Common B2B Quoting Challenges and How to Solve Them
Sources
http://blog.sellingpower.com/gg/2011/06/part-i-10-ways-configurepricequote-cpq-software-can-skyrocket-your-revenues.html
http://www.gartner.com/it-glossary/configure-price-quote-cpq-application-suites/
Nagle, Tom; Hogan, John (2016). The Strategy and Tactics of Pricing
Simon, Hermann (2015). Confessions of the Pricing Man:how price affects everything.
Hamilton, Warren D (2014). Pricing Strategy: tactics and strategies for pricing with confidence.
McFarlane, Bill (2012). Pricing Strategy:how to price a product
Bird, Tom;Cassell, Jeremy (2012). Brilliant Selling: what the best salespeople know, do and say.
Aberdeen Group, "Sales Enablement Advances with Configure/Price/Quote Solution," 2011