What is CPQ: definition, benefits, and tips on how to choose the right CPQ software
As a business owner, are you sure you always configure and price your products correctly?
We all know that sometimes the traditional quoting process may cause pricing and order errors. This may lead to losing a deal to competitors, who can produce an accurate, high-quality quote faster thanks to having implemented the CPQ solution.
In this article, we will explain what CPQ is and how it works. We will also look at some benefits companies can get from using CPQ software and share tips on choosing the right one for growing your business.
What is CPQ?
CPQ is an abbreviation that stands for Configure, Price, Quote and means a business process that helps companies, namely sales reps and sales operations managers, configure prices and quote products and services in the fastest and most efficient way.
CPQ allows businesses to create custom quotes for products and services and ensure that quotes are up-to-date, accurate, and consistent, which dramatically helps avoid underpricing.
Businesses can track customer data and purchase history, which is an excellent opportunity to provide better service, improve their clienteling, and, ultimately, boost sales. Automating the product configuration and pricing steps also helps streamline the ordering process, making it simpler and faster for customers to buy the products they need.
What are the steps in the CPQ process flow?
A CPQ process flow includes basic steps that need to be followed to generate a quotation.
- The process usually begins with the product/service configuration, where you tailor it to a customer’s needs.
- The price of your product/service will be based on several factors, including the amount of labor required, the cost of materials, and your overhead costs. You will also need to consider your target market, what your customers are willing to pay, and what your competitors offer. Crucially, you’ll have to decide what profit margin you want to achieve: you need to make enough money to cover your costs and make a profit, but you also don’t want to price your product so high that no one will buy it.
- The quote process varies from company to company. Some may have an online form that customers fill out, while others provide price quotes via sales reps. In either case, the company can provide an accurate quote only based on certain information from a customer, including the type of product/service, quantity, delivery date, special requirements, and the customer’s contact information so that the seller can follow up about the quote.
- All this information is then used to generate a proposal and negotiate with the customer on the product/service parameters and possible price discounts.
- Finally, the proposal is sent to the customer for approval. Once approved, the order is placed, and the product/service is delivered.
When this process is automated with a CPQ solution, the typical risks of traditional quoting are eliminated. That’s why an increasing number of companies, especially in B2B sales, are implementing CPQ software. Still, there are many other benefits such an upgrade can bring to your business.
What are the benefits of CPQ software for businesses?
First and foremost, CPQ software can help companies save precious time and money by managing the complex pricing of their products. It streamlines the process of creating quotes and orders, ensuring that your prices are correct and up-to-date, and, crucially, you don’t need to check it all—the accuracy is checked automatically with zero errors.
This helps you stay competitive by swiftly responding to any price changes from similar companies and ensuring that you’re always offering the best possible price to your customers.
Such practice is especially relevant for B2B eCommerce companies because they often need to configure multiple components and juggle dynamic prices. And with the supply chain pressures and rapidly changing prices, this process becomes a heavy burden for both the seller and the buyer.
CPQ software makes the product configuration and quote generation processes smooth. This results in a higher conversion rate and, ultimately, cost reduction and revenue enhancement.
As a result, CPQ software helps businesses increase their sales. By providing customers with accurate and legally compliant quotes quickly, companies can close more sales and reduce the likelihood of customers choosing alternatives.
With a CPQ solution, you can also improve customer satisfaction by making the buying process easier. Customers appreciate getting accurate quotes quickly without having to deal with complex paperwork or long wait times. So, if you’re looking for a way to improve your business’s pricing strategy, implementing CPQ software is a great option.
How to choose the right CPQ software?
When looking for CPQ software, it’s essential to consider your business needs. What kind of products/services do you offer? What are your pricing requirements? How do you want to configure your products?
Once you know what you need, you can start looking for a CPQ system that meets your requirements. Many options are available, so take your time and find the one that’s right for you.
CPQ software solutions on the market should do three things: pricing, configuration, and quoting.
- A pricing engine is used to create and manage price lists. It allows businesses to set product prices and discounts and to track inventory levels.
- Configuration software helps create product specifications, allowing businesses to model configurations and determine each configuration’s pricing and availability.
- A quoting system generates quotes for prospects, while businesses can track the status of each quote.
Now let’s look at the features of reliable CPQ software. A good CPQ system should:
- Be able to create proposals, quotes, and invoices quickly and easily.
- Integrate with your CRM and accounting software so you can keep track of your sales data and budget.
- Include a recommendation engine for cross-selling and upselling, as well as intelligence for guided selling and analytics.
- Have a guided selling feature, which generates questions to quickly navigate potential users through a product range toward the products they’re looking for.
- Be easy to use. Your sales team should be able to learn how to use it quickly, so they can start selling products right away.
All the above features you can find in popular modern CPQ solutions such as PriceFX, Zilliant, Salesforce, and Oracle.
In B2B sales, a thriving business should be able to make a clear and legally compliant proposal to its prospects as fast as possible. Not a surprise companies adopt CPQ tools that help them create accurate quotes and orders quicker and easier.
CPQ software also helps companies stay competitive. It automates the pricing process and allows businesses to develop custom pricing models that best fit the needs of their customers.
You can find many CPQ solutions on the market you can easily sync with your sales CRM. Don’t have a sales CRM? No worries. Snov.io free CRM welcomes you on board!