Is your sales process too complex, for instance, because of a large product portfolio or highly customizable products?
Do your salespeople struggle with the magnitude of pricing and discounting rules for different products, customers, or orders?
You will probably already have heard about Configure, Price, Quote (CPQ) solutions. CPQ is an important part of the larger Quote-to-Cash (QTC) process. It aids salespeople by providing a product catalog for:
- Selecting and configuring products
- Pricing them according to built-in pricing and discounting rules
- Preparing quotes to send off to customers
What are the benefits of CPQ solutions?
CPQ (Configure, Price, Quote) software offers several benefits to businesses across various industries:
- Streamlined sales processes. CPQ software automates and streamlines the configuration, pricing, and quoting processes, reducing manual errors and speeding up sales cycles. Sales representatives can quickly generate accurate quotes tailored to each customer's unique requirements, improving efficiency and productivity.
- Increased sales effectiveness. CPQ tools provide sales teams with guided selling capabilities. They help them identify the most appropriate products, services, and pricing options for each customer. By presenting relevant recommendations and upsell opportunities, CPQ software enables sales reps to maximize revenue and win rates.
- Improved accuracy and consistency in pricing. CPQ solutions ensure pricing and product configurations are accurate and consistent across all quotes and proposals. This reduces the risk of errors, discrepancies, and pricing inconsistencies, enhancing customer trust and satisfaction.
- Enhanced sales productivity. By automating manual tasks and eliminating repetitive data entry, CPQ software frees up sales teams to focus on high-value activities. For example, there is more time for relationship-building, negotiation, and closing deals. This improves overall sales productivity and enables teams to handle higher volumes of quotes efficiently.
- Optimized pricing strategies. CPQ software enables businesses to implement dynamic pricing strategies based on factors such as customer segmentation, competitive analysis, and market conditions. This allows companies to maximize profitability while remaining competitive and responsive to changing market dynamics.
- Visibility and insights into sales performance. CPQ solutions provide real-time visibility into sales performance, quote status, and deal pipelines. This empowers sales managers with actionable insights and analytics. The visibility enables informed decision-making, performance tracking, and continuous improvement of sales processes.
- Scalability and adaptability for better growth. CPQ software is scalable and adaptable to accommodate business growth, evolving product portfolios, and changing market demands. Whether expanding into new markets or introducing new products, CPQ tools can flexibly support the needs of growing businesses.
CPQ supports companies where it matters the most. But CPQ is not a home run. Some CPQ vendors will promise you that by simply automating the quoting process, all your challenges will be solved.
But the reality is much more mundane. Yes, these transformations can happen, and CPQ can have an enormous impact. However, you can only expect results through careful planning and an approach that fits your company’s strategy.
How to ensure the right planning, strategy, and implementation for CPQ solutions
A good start is by asking the right questions. At Simon-Kucher, we advise our clients on how to select the right CPQ vendors, optimize CPQ processes, and support software roll-outs. Based on our experience, we have prepared a basic framework for CPQ implementation success.
Below, we present a simplified version of the four most important levers from this framework to help you kick-start your CPQ project.
1. How do you optimize and harmonize sales processes?
From our experience, it is paramount to get the basics in place before considering introducing a CPQ solution. Here, you should optimize your processes to make them more efficient and harmonize them, where possible, to minimize differences between countries or business units.
From our experience, details matter. As an example, the following three elements are important to look into during process optimization and harmonization:
- Escalation levels. Check if the number of escalation and approval levels are the same across all companies in your group. If not, either harmonize those levels or make sure that your tool can support the differences.
- Business types. In most cases, the quoting process differs between product and project business. If this is the case in your organization, make sure that your CPQ tool can reflect these differences and that you align the definition of those businesses across organizations.
- Profitability calculations. CPQ tools may include ROI, TCO, or profitability calculators. These are often modelled after Excel calculators used by the salesforce. As these calculators are often prepared by the salespeople themselves and are, therefore, not centralized, it is important to align the input, output, and calculations before implementing them into the CPQ tool.
2. How do you define the necessary CPQ interfaces?
A CPQ solution by itself is often useless, as it also needs data from other enterprise systems. CPQs are usually built on top of CRM systems, with salesforce.com being by far the most popular (out of 18 well-known CPQ solutions, 14 support salesforce.com). Choosing a native CPQ for your CRM will make things easier – but other solutions will work too.
However, CRM is not the only interface. It’s important to look into what data is needed across your sales process and identify where it can be found.
We have noticed that companies often overlook a number of systems:
- PIMS for managing the product information and attaching it to quotes directly
- HR applications to read in employee levels and match them to escalation thresholds
- CLM systems to natively integrate quotes with contracts
- CAD tools for sophisticated configuration of engineering products
- BI/Reporting tools to analyze the quotation and proposal data
3. How do you select the right CPQ vendor?
There are a multitude of CPQ vendors on the market. Selecting the vendor that best suits a company’s specific requirements is not always easy. The CPQ solutions all offer similar functionality at first sight, but there are important differences, such as:
- Platform nativity. Some CPQ solutions (e.g. Steelbrick) are salesforce-native, while others are stand-alone.
- Industry-specificity. There are vendors who offer a product tailored to the needs of a specific industry, such as Apttus with its solutions for Healthcare, Financial Services, etc. Other vendors might offer a more generalist product.
- Pricing platform. Large vendors (e.g. PROS) offer solutions that are part of a whole suite of Enterprise Software. Smaller vendors (such as the aforementioned Steelbrick) offer only CPQ solutions.
- Pricing model. More and more companies offer SaaS models, but there are still companies who use a perpetual licensing model.
- Rule complexity. Some products merely include product catalogs with prices simply read in. Others allow the setting up of complex pricing rules based on SKUs, customers, segments, orders, etc.
This list doesn't include everything, but it already shows how hard it is to choose a CPQ solution. That’s why a comprehensive and structured vendor selection process is the best way to select the right vendor.
4. How do you manage the CPQ change process effectively?
The last part of our framework is probably one of the most important ones. However, it is also one that companies often improperly manage. Therefore, it can pose a great risk to the entire project.
It is easy to write off a CPQ implementation as “just an IT project”, but it’s much more than that. There are important points to take into account to make sure your organizational also uses this great tool:
- Communication. Companies must carry out a comprehensive communication strategy to ensure buy-in of the new tool within the organization. This should happen well before implementation.
- Training. User training is a no-brainer. But more often than not, this is far too technical. The training must communicate the added value of the new tool to the users as well as showing them how to use it.
- User engagement. You should involve the users at all stages of the process, starting with developing the requirements, down to final sign-off on the tool. Salespeople will like using a tool they helped build.
- Coordination with other initiatives. It’s easy to boil the ocean by orchestrating multiple IT initiatives at the same time. While it may make sense from purely an IT perspective, this can lead to exhaustion among the sales team. There is only so much they can handle.
Multiple important factors influence how easy it is to establish a CPQ tool within an organization. Following the above framework and expanding it to fit your needs may not guarantee success, but it will allow you to be better prepared.
How Simon-Kucher can help
- Optimizing pricing strategies. Our expertise in pricing strategy can help you develop and refine your pricing models within your CPQ systems. This includes implementing value-based pricing approaches, dynamic pricing strategies, and pricing segmentation techniques to maximize profitability and competitive positioning.
- Configuring pricing rules and algorithms: We can help you configure complex pricing rules and algorithms within your CPQ systems to automate pricing decisions. This ensures consistency, accuracy, and alignment with pricing strategies across all quotes and proposals generated by the system.
- Guided selling and upselling. We are here to help you implement guided selling capabilities within your CPQ solutions. This involves providing sales reps with intelligent recommendations and upsell opportunities based on customer needs, preferences, and historical buying behavior, maximizing your revenue potential.
- Customizing CPQ solutions. We can tailor CPQ solutions to align with the specific needs and requirements of each client's business. This may include customizing user interfaces, workflows, and integrations to enhance usability, efficiency, and compatibility with existing systems and processes.
- Training and change management. We also provide training and change management support to help companies effectively implement and adopt CPQ solutions. This includes educating sales teams on how to use the system, optimizing workflows, and driving organizational buy-in.
Reach out to our experts today!
