In today’s consumer-centric world, many products and services are no longer one-size-fits-all. Businesses want to provide personalized products that truly connect with their customers, but this can make pricing tricky. How do you know what to charge your customers? And how do you go about generating those quotes?
That’s where CPQ comes into play. But what is CPQ? And how can it benefit you? We’re here to answer your questions and help you understand how this software can transform your business.
What is CPQ?
CPQ stands for configure, price, and quote. In business, the CPQ meaning refers to a type of software that many sales departments use to generate quotes and proposals. CPQ software aggregates information from multiple sources, such as local economic factors, demand, raw material costs, and labor costs, to create a customized quote that presents the best possible price while remaining competitive in the market.
CPQ software can also generate quotes for subscriptions, repeat orders, and renewals, incorporating the previous price the customer paid — plus any new changes in the market. It often integrates with your existing CRM or ERP platforms, which provide the information it needs.
Industries that produce highly configurable or personalized products or services, like banking and finance, equipment and machine manufacturing, electronics, furniture, medical equipment, construction, and automotive, are most likely to reap the benefits of CPQ. So, what is CPQ? It’s an essential business tool for those who sell customizable products or services.
How Does CPQ Work?
CPQ software analyzes thousands of data points using complex algorithms and programming. For example, it may use data on your customers’ buying habits, market research in your region and industry, and information about your product. Many CPQ programs use artificial intelligence to “learn” in real-time and make faster, more accurate decisions.
A CPQ program can vary based on industry, but it always involves the three phases that make up its name: configure, price, and quote.
Configure: In this stage, the software builds the desired product and determines optimal pricing for both the business and the customer. The system operator controls the rules under which the algorithm runs, while the customer controls the inputs, for example, the color, size, and features they want.
Price: Now, the software determines how much the customer’s desired model will cost. This is a balancing act, as it needs to get the most money for the company without pricing out the customer. That’s why the software uses market research and other buyer indicators to estimate what a customer will be willing to pay.
Quote: Finally, the software generates the quote and automatically sends it to all parties involved. It’s important to look over every proposal, but this is one of the biggest benefits of CPQ. After all, what is CPQ without an actual quote?
Benefits of CPQ
Like many modern software applications, CPQ has the potential to make countless employees’ lives better and more stress-free. When it’s set up and used correctly, the benefits of CPQ are numerous:
Efficiency: Sales departments are always looking for ways to get more with less, and the number one benefit of CPQ is a more efficient sales cycle. Sales people will spend less time chasing data and have more time to focus on the core function of their job: building profitable relationships with customers.
Speed: CPQ software can create quotes faster than a human manually can. It can shorten your sales cycle by reducing the time customers spend waiting for a quote — and the time your sales team spends negotiating the price with unhappy customers.
Accuracy: You don’t have to sacrifice accuracy for speed. Because it leverages data from many different sources, CPQ software can help reduce human error and provide more accurate quotes based on the most up-to-the-minute information.
Collaboration:. CPQ can help break down silos between legal, sales, marketing, finance, project management, and product design teams by giving all departments one place to go for information and collaboration.
More sales: Ultimately, the answer to the question “What is CPQ?” is that it’s a way to increase your revenue. You empower your sales team to build accurate, competitive quotes that will help them win more sales, so you can close those sales faster, more efficiently, and at a lower cost.
How to Find the Right CPQ Software
CPQ software can vary by industry, business size, and more, so it’s important to answer the question, “How does CPQ work for my company?” Here are some features you should consider:
- Ability to create both standard and custom quotes
- Ability to track quotes throughout their lifecycle
- Integration with your CRM, ERP, CAD, product catalog, and other software
- Visual product configurators in 3D, AR, or VR
- Ability to consider outside factors such as competitors and changes in the market or regulations
- Out-of-the-box and customizable financial rules and a rules engine based on AI
- Secure, cloud-based platform
- Automated quote generation and reporting
CPQ software is generally highly configurable, but it will only be as good as the data it runs on. Ensuring you have quality, up-to-date data is essential.
Salesforce CPQ is one of the best applications for integrating CPQ into your business. It’s conveniently hosted within your Sales Cloud platform and links directly to your CRM so that it can automatically input information like billing rates, costs, customer roles, and more. Once an estimate is accepted, it will pass the information back into the CRM system so that your project management and customer success teams can take over.
As a part of the Salesforce platform, this software is designed to help you make smart, customer-focused decisions. It can also help you make an easier transition if you’re already using Salesforce, which many businesses are. However, you’ll still need to configure the platform and write the rules you want it to follow.
Salesforce CPQ is versatile and intuitive, but you may need help with the overall integration and setup. When you’re ready to implement CPQ for your business, we’re here to help. At 5P, we will assess your business goals, provide pricing strategy advice, and help you integrate CPQ software with your current technology platforms. Contact us today for a consultation.