Configure-Price-Quote (CPQ) is the fuel that drives sales cycles for any company that sells complex, configurable products and services. The greater the customization a product has, the more important it is to support selling efforts with a CPQ application that scales across all selling channels. For additional insights into why CPQ is one of the hottest CRM applications in enterprise software today, please see the article, The State of the CPQ Market.
- 83% of companies surveyed are using CPQ apps today, according to Accenture.
- 80% of companies have adopted a CRM system, and a large majority has deployed tools across the entire sales process.
- The global CPQ market is growing at a 20% Compound Annual Growth Rate (CAGR) through 2020. Cloud-based CPQ applications are generating the majority of revenue growth, growing at a 46% CAGR through 2020, according to Gartner.
Integrating product configuration, pricing and quoting into a unified application that scales across all channels is revolutionizing the sales of customized products. Mass customization is accelerating as customers expect greater flexibility and freedom in defining what they want. The BMW Mini now has over 10 million different ways to make one of their cars unique. This extreme level of mass customization is quickly becoming the new normal, making CPQ strategies essential for selling customized products. An Industry Week article explains the supply chain implications of selling using a CPQ-based strategy that scales across all channels.
Leading CPQ providers are also introducing advanced analytics, intelligent agents and machine learning into their application suites to improve selling effectiveness. 5 Ways Intelligent Agents Are Revolutionizing CPQ provides insights into how these latest-generation technologies are also contributing to greater selling effectiveness and driving company revenue growth.
Kickstarting CPQ Strategies And Growing Revenue
The challenge every company that sells configurable, customized products faces is that sales cycles get bogged down when product configurations and quotes are manually created. Manually-based approaches to checking customized product configurations and creating quotes waste valuable time. CPQ applications are designed to streamline the entire selling process by checking product configuration, quoting and pricing for accuracy before ever delivering the final quote to the customer. With so much value being delivered by CPQ applications, the smallest manufacturing company selling customized products to the largest global manufacturer is benefiting from these applications.
Kickstarting CPQ strategies and growing revenue in the next year need to include the following:
Benchmark the selling areas that are causing the most pain first and get a baseline of what their performance levels are today.
The most common areas are incorrect quotes, product configurations that aren’t buildable, incorrect pricing, too much reliance on swivel-chair integration (or manually-based approaches to sharing CRM and ERP system data) and quotes hat take weeks or even months to get done. Slow quoting workflows and response times kill more deals than competitors ever do. 50% of the time, the first received quote wins the deal.
By tracking the performance of the sales processes causing the most pain, it’s possible to get a baseline to chart improvements based on the adoption of a CPQ application across sales teams. The most common pain point is the ability to produce an accurate quote of a buildable product within the timeframe that a customer needs it in order to make a decision.
Based on the areas of greatest selling pain, define a plan to improve, setting realistic goals and objectives for improvements in a pilot period.
A global manufacturer of electronics competes by relying on build-to-order, configure-to-order and engineer-to-order product strategies. They scale to the level of customization that their customers need, and often take weeks to produce a quote. Their challenge is getting quotes faster and more complete than competitors who are smaller, faster and focused on getting into their best accounts. The pain they have is a slow response. After benchmarking this area and others, the global manufacturer created a scorecard to track their performance during the CPQ pilot against previous levels of performance.
At one point, it took 60 days to complete a complex quote that required custom engineering drawings. During the pilot, they progressed to being able to produce a complete quote in less than ten days. It was a major improvement, but not enough to win deals against smaller, more aggressive competitors. The global manufacturer had more work to do, and decided to go to the next phase of kickstarting their CPQ strategy, which is setting company-wide goals for this strategy alone.
Define CPQ goals based on pilot results, using the selling pains to create a roadmap that focuses on change management.
The global manufacturer set the goal of being able to produce a quote in 24 hours or less, which was quite an improvement from the 60+ days they had taken in the past. They set the goal of being able to produce an engineering-validated quote in a day or less by automating product validation checking, pricing validation and the use of Special Pricing Requests (SRs), if needed.
Automating product rules and constraints using integration with their ERP and CRM systems while ensuring that each quote that defines a product can be profitably built and delivered are the key goals. With their goals defined and a roadmap of which areas needed to improve laid out, the manufacturer began looking for vendors that could assist them. The following graphic illustrates the contributions CPQ can make to selling strategies by benchmarking performance and then taking action on the greatest pain points, slowing down selling strategies:
Set the bar high for CPQ vendors — only evaluate those that can meet both the CPQ project goals and the challenges of your selling pain roadmap by requiring a demo of your data and your systems.
There is an overabundance of hype on the CPQ market today. The best way to de-hype your vendor evaluation is to require a demo using your data and systems to show how a given vendor can help meet your challenges. Use the goals and the pain roadmap as the filter to screen only the vendors that have proven they can deliver results and get you closer to your CPQ goals. The good news is that many of the most proven CPQ vendors are moving in the direction of analytics, machine learning and Intelligent Agents.
Give every department whose jobs will be affected by the new CPQ system a voice in which vendor gets selected, and how the screens and workflows are created.
The best CPQ systems can flex to match how a given company works, not forcing them to change. Getting teams to adopt a new CPQ system needs to start with having them involved from the very beginning. This gives them a chance to own every phase of the process. Providing a chance to own initiatives and programs is one of the foundational values in Google and Microsoft, where every new app produced internally gets an intensive level of review. The electronics manufacturer mentioned earlier found that 9 dollars out of every 10 they spent were on change management, including adoption efforts and education.