Ok, let’s cut right to the chase – CPQ stands for “Configure, Price, Quote” and represents a category of software that’s become a crucial sales enablement tool in the past 10 years.
CPQ solves the ever-increasing issue of complex products with variability. While it would be nice if we could all sell a few simple products with simple pricing to all our customers, the reality is most of us aren’t running lemonade stands. B2B software in particular usually comes with variability in features, pricing structures, discounts, and more that create complexities when drafting accurate proposals. CPQ solves this very problem.
Why is CPQ Important?
Where CPQ shines is by automating much of the work needed to ensure different combinations of features and pricing structures are recorded accurately, approved quickly, and ultimately reflected correctly in the proposal.
This is important for a couple reasons:
- It prevents users, particularly sales reps, from going “off the rails”
Let’s face it – we love you salespeople…but you aren’t always the best when it comes to the fine print. Your goal is to do one thing: CLOSE THE DEAL! A CPQ solution ensures sales reps can sell with confidence. CPQ’s rules, integrations, and user interface come together to create guardrails that guide sales reps and prevent them from getting too crazy with custom product configurations and pricing.
- It streamlines what is traditionally a very lengthy proposal approval process
Tell me if you’ve heard this story before:
Rep sends proposal to engagement manager, engagement manager reviews with rev ops, rev ops says “hold up…we can’t approve these payment terms”. So rep communicates with prospect on new terms. New terms are agreed upon, and new proposal is sent to engagement manager. All of the sudden, legal steps in…there’s a key clause missing in the proposal! Once again, rep revises proposal and reviews with prospect. 2 weeks later, the proposal is FINALLY approved.
With CPQ, situations like this can typically be avoided since any product configurations or combinations with tricky terms and pricing can be built in and pre-approved BEFORE a proposal is drafted, saving multiple departments a lot of time and headache.
*A third additional benefit of CPQ is that it integrates with your existing CRM, ERP, and other key systems. It can automatically create quote lines and pass key data to your opportunity objects as well as update forecasting and resource requirements in your ERP.
Why you might (or might not) need CPQ…
A CPQ solution, while certainly a great tool, isn’t for every business. Smaller companies, B2C model companies, companies who sell physical goods, and SaaS companies with simplified products and pricing structures usually don’t need to invest in a CPQ tool.
However, if you’re beyond the startup phase and sell anything that has any degree of configurability and flexibility in price – particularly B2B SaaS – a CPQ is almost a must-have. Research has shown there’s some incredible gains to be had from CPQ:
- 105% larger average deal size ($432K vs. $211K)
- 49% higher proposal volume (20.9 vs. 14.0 per rep, per month)
- 28% shorter sales cycle (3.4 months vs. 4.7 months)
- 26% more reps achieving quote (58% vs. 46%)
- 17% higher lead conversion rate (35% vs. 30%)
Any one of those statistics alone is enough to make a CRO salivate!
At the end of the day, a CPQ is an investment that affects multiple teams and stakeholders within your business. A unified discussion across these teams and good planning is required to understand how CPQ can benefit your business from an ROI standpoint.
So CPQ handles complex products…but what about SERVICES?
CPQ is great for products – or anything with a SKU. But when it comes to configuring and quoting services, that’s where traditional CPQ falls short. Services are typically much more variable and configurable than even the most complex products since they require teams of experts, are less predictable in their outcomes, and engagements are often broken out into phases or multiple overlapping timelines. Product CPQ lacks the functionality needed to capture the pricing structure and custom dependencies of services engagements.
In recent years, a new category of CPQ – aptly named “Services CPQ” – has emerged to address this problem. Solutions like WorkRails utilize tools and functionality specifically built for services to create a streamlined pre-sales and document generation process.
Check out our blog – Indicators that your business needs a Services CPQ Software – to learn more about Services CPQ.
And if you’d like to learn more about WorkRails’ Services CPQ, then Let’s Talk!