CPQ (configure price quote) is a hot application; estimates of its growth suggest the total market for CPQ solutions will grow by about 50 percent over the next three years. That’s good news for vendors – but it also means that there are a lot of future CPQ users still employing manual processes to generate quotes and proposals. All these future users will need to tackle the daunting task of taking the information they’re using now and moving it from pricing and product books, spreadsheets and other formats and putting it into CPQ.
Casual observers might see this as a project for the IT department. After all, it’s just the process of moving data into a new system and making sure the system works when you test it, right?
Well, not exactly. CPQ has an impact on multiple parts of the organization – sales, marketing, IT, engineering, product marketing and management, finance, and on and on. The system needs to be a solution for all of them, not just for one department.
So, while IT can use tools to help import data, it’s important that expertise from across the organization – in the form of the participation of the right people – is vital. CPQ allows businesses to achieve things they would otherwise be unable to do: guided selling, assisted up-selling and cross selling across a huge product mix, delivery of ideal content about products at the time of quote generation, and more. It’ll be important for senior people to think about the possibilities and include them in the CPQ configuration. Need to establish automated approvals that respect discounting guidelines? Finance should be able to help with that. Want to include up-selling suggestions that span the product line? Get the sales and product management folks involved. Crave perfect delivery of the right content at the right time? You’ll need to work with whoever’s in charge of sales enablement to make sure CPQ is integrated with your enablement solution.
The frustrating part of this need for collaboration is that, in most cases, the people you need expertise from are the people with the least time available. They may be working on closing sales or on managing their own departments. This is where your senior management becomes critical: they can prioritize CPQ configuration and encourage these busy people to commit time to the project.
IT is certainly involved, and is intimately involved in moving the data in current systems into the new system. However, the CPQ solution will only be as good as the data it contains, so this is a great time to review the data you have. If you’re like many organizations, you may have a lag time between new information being added about products or pricing; unless sales s involved in the configuration process, IT has no access to that data.
Also, make sure the data in use includes everything you sell – not just catalog products. It’s common for companies to have higher margins on services, spares and extended warranties – so forgetting these items during the configuration is costly, not only in lost sales but in its impact on adoption. If a salesperson realizes these important components of the sale are missing, he or she may simply revert back to earlier methods of quoting.
And, once the solution is up and running, you’ll need to maintain it. New products, new bundles, adjustment s to discounting rates – all of them must be added to CPQ as they are added to your sales processes.
Whew! Sounds like a lot of work! But growth comes with a little pain – and compared to the benefits CPQ offers, the configuration process is little pain, indeed.
Let’s start with the painful parts of the configuration process. The time invested by product experts, sales leaders, sales operations specialists and finance pros will pay off for them. They’ll see an immediate reduction in the number of times they’re diverted from their jobs to take care of small tasks, requests and approvals stemming from the sales process.
The people in charge of your product and pricing catalogs will find life much easier. Instead of having to manage different versions, and to explain gaps between changes and the production of new versions, they can add updates to the CPQ system and make the changes instantly – and at much less cost than with manual processes. And IT will be able to turn most of the maintenance of the system over to business users.
These things are nice. The next set of benefits are fantastic.
Automating the quote generation and approval process shortens sales cycle times and allows salespeople to conclude deals more rapidly. According to Peter Ostrow of Aberdeen, companies that use a CPQ solution see a sales cycle length 28.8 percent shorter than companies without a CPQ solution.
Building up-selling and cross-selling into CPQ has a profound effect on deal size. Ostrow’s research found that companies that use a CPQ solution have an average deal size 105 percent greater than companies that do not use a CPQ solution. Salespeople no longer miss opportunities, because they don’t have to carry the catalog around in their heads, or sell just the products they have extensive knowledge of and find easier to sell.
Not only are your deals bigger but your company makes more from each of them. By enforcing thresholds on margin, CPQ prevents unacceptable discounts and minimizes pricing mistakes that can render deals unprofitable. According to the Aberdeen research that means that companies that use CPQ solution are 23 percent better at margin protection than companies without a CPQ solution.
And perhaps most importantly, CPQ contributes directly to a higher win rate. CPQ makes your salespeople appear more authoritative and prepared, and that reflects on your business. At the same time, it allows deals to move at the customer’s speed and improves the buying experience. As a result, in Aberdeen’s research, the average lead conversion rate for companies using a CPQ solution was 35 percent, compared to 30 percent for companies without a CPQ solution.
Setting up a CPQ solution takes work – but everything in your business requires work. CPQ pays back that investment at a rate that outstrips nearly every other system in your sales and marketing arsenal. If you’re debating whether moving from a manual process to CPQ is worth the effort, keep the numbers in mind – then, get to work.
See how Kio Networks used CPQ to increase margins and make its sales team more productive in this video.