article | July 14, 2015
The Business Case for CPQ
We’ve found a great methodology in CPQ. It’s a way to simplify complex sales, reduce errors and lower expenses.
If you’re not familiar with it, don’t worry. In this post, we’ll put you on the leading edge. We’ll examine CPQ, what it does and how to know if you need it.
CPQ can simplify complex sales, reduce errors and lower expenses. Breaking Sales Into Three Parts
The acronym CPQ stands for Configure, Price, Quote. These are three distinct steps in delivering exactly what customers want.
Let’s look at each individually, and then we’ll explore CPQ’s business value.
This is where a customer assembles the elements of a product or service. As an example, consider a health insurance plan.
The customer selects the type of plan that best fits the need. The next choice may be the level of deductible or copay. After that, maybe the customer adds riders – say, dental coverage.
Each of those pieces has its own price, contributing to the overall cost. If the customer ordered A, B, and C, these add up to one price.
But configuration options may change things. There might be bundle pricing or discounts or a promotion for a different price. Maybe ordering A, B and C gets the customer D for free.
Geography can make a difference, too. In Latin America, health insurance discounts are higher. Consequently, prices are lower than in the United States.
This is the output of the process. Now the customer sees the product selection, pricing, warranty – everything involved in the purchase.
Self Service or Sales Assistance?
Depending on the customer’s familiarity with the product, CPQ might be DIY. Most people, for example, are familiar with the components of health insurance.
For more complex products – technology, for example – a sales rep should help. Configuring a technological system correctly may require more specific knowledge than a customer has. A good partner is a valuable ally.
How CPQ Is Good for Business:
Think about it from the sales side. With CPQ, your reps gain time they would have spent configuring, pricing and quoting. They can more profitably use that time to prospect, sell and close sales.
Think about it from the management side. You can see exactly where in the process a purchase is. Who is working on it? What’s its status? Clear visibility and accurate reporting replace those long, frustration-filled email threads.
Greater Efficiency, a Better Bottom Line:
Efficiency increases and revision issues decrease. Channel partners don’t need as much configuration technical support.
Overall, CPQ means less human involvement, fewer hand-offs, no need for rekeying spreadsheet information. This reduces both the number of revisions and time per revision.
It also reduces errors. That translates to better customer satisfaction. And that translates to a better bottom line.
How Do You Know You Need CPQ?
Take a moment to download our CPQ Checklist. This tool will help you see if CPQ is right for your business. We’ve also included CPQ best practices to model. Download the tool here.
In the meantime, look for these telltale indicators.
How CPQ Can Go Wrong:
No process is immune to mismanagement or misapplication. Know and avoid the traps.
Technology factors in, but CPQ isn’t an IT initiative; IT wouldn’t respect the process. To get customer adoption, treat it as a business initiative.
A Whole New Process:
Don’t think of CPQ as a solution or a corrective for a current process. Instead, rebuild the process around CPQ, along with any needed support system.
Bring all stakeholders aboard. This involves more than your direct sales and IT teams. Finance, product, channel sales and order management have key interests in this, too.
Apply change management and make it clear CPQ is the new way of working. Be on guard against team members slipping into previous habits. No calling the old go-to-guy. No working through back channels.
Create your CPQ process for the majority and allow for the minority. You may have a vocal minority pleading its case, but don’t focus there.
Three Paths – Primary, Alternate and Exception
Approach your redesign with the proper scope. Begin with primary paths where low-hanging fruit means quick victories. Move on to alternate paths. Finally, address the high-impact, exception paths.
Example – the coffee-shop drive-through. The primary path is to order coffee, pay and leave. An alternate is your preference isn’t available, you choose something else, pay and leave. An exception: You order, pay, the shop gets it wrong, you demand a discount.
Best Practices Bring CPQ Success:
Best practices for CPQ aren’t many, but they are important.
As you get your program running, keep a close eye on its performance. Identify and act on quick successes – and celebrate them. The more profile you can give this, the faster you’ll develop momentum.
Apply “sandbox” methodology to allow for pricing automation. But create cultural acceptance for potential change so you can revisit your sandboxes’ borders. Then you can adjust to performance, marketing shifts and the moving target of pricing.
CPQ Saves Time, Saves Money, Moves Products:
Configure, price, quote. Three words and one powerful concept. It puts time to better use, gets reps busier selling and cuts costly errors. Why wouldn’t you explore deploying it with your sales team?
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A Business Strategy Consulting Company
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Amsterdam, The Netherlands