Although effective for any company, CPQ software is especially impactful for organizations with a wide range of products or variable product configurations and bundling options. It’s also essential for companies that offer discounts in order to close deals.
Over the past decade, as the value of CPQ software has proven itself time and time again, it’s become an integral part of the sales process and contract management at most of the leading companies in the world.
How does CPQ software work?
To illustrate how a CPQ solution works—and its importance—consider this:
You’re a sales rep at a B2B software company, and you’re in the final stages of closing a great deal with a prospect. Maybe you’re looking to offer them a certain discount, or maybe they’re looking for a specific configuration of your software that includes some, but not all, of your product’s features and add-ons.
Without CPQ software, it could very well be a painstaking process for you to give this lead a quote. That’s because everything must be done manually: You’ll have to dig through a myriad of spreadsheets, check in with your sales leader, and then get the quote approved by the powers that be.
Even then, there’s a fair chance your quote will be inaccurate.
Yep. Not good.
However, with a CPQ solution, all of your product configurations, packaging options, prices, and discounts are automatically specified ahead of time. The CPQ software literally guides you through the quote-building process, allowing you to create an accurate quote for any product configuration or sales discount in a fraction of the time. Then, with your accurate quote created, the CPQ software will automatically deliver the quote to your colleagues who need to give it approval.
Okay, now let’s look at exactly what CPQ software helps you do, step by step.
1. Configuring products and solutions
In B2B, and in growing areas of B2C, there’s a lot of them. Customized solutions, tailor-made products, customer-designed plug-and-play experiences. The list goes on and on.
All this configuration can be a serious headache for you, the seller. But not when you have CPQ software.
That’s because CPQ software actually configures the different product customizations to match exactly what the customer has requested. It’s all automated, without any manual manipulation of the configurations.
That’s right—bon voyage to human error. This is accuracy at its finest.
2. Determining accurate pricing
One crazy awesome advantage of CPQ software? Knowing how much a customer is willing to spend on a specific product configuration.
It sounds too good to be true, but CPQ uses artificial intelligence (AI) and market analysis to detect what prices would be fair and agreeable to your customer based on what they’re looking for—without sacrificing profitability for you.
3. Sending a quote
As we mentioned before, CPQ software allows you to rapidly create accurate quotes for prospective customers.
This is a huge advantage over your competition, who very well may be talking to the same prospects as you are. If your competitors are burning hours thumbing through spreadsheets and running around trying to get approvals while your quote lands in the prospect’s inbox, there’s a better chance you’re going to win that deal.
Speed and accuracy is a reflection of an organization that is professional, responsible, and purposeful. And those are the companies people want to buy from.
4. Integrating into ERP solutions
Of course, a deal isn’t done just because you send an accurate quote to the prospect.
If—and when—the deal closes, someone on your Accounting and Finance team will have to perform several additional tasks to set the contract up for billing per the schedule and pricing from the quote: collect payment, recognize revenue according to proper accounting standards, and update critical reports and KPIs on the business.
All of this should happen within a single system: your Enterprise Resource Planning (ERP) system. Using a CPQ software that can seamlessly integrate into your ERP system will drastically improve the working relationship between your sales, operations, and finance teams, because it brings all aspects of the order-to-cash process under one single application.
Benefits of CPQ software
Managing configurations, product pricing, and quote creation is hard. Especially for a rapidly growing B2B organization with fresh-faced sales reps who need to ramp up fast and start closing deals.
We just got dizzy thinking about it.
The combination of a growing product list or service offerings and a rise in demand can create serious growing pains for a company, often because of bottlenecks in the order-to-cash (O2C) process, in which CPQ plays a role. (And that’s no supporting role, either—CPQ software is one of the stars of the show. More on this later.)
And that’s because, with the right CPQ software in place, you’ll start seeing enormous benefits to your entire business.
From the bottom line to the top line and everywhere in between.
Let’s dive in.
Collaboration for accurate quote creation
The last thing you want to do is send an inaccurate quote to a prospect.
Quote their order too high, and you’re likely to lose the deal. Quote it too low, and your company loses money on the deal. If you sold Product A, did you also remember to sell its required counterpart, Product D?
CPQ software helps you prevent quote inaccuracies through collaborative quote creation. Simply grant your colleagues in the appropriate departments access to your cloud-based CPQ software, and they can view and edit the quote you started in real-time.
It’s the fastest and easiest way to ensure your quote is up to snuff—to the very penny—before you send it over to your prospect.
Increased sales efficiency
With faster, automated, and more accurate quote creation comes prospects who are more willing to throw their hands up and scream, “YES!”
This is because, with CPQ software, they’re not sold on prices that aren’t possible. Nor do they have to wait days or weeks for a quote to come through their inbox.
Speed and accuracy, together, are possible with CPQ software because it cuts out most of the potential for human error in the process.
(It also doesn’t procrastinate or take lunch breaks or get distracted, which helps a bit, too.)
Believe us, this pays dividends when it comes to sales efficiency.
Higher revenue streams and savings
Since CPQ software helps you a) accelerate sales cycles, b) enhance pricing accuracy, and c) increase visibility into upsell and bundling opportunities, then it should come as no surprise that it delivers higher revenue streams and savings for your company.
Wow, that felt good. Let’s say it again:
Higher revenue streams and savings for your company.
The thing is, with a modern CPQ system, you’re able to deliver a consistent sales experience for your prospects, which results in more money earned and less time wasted for you.
In other words:
Fewer closed lost, more closed won.
What more is there to say? CPQ truly is a game-changing software.
How CPQ improves the order-to-cash (O2C) process
The order-to-cash (O2C) process is the complete order-processing system of a company. It includes everything that happens from the moment a customer places an order to the moment your company receives payment.
But what does CPQ software have to do with it...and how does it improve the O2C process?
CPQ software radically accelerates quote-creation and client-delivery times, getting you to the “C” (“cash”) in the O2C process faster. This can have very positive implications—not only on your sales performance and revenue generation, but also on your revenue recognition, run rate, forecasting, and payroll.
Does my business need a CPQ system?
If you’re reading this and you aren’t convinced that you need a CPQ system, but also aren’t convinced that you don’t need a CPQ system, then here are a few giveaways that your business is ready for one:
- You’re losing out on deals because of slow quote generation or quote approvals.
- You’re relying on a person (or multiple people) to manually review all sales quotes.
- You’re beginning to scale and it’s overwhelming your sales and sales ops teams.
- Your sales reps are spending more time creating quotes and getting approvals than they are doing what you hired them for—selling.
- You’re designing new—or already operating under one or more—recurring revenue streams.
- You’re losing out on deals because of miscommunications between reps and prospects about price.
- Your reps are sending inaccurate quotes to prospects.
Resources on how to choose a CPQ system
Are you actively on the search for a CPQ software solution? Or, do you think you’ll be considering one soon?
If you nodded your head “yes” to either of those questions, then it’s important that you know exactly what you’re looking for. To help you do that, we’re leaving you with a list of resources to check out before making a final decision.
(They say “knowledge is power.” And if that’s not true for everything, then it’s at least true for business investments.)
Here they are: