Some have said configure-price-quote (CPQ) software is overkill for software-as-a-service (SaaS) companies. They maintain the solutions offered by SaaS organizations aren’t complex enough to warrant CPQ, but this thought process is rapidly changing. Forward-thinking organizations recognize the need of CPQ software within SaaS businesses – both small and enterprises. A few key reasons for this change is the evolution of buying and selling, as well as the complexities associated with today’s product configurations and pricing models. Before jumping into CPQ features and benefits, let’s quickly review what CPQ is and what it isn’t.
CPQ: A Quick Review
CPQ is the first three steps of the end-to-end quote-to-cash (Q2C) process and provides the following functionality.
Regardless of whether your offerings are simple or complex, tailoring them to meet customer expectations has become the norm for SaaS sales reps. Equipped with a unified product catalog and a rule-based configuration engine, configuration guidelines enable sales reps to develop proposals that consist of valid combinations of products and services.
When it comes to SaaS sales, a “one-size-fits-all” pricing model simply doesn’t exist. Using robust subscription and usage-based pricing, discount schedules, flexible contract durations, etc., the price component of CPQ enables sales reps to accurately price products and services – providing for a streamlined and automated routing and approval process.
When quotes are riddled with errors and inaccuracies, not only is the potential sale at risk but if underpriced, there’s a good chance money gets left on the table. QPC ensures that quotes are accurate and error free, enabling deals to be quickly and automatically turned into branded proposals. Additionally, with electronic proposal acceptance deals are closed faster.
While the above provides the foundational elements of CPQ, there is another component that your CPQ tool shouldn’t be without – analytics. Inclusion of analytics within the CPQ solution provides the data needed to quickly determine many things. This includes the number of quotes in the system, approved quotes, total value of quotes, products that are selling best, and much more. That way you always have your finger on the pulse of your SaaS organization’s financial health.
Interested in the inner workings of CPQ and the return on investment (ROI) you can expect to receive? Then you probably should take a moment to learn how a CPQ tool works.
CPQ Features and Benefits
One thing is certain, CPQ doesn’t lack when it comes to features and benefits. Let’s start by covering CPQ features:
CPQ features a tool within that provides prompts about the needs, requirements, and specifications of the required solution. This process enables sales reps to quickly and easily filter through offerings to determine the product(s) that most closely match the needs of the customer.
Product and service configuration
As discussed above, to meet customer expectations the solution provided, most often then not, needs to be tailored. CPQ leverages automated rules to allow reps to customize the product’s components and features.
Revenue and profitability are dependent on your organization’s ability to accurately price offerings and make pricing adjustments quickly and easily – without wreaking havoc on your product catalog. CPQ features the ability to define rules within the product catalog for pricing, rating, promotions, and discounting. And out-of-the-box rating methods ensure pricing scenarios are aligned to the solution’s value.
Standard and non-standard deal management
Knowing your financial health and your customer preferences are essential and CPQ provides the key metrics needed such as quote accuracy rate, quote turnaround time, standard to non-standard deal ratio, quote conversion rate, and self-service quote ratio.
Workflow and approvals
If you’re still handling quote approvals manually, the bottlenecks and process standstills encountered can negatively affect your bottom line. Automated approval workflow takes into consideration parallel approvers, the rerouting of approval requests, and auto-approval workflows for pre-specified bundles that contain preset discounts – maximizing efficiencies, streamlining the process, reducing approval time, and helping to maintain audit trails.
Quote generation and amendments
Initial quotes are rarely accepted as is. When handled manually, this process can be intensive and time consuming. Whether a new contract or a renewal, streamlining the process and avoiding errors is essential. When it comes to contract renewals, without automation there are a number of manual processes, including pricing revisions, upsells, cross-sales, etc.
Once a quote has been accepted by the customer, some CPQ solutions provide the ability to automatically convert a quote to an order, eliminating manual and duplicate efforts. By defining processes to auto-validate and auto-book quotes to orders, SaaS organizations can significantly reduce time associated with the sales cycle.
Increasingly being adopted, asset-based ordering or ABO functionality enables SaaS organizations to handle hardware and software as an asset. Typically, a back-office function, moving it to the front-office provides the company with a 360-degree view of all products and services purchased by the customer.
As mentioned above, analytics is a critical component in CPQ features. Unlike data mined from other systems, CPQ provides insights into the sales cycle, quote conversions, deal characteristics associated with wins and losses, product value and demand, etc.
Now that we covered what CPQ is, let’s look at what CPQ isn’t. A quick Google search tells the story in the form of a question. Is CPQ the same as customer relationship management (CRM)? CRM and CPQ are two different software applications: neither competitors nor antagonistic, but complementary. One is a teamwork tool used mainly by the back office that deals with the entire customer management. The other “triggers” its effectiveness at the time of sale.
Essentially, CRM doesn’t help you sell, whereas CPQ does.
Integrating CPQ: Better Together
While some companies opt to use CPQ as a standalone tool, when integrated with other software applications the solution becomes even more impactful. Let’s look at the common back- and front-office integration points as they relate to the lead-to-cash flow.
The sales process begins in CRM with leads and opportunities, becoming a seamless component of the sales process. Once qualified, it progresses to the CPQ flow where the offering is configured, priced, and a quote is generated. Then the proposal is attached to the opportunity residing in the CRM application. At this stage negotiations may take place before the customer accepts the proposal. Once accepted, the quotation is converted to a sales order and the order fulfillment process takes place. Integration of ERP is essential to ensure the entire Q2C process is uninterrupted. The final step in the lead-to-cash workflow happens once the order is fulfilled. This step – invoicing – consists of leveraging the sales order to develop the invoice, receiving payment, and when necessary, following up on past due invoices with payment reminders and collections management.
Whether using application programming interfaces (APIs) or pre-built connectors, integrating back- and front-office applications enables you to streamline the entire lead-to-cash flow, create a seamless and efficient financial ecosystem, and deliver the kind of experience prospects and customers expect.
Can Your SaaS Organization Benefit from CPQ?
Built for business users, BillingPlatform provides a unified quoting and billing solution for sales and finance. Unlike most CPQ providers, we bring CPQ and billing together in a single solution with a single product catalog. This way you can seamlessly translate quotes into invoices. Developed as a cloud-based platform, you get a strategic view of:
- All sales activity
- Intelligence needed to ensure offerings are profitably configured
- Insights into your revenue pipeline for improved profitability
- Ability to exceed customer expectations
Is your SaaS organization ready to benefit from a platform with all the CPQ features you need? Then don’t wait any longer, go ahead and set up a conversation with our experts.