As defined by Gartner, configure, price and quote (CPQ) application suites provide an integrated set of software applications supporting the configuration, pricing and quote generation activities that accompany solution and negotiated selling. CPQ application suites are also deployed to support self-service sales environments, including business-to-consumer (B2C) and business-to-business (B2B) sales environments. CPQ systems typically include pricing engines, proposal generators, quoting systems, and rules or constraint engines, and are complemented by approval and authorization workflows.
CPQ: A Walk Through History and Beyond
Introduced in the early 1980’s, it entered the market as a rudimentary configuration system (aka a “configurator”). With the goal to ensure specifications didn’t conflict with enterprise resource planning (ERP) systems, it provided assistance during the sales process to help reps manage the product specifications customers chose. Fast-forward a few years, and we find that configurators become a bit more sophisticated and more integrated with customer relationship management (CRM) systems.
The 1990’s was a big year for technology advancements and the configurator was no exception. During this decade the configurator made its way to the front office and became a key component of interactive selling.
In the early 2000’s, many small- to mid-sized sales organizations were struggling with quote-to-cash (QTC), and needed a way to further automate the process. A subset of QTC, CPQ gained even more traction across the business community.
2010 was another big year for CPQ. First, Gartner Research released a report that stated “CPQ systems typically include pricing engines, proposal generators, quoting systems and rules or constraint engines, and are complemented by approval and authorization workflows” – officially launching and giving merit to CPQ. Second, as a result of continuing technological innovations, businesses began using CPQ as a comprehensive quote generator.
Do we see the CPQ trend slowing down? Unlikely. A Gartner Magic Quadrant for Configure, Price, and Quote Application Suites states, “that market revenue for configure, price, and quote software was approximately $878 million in 2016, with growth of 20% per year expected through 2020.” Ever since it began to gain traction, CPQ software has proved its weight in gold by helping companies scale sales processes, identify upsell opportunities, improve accuracy, and assist in delivering personalized sales experiences regardless of the channel.
It’s now four decades from its inception and CPQ has morphed from a basic tool to an advanced technology, one that’s become a must-have for businesses small and large. In fact, according to an Accenture Interactive’s study, 83% of sales professionals currently use some form of CPQ system.
We need to note at this point today’s CPQ software only vaguely resembles its predecessors. It’s now able to bring products to life in 2 and 3 dimensions. Known as visual configurators, a digital catalog allows users to design custom products without any assistance.
So, what’s next on the horizon for this software from its humble beginning? Already gaining a foothold, virtual reality product configuration creates an immersive virtual experience that enables you to educate prospects and customers about your products, and provides an innovative way for them to explore your solutions.
CPQ: A Look Inside
Designed to help companies accurately define the pricing of product and services across a large and dynamic set of variables, CPQ software accumulates the variables enabling businesses to create configurations in the best way possible (i.e. bundling, upselling, cross-selling, etc.). In addition, it takes the following into consideration to deliver the best possible price – costs, competition, and economic factors.
Often deployed within existing systems such as CRM, ERP and eCommerce, CPQ software solutions enable businesses to simplify complex configurations and deliver accurate quotes. With the ability to expedite and automate the sales process, CPQ ensures that customers receive the exact products (or services) they desire and provides for a more efficient and personalized customer experience. This is a win-win for businesses and customers alike.
Let’s go under the covers and unwrap each of the functions that QPC performs.
Using business rules, an ideal or the right combination of products, services and options is created (configured). Some CPQ software solutions provide proposal collaboration with other parties, such as suppliers and buyers.
Using business rules, discounts, promotions, and bundles are applied to the configured products and services. The rules can range from simple quantity discounts to more sophisticated rules, including value-based or outcome-based pricing. In addition, some CPQ software solutions streamline the approval process in the event that business rules are exceeded.
Finally, an error-free quote is generated which contains detailed price features and graphics. By automating this step, businesses can ensure that best practices are always applied, proposals are quickly generated, and buyers are able to quickly and accurately understand the proposal. Thus expediting the ability to convert quotes to revenue-generating orders.
Rise Above Proposal Complexity
The need for greater agility and speed is driving businesses to incorporate more flexible support solutions – like CPQ. Powerful sales tools like CPQ remove the complexity from complex product configuration, enabling you to decrease quotation turnaround time, increase average order value, improve quote accuracy, win more deals, and deliver the personal experiences customers now expect.
With the right CPQ software, you’re able to capture everything you need in one place – products, pricing and business rules – and rise above the competition by closing more deals faster. Reach out to BillingPlatform’s experts to learn more today about innovative CPQ solutions for your organization.