When it first came on the market, CPQ software was touted as being one major thing: proposal automation software. It was about sales proposal templates, automating the building and easing the sending of sales quotes, and being able to more clearly track every proposal sent.
Let’s call that meaning of CPQ the flip-phone equivalent to today’s smartest smartphone.
Because today CPQ means a whole lot more. Yes, it’s still essentially a “bottom of the funnel” sales tool, and it’s still used to build and send quotes. But businesses of all sizes and across all markets are finding new and effective ways to drive more value from this ever-more flexible, cloud-based solution.
No longer merely a quote builder, CPQ plays a central role in simplifying complex sales… as you shall soon “C.”
Product & pricing configuration/configurator
The crux of CPQ’s transformation from sales proposal automation software to the cornerstone of complex sales is the C in CPQ: configuration. It’s the ability to simplify, centralize, and automate the “assembly” of a complex product.
For example, suppose you sell machinery consisting of hundreds – or even thousands – of components, like heavy equipment used in the construction industry. The equipment you sell may have just a few choices for a chassis, but the options after selecting a chassis become exponential immediately.
Attempting to both store and keep track of components in a spreadsheet, and then create – to a customer’s unique specifications – a complete, usable product by spreadsheet or other manual process is a heavier lift than most heavy equipment can handle.
However, a configuration engine that has all components stored and most every configuration of those products at the ready helps streamline the process, automating the building of viable deliverables, enabling customization, and ensuring the final deliverable meets all specs.
“Meets all specs” should be a given, but there are often rules and/or limitations attached to product components that may result in a manual configuration not meeting specs. E.g., the customer may want trailer X with truck Y, but built into your CPQ solution are rules that prevent that assembly as truck Y does not have the horsepower to haul trailer X. While this would be an easy mistake to make in the manual world, it’s impossible to make with rules-based configuration driving product options.
The configuration engine in CPQ is now perhaps its greatest benefit, and is even being used independently of any sales proposals via customer self-serve portals where they are in charge of their own configurations. While not ideal for initial complex sales, such self-serve mechanisms are the perfect fit for companies selling products that require replenishment (as customers need not bother a sales rep for new parts to existing products: they simply place the order).
A bit about pricing
It’s not all about product configuration. There’s the P as well, pricing.
In the past, pricing sheets made the rounds, sales people knew what their margins were, how much room they had to move with discounts, added services, and similar incentives. Then, they could use proposal automation software (if they had it) to make a professional looking sales quote.
Now, pricing can be 100% centralized and administered with CPQ. A sales manager can create geo-specific pricing, fix discount structures, and more. Not only that, but pricing administration can be specific to reps as well (more experienced reps may get more wiggle room, whereas rookies don’t).
In the end, the meaning of CPQ today has practically traveled light years from mere proposal automation software. With automated product configuration and central pricing administration, CPQ is now more like proposal optimization software.
