Abacus

In the CRM or sales environment, the term „CPQ“ is being used more and more frequently, but what exactly is behind it and why and how is it used?

What does CPQ mean?

„CPQ“ stands for „Configure, Price, Quote“ and usually describes software in the sales area that quickly and appropriately determines the right prices for orders. Automated rules ensure that prices can be generated without errors and take into account a wide variety of variables, e.g.:

  • Quantity
  • Discounts
  • Individual adaptations
  • Optional functions
  • Different subscription types
  • etc.

Why is CPQ used?

CPQ plays a growing role in the B2B sector because many offers and products come with highly complex pricing structures and individual contract differences which heighten the risk of calculation and contractual errors throughout the sales process.

With more errors and lack of transparency/standardization, these complex offers could also lengthen the sales cycle and cost time and resources both for the vendors as well as the customers. This in turn could lead to a higher probability of losing customers who might favor vendors with more transparency.

This complexity has many reasons. There might be customizable products and services, different payment models, service packages or combination options. It is not seldom that bigger customers also get individualized offers which add further complexities to the overall offer since they still need to follow financial guidelines. In the worst case, the customer may have the impression that not everything is billed correctly, or the company does not even make revenue with the „low-cost“ offer.

Companies can use CPQ software to enter their specific products and services in detail, including all possible customization and subscription options, and then determine the right offer or price with a simple click of the mouse. Even special variables such as individual contract agreements can be taken into account, since the CPQ application is usually linked to a CRM or ERP system and can therefore also access customer data.

What are the concrete advantages of using CPQ?

The following study results are based on studies* by the marketing company Aberdeen Group, quoted via SuperOffice and Andrew Moravick (PDF), as the originals are unfortunately no longer online.

*The studies were conducted in 2013 and 2015 and summarized survey results from 165 – 175 companies.

Sales teams using CPQ software:

  • have a shortened sales cycle (3.42 months vs. 4.68 months)
  • have a higher lead conversion rate (+ 5 %)
  • achieve their goals more often (58 % vs. 46 %)
  • send more offers on average (21 vs. 14 per month)
  • could reduce the number of people involved twice as often

Further advantages:

  • Offer processes can be standardized and thus also scaled more easily (e.g. for distributors)
  • Error rates are reduced
  • Both customers and suppliers gain more transparency about the composition of the offer
  • Discount and other offer bases can be defined more easily
  • The product team can work better with Sales in pricing and product development

Find out how your sales team can profit from CPQ offers and many more functionalities with a smart digital workplace.

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