CPQPricing

What is Configure Price Quote (CPQ)?

Nils Knäpper11/7/2023

Configure individual products as quickly as never before, price them and send them as an offer to customers - this is possible with CPQ systems!

Table of contents
  1. What is Configure Price Quote Software?
  2. Maturity levels of CPQ systems
  3. Advantages of CPQ systems
  4. 5 CPQ Softwares for your business
Is your business specialized in variant-rich and customer-specific products, and you are looking for a way to implement your goods more quickly and accurately? Then the magic word is "Configure Price Quote", better known as CPQ. In the world of sales, CPQ has established itself as an indispensable tool that enables even the most complex products to be configured, priced, and then send the corresponding offers in no time. But how do CPQ systems actually work, whom are they suitable for and what benefits do they really offer you? We get to the bottom of these and other questions in this article.

What is Configure Price Quote Software?

Imagine a typical workday in sales: A customer requests a specially adapted product consisting of numerous components that must be individually configured. In the past, this would have been a time-consuming process which could take several hours or even days to check all options, calculate prices, and create an offer. This is where Configure Price Quote Software comes into play, turning this challenge into a quick, efficient process.
CPQ software is a powerful tool that helps sales staff create customized offers for complex products and services. By automating product configuration, pricing, and quote documentation, CPQ allows users to work more accurately and faster:

Configuration

The first step in the CPQ process is product configuration. In this phase, the product or service the customer is asking for is tailored to their specific needs and requirements. With complex products consisting of numerous components, CPQ software guides users through a range of choices and options, based on predefined rules and logic. This rule-based configuration ensures that only compatible options are selected and the end result is a functioning, customer-oriented product. CPQ Software also ensures that the configuration is feasible, taking into account technical feasibility and available stocks.

Pricing

Once the product is configured, pricing comes next. CPQ software automatically calculates the price for the configured product by taking into account a range of factors that could influence the final price. These include quantity discounts, regional price differences, special promotions, customer contracts, and other variable constituents of the price. This complexity is handled by the CPQ software, which is capable of processing all these variables to calculate a correct, market-oriented price. This automation not only ensures efficiency but also minimizes the risk of errors that could occur with manual calculation.

Creation of the offer

The final step is quote creation. After the product has been configured and the price set, CPQ software automatically generates a detailed quote document. This document contains all relevant information customers need to make a purchasing decision, such as a description of the configured product, the price, the delivery and payment terms, and other relevant sales and warranty information. The quote creation often also includes visual representations of the product to give customers a clear idea of what they are buying. The automated generation of bids not only saves time but also ensures that every bid looks professional and is consistent with the company's brand identity.

Maturity levels of CPQ systems

The maturity levels of Configure Price Quote (CPQ) systems show how far the integration and automation of these systems into a company's sales and production process have progressed. Modern CPQ systems have evolved far beyond their original functions and play a key role in the digitalization of business processes, making them an essential element on the path to Industry 4.0.
At a basic level, CPQ systems are closely linked with CRM systems and support sales in the creation of bids. However, the actual innovation arises when, after acceptance of the offer by the customers, the CPQ system directly transmits the created configuration to an ERP system, which automatically triggers production. This poses a challenge as creating bills of materials for variant-rich products is not usually part of the sales process.
This is where the product configurator of the CPQ software comes into play: It translates the customer-specific product configuration into a technical form that can be used for production, without customers coming into contact with complex bills of materials. This translation enables swift and error-free production based on individual customer wishes.
A further level of maturity is reached when the product configuration is simplified to the extent that it can be used directly by dealers or partners. Often such configurators are integrated directly into B2B portals or dealer portals, making it possible to place orders without direct contact with the sales staff.
The pinnacle of maturity is the integration of the CPQ system into a webshop, which allows direct purchases by end customers without any human interaction in the sales process. To maximize user-friendliness, products are often represented through 2D or 3D visualizations. These advances enable a completely digital customer journey from initial interest, through purchase to production.

Advantages of CPQ systems

From a corporate perspective

  • Efficiency increase in the sales process: CPQ systems automate the quote creation process, significantly reducing the time it takes to create quotes.
  • Reduction of errors: Manual quote creation is prone to errors. CPQ systems, on the other hand, ensure accuracy in configurations and prices by using the latest product data and pricing rules. This reduces the risk of errors that may lead to conflicts with customers or internal issues.
  • Improved margins and profitability: With CPQ software, companies can intelligently design their pricing models. They can make dynamic price adjustments based on factors such as volume, combinations of products/services, or current market conditions.
  • Scalability: CPQ systems enable companies to scale with the growth of their product portfolio and the expansion of their customer spectrum. New products and services can be quickly integrated into the system, keeping the company flexible and agile.

From a customer perspective

  • Faster response times: Customers benefit from quick quote production and fast response to their queries. CPQ systems reduce the waiting time from first contact to quote, improving customer satisfaction and the likelihood of closing a sale.
  • Transparency in pricing and options: CPQ systems provide a clear display of prices and available options. Customers can immediately see the impact of their selection decisions on the price, contributing to a transparent and trustworthy purchasing process.
  • Self-service options: Advanced CPQ systems allow customers to individualize products and services through online configurators. This increases customer loyalty as they are actively involved in the process and can design solutions according to their own specifications.
  • Reliability: With the accuracy of CPQ systems, customers can trust that the offers are correct and meet all their requirements. The reliability in the quote creation builds a solid foundation for a long-term customer relationship.

5 CPQ Softwares for your business

Are you now looking for the right CPQ solution for your company? Then take a look at our category for CPQ Software on OMR Reviews. There you will find numerous providers and gain valuable insight into the range of functions, prices, and user experiences with the individual tools. We have brought you five sought-after providers here:
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CPQ
With CPQ software (Configure, Price, Quote), companies automate the lifecycle of the quote and tender process, which begins with the customer specifying their requirements for a company's offer, through to creating the offer, and ends with the shipment of a detailed offer to the customer or interested party. Sales departments use CPQ solutions to accelerate sales processes while simultaneously creating tailor-made offers and improving customer relationships. Therefore, CPQ systems provide functionalities for identifying customer needs and creating custom-made offers that best meet customer requirements. Most solutions build on a CRM system or are suitable for integration with one or more CRM software. CPQ solutions include all functionalities to map basic activities of the Configure-Price-Quote lifecycle. This includes a configuration logic for offers, standard prices and custom prices, as well as quote tracking. In addition, CPQ systems should provide all the information that salespeople use to create quotes that offer benefits for customers and the company, and workflows for users to create, customize, send, and track quote documents in various formats. CPQ tools also enable the use of CRM software, ERP systems, and other data from business software like PIM systems to define and manage product catalogs, pricing, and bundling of products. Furthermore, the profitability of quotes can be evaluated using financial rules, prices, costs, and external factors such as competitors, market changes, and laws and regulations. CPQ solutions can also be integrated downstream (capture and analysis of quote data) and upstream (transmission of e.g., prices to other solutions) with other applications. Finally, they support users in creating analytics and reports throughout the entire offer process, and provide data and suggestions for improving the process.
Pricing
Companies use pricing tools to define, manage, and analyze price strategies for their products and services. Even though prices are usually initially created in ERP and CRM solutions, sales teams can set customer-specific prices as well as discounts or reductions using the flexible features of price management software. Pricing software offers data analysis functions that allow companies to understand the impact of their pricing strategies on the profitability of sales. Based on the analyses, companies can optimize the profitability of their sales by increasing their closure rates and margins. This is why these solutions are often referred to as pricing optimization software. Pricing solutions offer the possibility to create initial price lists and dynamic pricing for certain sales scenarios. Common integrations of pricing management tools include CRM systems, ERP software, E-commerce platforms and CPQ solutions. It should be ensured that pricing software can be integrated with CRM and ERP systems, as these software solutions hold the most important price databases. Through these integrations, pricing information can be shared with all parties involved in a sales and negotiation process, such as customers, sales managers, and others. Therefore, pricing software should offer functions that allow sales staff to set individual prices for individual customers or customer categories. These should take into account factors such as volume, payment terms, contract terms, customer value, sales targets, objectives, or the like. Furthermore, they should include various price finding methods, such as demand-driven pricing. Pricing solutions should also provide analyses that support sales staff in determining the best pricing strategy based on the criteria mentioned before. Additionally, the analytical functions of such software should enable the estimation of the profitability of individual sales, product lines or customer categories.