The Evolution of CPQ Software

Perhaps you’ve heard of configure, price, quote (CPQ) software, but haven’t implemented it into your business. Or, maybe you just want to learn more about CPQ and the solutions available. This guide will explore everything you need to know about CPQ software, including: 

 

What is CPQ, and how does it work?

CPQ features to look for

When should you use CPQ software?

How to implement CPQ

How can CPQ help improve the sales process?

What to look for in CPQ solutions

How CPQ tools integrate with your modern tech stack

When and why should startups consider adopting a CPQ solution?

FAQ about CPQ

 

Effective CPQ software should be able to handle complex contract structures, allow finance to invoice and recognize revenue accurately, and manage subscription modifications. It should provide the needed flexibility and guardrails for sellers to close deals rapidly.

Let’s explore how CPQ software has evolved to meet the demands of modern business and the benefits it can deliver to SaaS companies.

 

What is CPQ, and how does it work?

CPQ stands for configure, price, quote. CPQ technology helps businesses streamline their sales process by automating the configuration of complex products, determining accurate pricing based on various factors, and generating customer quotes. It integrates with native CRM and ERP to enable customer self-serve.

But what exactly does that mean for modern businesses? Let’s break down the core components of the CPQ process:

Configure 

During the sales process, CPQ tools enable users to choose and customize various components, features, and options according to specific customer requirements.

For instance, suppose you’re a customer looking to purchase a computer. You have specific requirements regarding processor speed, memory capacity, storage options, and graphics capabilities.

A CPQ solution provides a user-friendly interface to configure your ideal computer system. You start by selecting the base model, and then you can customize it by choosing the processor, memory, storage, graphics card, and any other desired features.

As you make each selection, the CPQ software ensures that the chosen components are compatible with valid options for your chosen base model.

It also provides real-time feedback, displaying the updated price and specifications of the configured system.

Price 

CPQ software automates the pricing process, combining recurring or subscription, usage-based, and one-time pricing models in complex hybrid methods such as consumption-based, prepaid, drawdown, or minimum commit plus flat fees. The power of CPQ is clear when calculating complex price changes for contract modifications.

Quote 

Once the product has been configured and priced, CPQ software generates a custom quote that includes all relevant details, such as product features, pricing, and terms and conditions.

CPQ guardrails ensure that quotes are accurate, comply with company rules, and follow required internal approval processes before being sent to the customer for review and approval.

 

CPQ features to look for

Before you choose any CPQ platform, there are certain essential features the right platform for your business must have. Here are the things you need from a CPQ platform:

Completely automate the sales process

Arguably, the primary function of a CPQ is to provide an easy and fast quote–generating tool. If a CPQ still requires manual labor to generate quotes, it’s not flexible enough. Keep searching for a more suitable solution.

Speed

Have you heard about the sales reps that take days to generate quotes? When customers ask for a pricing proposal, they want it fast. You need a CPQ that enables sales agility. Choose a CPQ solution that allows sales agility by providing a fast and efficient quoting experience. The system should quickly guide sales reps to the right set of products and prices, eliminating the need to sift through extensive SKUs.

Scalability

As your business grows, you need a platform to handle your increasing workloads and demands without impacting your performance. A scalable CPQ saves you from costly, disruptive system upgrades and migration—factors such as the number of users, products, and pricing configurations the platform can support tell you how scalable the vendor is.

Native CRM integration

Sales ops work with different tools depending on your business models and requirements. So, the CPQ platform must integrate with CRM and ERP to facilitate seamless data transmission. This offers the following benefits:

• Sales and finance team to get detailed insights into customer data, deal history, and pricing information. They can track customer interactions, analyze the sales pipeline, and make data-driven decisions.
• Facilitates effective management of prepaid drawdowns, subscriptions, and amendments, ensuring accurate and timely execution.

Customization and flexibility

Consider a CPQ solution that allows your sales team to structure deals to satisfy customers and accommodate various pricing models (bundles, recurring, usage, promos, etc.). Such a solution should enable your sales team to sell, price, and execute renewal according to their preferences.

The solution should also support different price packages in different ways (bundles; one-time, recurring, usage; promos; different options for different channels). Each business has its unique product configurations, pricing models, or approval workflows requiring customization options and specific requirements.

Great user experience

A great CPQ is intuitive, user-friendly, and enables fast quoting for your sales teams. The CPQ platform with great user experience includes guided selling, dynamic pricing, and a visually appealing interface.

Pricing and ROI

Watch out for CPQ tools with hidden fees. Some CPQ solutions have low initial costs, but you incur other fees to use certain features as you scale. Before you commit, determine their pricing structure, implementation costs, licensing fees, and ongoing maintenance expenses. Compare the features and functionality different platforms offer to ensure you get the best value for your investment.

Industry expertise

A vendor with industry expertise is likely to have a CPQ solution with the needed features and components that align with your business needs. However, a lack of industry expertise often results in a CPQ solution with inadequate customizations and configuration capabilities.

Support and training

As you explore CPQ solutions, you may need help at times. Choose a responsive vendor that offers comprehensive training assistance and effective customer support when needed.

Security and compliance

What are the vendor security measures and data protection capabilities? Great CPQ vendors comply with industry regulations and standards to safeguard sensitive customer and pricing information.

References and reviews

Do they have past customers? Ask for reviews from past customers and existing customers of the CPQ platform. Asking for references from those in your industry can go a long way to helping you choose a good or bad vendor. Ensure you gather valuable insights into the platform’s performance, reliability, and customer satisfaction.

Future roadmap

Innovation is key. Consider the vendor’s future roadmap and commitment to innovation. A forward-thinking CPQ platform will continually enhance its features and functionality, keeping up with evolving market trends and technology advancements.

 

When should you use CPQ software?

CPQ software proves valuable in various scenarios, particularly where traditional CRM systems struggle. It makes the quoting process exceptionally fast and easy.

A CPQ is particularly useful if your company has:

 

High-complexity configurable products

CPQ software shines when handling products that offer numerous customization options, variations, and interdependencies. Its systems are specifically designed to tackle the challenges posed by product complexity. Companies can use CPQ to simplify and automate customizing and pricing these complex products.

Multi-channel sales

When a company operates through multiple sales channels, such as direct sales, resellers, and e-commerce platforms, it can be challenging to keep track of all the moving parts. Salespeople face many challenges, such as inconsistent pricing, fragmented customer data, channel conflicts, and inventory management challenges.

CPQ tools help them tackle these challenges by:

• Providing a centralized platform to ensure pricing and quoting consistency across these channels.
• Integrating with various systems to ensure real-time inventory visibility and streamline order management.

High-volume quoting

As companies scale, requests for quotes (and the sales team’s workload) increase. CPQ comes to the rescue by automating various aspects of the quoting process, reducing the time and effort required to create each quote. This enables sales teams to scale more efficiently, even when faced with a high volume of quoting tasks.

Reduced sales performance

If your sales team’s performance is suffering even with an influx of leads, you might need a CPQ tool to make their workflow more efficient.

With a solid CPQ tool, your sales team can focus more on selling and less on generating quotes. This will improve their overall performance and drive more revenue.

 

How to implement CPQ

Now that you have an idea of what CPQ is and how you should use it, let’s go through some steps to help you implement CPQ into your business.

Determine goals: Before beginning the CPQ implementation process, think about your goals around some important KPIs:

• Time spent per lead

• Churn rate

• Win rate
• Turnaround time
• Quote accuracy 
• Renewal rate

 

Focus on top CPQ features: CPQ features are well worth the investment, but you also don’t want to overwhelm your team with too much to implement at once. Pick the features that are most important to your sales goals with qualities and components, such as:

 

• Flexibility
• Scalability
• Support
• Integration
• Ease of use
• Reporting

 

Pick an all-star team: Assemble a project team to keep the process moving. You’ll want to chat with your CPQ implementation partner to determine the best strategy for setup and recruit top performers to ensure the setup goes smoothly.

 

Optimize the quote-to-cash process: To successfully implement CPQ, your quote-to-cash process must be in check. Conduct an assessment to determine if any changes need to be made to your process.

 

Dive into data management: CPQ software is meant to help your sales team work more efficiently with the correct data in front of them to create accurate quotes. Your data may be located in different spreadsheets and other platforms, so you’ll want to organize and move it into one place for efficiency.

 

Document the process: Keep the sales process moving by documenting any training. Document the following to help you with the quoting process:

 

• Added products
• Approvals
• Signed documents
• Closed wins
• Renewals

 

Establish post-implementation support: Stay in contact with your implementation partner to avoid delays and keep the sales process moving along efficiently. New software takes time to learn, so asking questions early on will help speed up the process.

 

Measure success: Now that you’ve implemented your CPQ software, look at your sales performance, CPQ data, and any process improvements to see what went well and what to improve on.

 

How can CPQ help improve the sales process?

Good CPQ tools can do much to improve the sales process. Sales reps only spend 35% of their time engaging with prospective buyers and the rest on administrative tasks. Having the correct software can allow sales reps to spend more time connecting with clients.

Here are other specific ways using a CPQ tool can boost your sales process:

 

Sell more quickly

Research shows that 50-90% of the buyer’s journey is finished before the customer talks with a sales representative. CPQ systems speed up the sales cycle and increase revenue by reducing time waste. This means that sales teams can focus on closing deals faster. Here’s how CPQ achieves this:

 

1. Maximize client interaction to reduce wasted time: CPQ solutions streamline time-consuming administrative tasks by providing a straightforward, error-proof process for configuring and pricing products or services.
2. Build sales momentum: CPQ helps maintain momentum by enabling quick response times when prospects request quotes or information. Providing relevant materials quickly keeps prospects engaged, which is crucial as market conditions and customer needs can change rapidly.

 

Delays in the sales cycle create opportunities for agile competitors to seize prospects’ attention. CPQ solutions simplify the sales cycle, reducing delays and ensuring a continuous flow. This reduces the risk of lost prospects and increases profits.

Streamline the approval-deal process

The B2B sales cycle is notoriously long and involves several decision-makers. Integrating CPQ into your sales process can improve and shorten the deal-approval process for operational efficiency.

The following CPQ features expedite approvals, enhance collaboration, and ensure efficient operations:

 

• Automatic approval notifications: Many CPQ tools notify stakeholders and decision-makers when a deal reaches the approval stages. This eliminates the delay caused by manual communication.

• Comprehensive deal details: CPQ presents comprehensive deal details such as pricing and specific terms and conditions on one screen or in concise emails, facilitating informed decision-making.

• Deal-approval visibility: CPQ tools support transparency by tracking approval progress, which enables effective communication and prevents delays.

• Compliance and audit readiness: CPQ software provides sales teams with a detailed audit trail, which can be invaluable for scrutiny and regulatory oversight. It also allows sales teams to evaluate the decision-making process, showing who, when, and why a decision was made.

Related guide: How to bridge the gap between sales and finance

Enhance sales with accurate branded proposals and quotes

Creating accurate proposals or quotes with corporate branding and personalization can improve your business sales. One of the top three things that encourages consumers to pay more for a more expensive product is if it conveys brand reputation and trustworthiness (17%). Nearly half of consumers (44%) are also more loyal to a brand with a good reputation and trustworthiness.

For many salespeople, a quote and proposal are all about accuracy — they care little about how aesthetically pleasing the documents are to their clients.

This could lead to seemingly small, but reputation-damaging errors in customer-facing documents, such as outdated or low-resolution logos and images, misspellings, inconsistent adherence to brand guidelines, and amateurish layouts.

But with the right CPQ solution, you can access a comprehensive document tool tailored to your brand compliance. This tool enables your salespeople to provide customers with accurate quotes or proposals and visually appealing documents that present your brand as it is.

Enable guided selling

CPQ systems automatically simplify customer needs by examining them through simple, user-friendly questions. Once the customer enters their response, the CPQ intelligently presents the seller with suitable choices.

This method follows a well-defined logic connection between a customer’s needs and product selections.

Here’s why it is useful:

• Selling is initiated purely by relying on customer-centric questions rather than product knowledge — leading to more conversion.
• It also facilitates onboarding and minimizes the cost of training new salespeople since salespeople don’t need to memorize an extensive list of product names and codes.
• It leaves almost zero room for wrong product selection.

Ensure error-free orders

One of the biggest selling points of CPQ is that it ensures error-free orders. A CPQ eliminates the need for manual orders. For example, it integrates with the CRM system, allowing sales teams to access customer information directly. It also configures the accurate product so that feasible product combinations are presented to customers, eliminating the risk of errors in the order.

Simplify subscription management

With CPQ subscription-based revenue, companies can manage their customer subscription without going through the pains of manual processes.

CPQ systems effortlessly enable tracking of customer renewal dates, adjustment of pricing based on different subscription tiers, and handling upgrades and downgrades.

It also supports renewals, up-sells, and cross-sells, increasing revenue and profits. This makes it easier for businesses to identify opportunities to offer additional services or upgrade subscription plans.

CPQ software accurately calculates pricing adjustments. It can then send instructions to supporting systems to remove or alter MACD (Move, Add, Change, Delete) records, ensuring accurate pricing changes and updates.

These features allow businesses to minimize errors and provide a streamlined subscription management process.

 

What to look for in CPQ solutions

There are several important things to look for when choosing a CPQ solution for your business.

 

System integrations: A good CPQ solution should easily integrate with ERPs, CRMs, and other systems.

 

Easy communications: Part of an efficient sales process is being able to communicate with internal and external members of your team. Your CPQ solution should have a central location to coordinate with everyone involved.

 

Custom quotes: Product quotes are not a one-size-fits-all. Your CPQ software should allow you to make adjustments to pricing quickly and easily.

 

Intuitive platform: A software like this should make your sales process easier. It should be accessible to all team members involved without extensive training.

 

Scalability: As your business evolves, the CPQ tool of your choice should scale with it. Look for a solution that will easily adapt to workload and other changes.

 

Cloud delivery: Cloud-based software will enable all team members to access the system from anywhere.

 

Reporting: Reporting features help you monitor performance, trends, and sales.

 

Platform assistance: Even experienced platform users will have questions now and then. Ensuring your solution has a support team to walk you through any hurdles will reduce confusion.

 

How CPQ tools integrate with your modern tech stack

The right CPQ software can unify sales, revOps, and finance into a streamlined process integrated with the rest of your tech stack. The most common integrations and downstream operations of CPQ are:

 

Billing/payments solutions

CPQ should integrate with a business’s billing and payment systems to avoid manually re-keying orders into the accounting systems. While most CPQs can send a new order contract to a billing system, many struggle to amend an existing contract.

That requires CPQ to pull data from the billing system, modify it within the CPQ tool, and push it back to billing after approvals. Zuora CPQ is the only quoting software purpose-built for quoting any combination of subscriptions, products, and services for the entire subscriber lifecycle.

Related: How CPQ supports complex contract modifications and drives NPS

CRM

Leading CPQs integrate natively and deeply with CRM, with a bidirectional data sync deep enough to handle complex upgrades and midterm changes. Simplifying the sales process in CRM, sellers quote on a single screen in their CRM tool with Zuora CPQ.

Product catalog

CPQ software is only as strong as the integrated product catalog. Many SaaS businesses lack the tools to support contract terms on the contract such as ramps, start dates, and renewals. They cannot construct complex recurring products with multiple rates plans and elements such as one-time fees, usage-based fees, and tiered pricing in their product catalog.

Zuora boasts an incredibly flexible and powerful product catalog that is purpose-built to handle modern business.