What is Product Configuration?
Product configuration is the process of setting up a product for sale per the customer’s needs and preferences. It involves configuring features, attributes, options, pricing, and delivery methods to construct an offering that meets their requirements.
The product configuration process is most important for B2B vendors selling complex products and services (e.g., manufacturers, distributors, and enterprise software providers).
Customers can either configure products themselves through eCommerce self-service portals, or a sales rep or product engineer can carry the process out for them.
Increasingly, prospects and existing customers choose the former over the latter — modern B2B buyers prefer to do their own research, talking to company reps only when they have to.
Synonyms
- Configure-to-order (CTO): A production process where a business builds products based on customer specifications.
- Product configuration management: Software that enables companies to sell their products with multiple options and customizable product features.
Types of Product Configuration
There are three types of product configuration: rules-based, late-stage, and CPQ product configuration.
Rules-Based Product Configuration
Rules-based product configuration relies on predetermined rules and conditions to create customized product offerings.
A rules engine — the core component of a rules-based product configurator — defines and manages all the product rules required for proper configuration. It ensures every combination of product attributes and options is valid, feasible, and optimized according to the business’s objectives.
On the frontend, sellers or customers configuring products through a rules-based product configurator see only valid combinations of options and features, rather than manually selecting each one.
Businesses that benefit from rules-based product configuration typically have complex product portfolios with multiple customizable elements and customers that place repeat orders.
Examples include:
Late-Stage Product Configuration
Late-stage product configuration is a production process where products are configured and customized to the customer’s specifications after they’ve been built.
Late-stage configuration allows businesses with a high degree of control over their manufacturing operations to offer customers selectable options, upgrades, or add-ons after the initial sale.
It works well for more expensive items, such as industrial equipment, agricultural machinery, and computer systems.
It also works well in other instances where general product design remains the same, but minor adjustments, such as colors or special features, can be added at the end of the process.
CPQ Product Configuration
Configure, price, quote (CPQ) product configuration involves the use of software to guide sales reps through the CPQ process (the first stage of which is product configuration).
CPQ solutions allow sales reps to generate quotes for complex products and services in real-time, reduce errors in the overall process, and streamline manual processes associated with configuring products, such as gathering customer requirements and calculating pricing.
CPQ accomplishes these things through features such as product and pricing configuration, guided selling, a rules engine, ERP integration, and document generation.
Businesses with sales infrastructure use CPQ to optimize their internal sales processes, improve customer experience by providing transparent pricing and product options upfront, and increase sales productivity.
Benefits of Product Configuration Management
Product configuration management is important because it helps sellers sell, and buyers buy.
Sellers enjoy the intuitive interface, automatic rules-based logic, and a streamlined sales process. Buyers appreciate the ease of selecting product options and features that best fit their needs and the transparency that comes with it.
It’s a win-win.
Product Customization
Customization allows vendors to offer their customers more options without dramatically increasing their overhead.
Take car manufacturers for instance: They use product configuration management systems to let customers select from multiple body types, colors, engines, interior options, and accessories.
By providing a user-friendly interface, customers can easily build their dream car, while the system ensures that all selections are compatible and meet manufacturing standards.
Valid Product Designs
Product configuration management systems play a vital role in enhancing the sales and purchasing experience by presenting only valid and available options to both sellers and buyers. This approach minimizes the risk of disappointment or confusion, ensuring a frictionless transaction.
By integrating product data from the company and syncing it with ERP and inventory data, product configurators can accurately display available options, features, and add-ons.
Rules-based logic within product configurators further enhances the user experience by guiding customers through the selection process. The system can recommend complementary features or add-ons based on the customer’s chosen configuration, helping them make the most of their purchase.
Helpful recommendations and guided workflows simplify the decision-making process and increase the likelihood of upselling and cross-selling opportunities for the business.
Cost Reduction
Product configuration management offers several cost-saving benefits for businesses by streamlining sales processes, increasing efficiency, and reducing the reliance on manual tasks.
- Efficient sales reps. By allowing buyers to configure products themselves, sales reps can focus on finding and engaging new prospects. This increased efficiency helps businesses maximize their sales team’s productivity while generating new revenue.
- Fewer manual processes. Eliminating time-consuming tasks like data entry and searching through product catalogs frees up sales reps’ valuable time. This allows them to concentrate on building relationships with customers and closing deals, leading to better use of company resources.
- Cost savings through process automation. Most IT leaders agree that automation technology saves companies between 10% and 50% on manual processing costs. Employees report saving up to 2 work hours daily (240 hours per year) through automation.
- Greater cost reduction at scale. As businesses grow, the cost-saving benefits of product configuration management have an even larger impact. The streamlined sales and buying processes enable companies to efficiently handle increasing customers and orders without incurring significant additional expenses.
- Momentum for further savings. Once the sales and buying processes become more efficient through product configuration management, businesses can use their momentum to identify other ways to achieve operational efficiency.
Align Sales and Engineering
Sales reps aren’t engineers themselves, but they frequently sell to buyers who care about and understand the technical elements of a product.
Product configuration management is critical in bridging the gap between sales and engineering departments by:
- Centralizing product data
- Facilitating communication to address queries and solve technical issues
- Helping both teams identify features customers care about the most
- Aligning them on product variants, specifications, and capabilities
- Creating a feedback loop for customer insights to inform product design and sales tactics
Connect eCommerce to Manufacturing
New data from TrustRadius verifies a trend most companies have seen become more prevalent in the past half-decade: customers prefer to research and purchase products online.
Nearly 100% of B2B buyers want at least some form of self-service throughout the buying process, and only about a quarter engage with a salesperson before making a purchase.
Product configuration management systems can help turn this eCommerce trend into an opportunity by connecting customers to factory floors and delivering configurable products at scale.
Real-time product visualizations, sales quotation and order management, 3D configurations, and integrated inventory data make it easier for buyers to carry out complex product configurations from the convenience of the vendor’s website.
Deliver Orders Faster
Without a product configurator tool to manage it, the configuration process is cumbersome and time-consuming. Product configurations can involve multiple teams, databases, manual processes, and product designs.
Product configuration management automates the workflow from start to finish by syncing customer data with ERP and inventory data. That way, businesses can accurately plan production schedules, create accurate pricing models, and reduce lead times for delivery and assembly.
Product Configuration Software Features
Not all product configurations offer the same features. The exact ones to look for depend on a company’s size, structure, product and service suite, and internal processes.
Here are the five most essential product configuration software features:
CAD Automation
For companies with complex B2B products, CAD automation provides important capabilities such as viewing parameters and 3D model visualization.
CAD-configured models simulate the assembly process before they’re produced and show product dimensions and performance data to buyers.
Visual Configurator
Even for existing customers, the buying process is considerably harder without a product visualization.
Configuration software lets customers build the product themselves and get a detailed and accurate look at it on their screen.
This gives some buyers a confidence boost. For others, it’s the difference between converting and not.
Product Catalog
Every product configuration tool should ingest, internalize, and add to the company product catalog data.
This includes adding new parts or features to existing products, customer-specific variations, inventory updates, pricing models and discounts, relevant product images and descriptions, and compatibility information.
Customers should be able to search for items by name or click through categories to find a product they need, and the configurator’s backend should be able to return it quickly.
CPQ
CPQ software is usually the overarching tool that product configuration is included with — it streamlines the entire configure, price, and quote process.
CPQ automates the sales process and simplifies pricing and quoting by taking into account product configurations, customer discounts, taxes, shipping costs, and other factors that can influence the final price of a product.
Then, it can turn a complex configuration into a sales quote or purchase order with the click of a button.
ERP Integration
ERP software is a critical data source for product configuration software. It enables product teams to quickly and accurately plan production schedules, deliver orders faster, manage customer preferences, and unify processes like billing and inventory management.
ERP integration keeps information from customers, sales reps, and manufacturing teams accurate. Plus, it reduces manual input and simplifies data management.
FAQs
Product configuration is important because it helps businesses streamline sales and buying processes, improve customer experience, reduce lead times for delivery and assembly, ensure the accuracy of product data, align Sales and Engineering departments, and save time and money on manual data management.
Product configuration components can include:
Parts
Individual combinable elements
Materials and services
Assembly groups
Product variants
Pricing models and discounts
Services
The main purpose of product configuration is to reduce the complexity of the buying process and shorten lead times for customers. Streamlining product configuration helps businesses deliver more accurate orders and improve the customer experience.
![Andrew Parker](https://cpq-integrations.com/wp-content/uploads/2023/05/andrewp.png)
Andrew is a professional copywriter with expertise in creating content focused on business-to-business (B2B) software. He conducts research and produces articles that provide valuable insights and information to his readers.