CPQ: The Key to Driving Higher Customer Lifetime Value (CLV)

Subscription businesses rely on one thing and one thing only: recurring revenue.

And that means customers don’t spend enough in one transaction to even make up for the cost of acquiring them — you need them to keep their subscriptions for months (or years) for them to become profitable.

So, as a subscription business, customer lifetime value (CLV) is your most critical metric. If you can keep it above a certain threshold (ideally, a CLV:CAC ratio of 3:1 or greater), you’re in a good position to sustain profitability, scale, and grow into a valuable company.

Maintaining a high CLV is one of RevOps’ biggest challenges. It sounds like it’s all about customer retention. But, in truth, it starts much earlier in the customer journey: the sales process.

In recurring revenue models, CLV is constantly at risk.

There are tons of threats to a subscription business’s CLV. Competition is the obvious one, but most of them actually come from within your organization.

Complex pricing structures lead to confusion and dissatisfaction.

The main problem with today’s subscription models is that they can be confusing and inconsistent. Different packages, pricing tiers, add-ons, discounts, promotions, à la carte options — it all adds up.

When you factor in customers’ ramp schedules and usage fluctuations, it makes things even more complicated.

When users don’t understand what they’re paying for, they begin to question everything you bill them for. Eventually, they cancel.

Inaccurate quoting creates revenue leaks.

Of course, you’re going to lose deals without a streamlined quoting process. Nobody wants to sit around waiting for you to present your offer when 3 other vendors were able to respond in a few hours’ time.

But inaccuracies are the worst symptom of a broken quoting process. For the errors you or your customer catch, it creates additional friction in your sales workflow. But for those you don’t, you’re not billing for everything you should be.

You might not notice it right away (hence the term “revenue leak”). But over time, those missed opportunities add up and eat into your CLV.

According to Chargebee, companies lose ~9% of their total revenue to revenue leakage.

Inefficient subscription management leads to earlier churn.

When customers can’t easily change their subscription details, update their billing information, or view previous invoices, it’s extremely frustrating for them. This is especially true if you’re selling a B2B SaaS product, where your subscribers need this information for expense reports.

If you create confusion around what your customers are paying for, they’ll stop trusting you. And they’ll find a vendor who can offer them the ease and transparency they’re looking for.

Bad experiences damage customer relationships.

Over half of customers say they’d switch to a competitor after just one bad experience. While it’s unlikely that accurately reflects the B2B SaaS landscape where switching costs are higher, the fact of the matter still stands:

You’re one bad experience away from potentially losing a subscriber. Even if they can’t switch right away, they’ll, at the very least, start looking around and stop advocating for you.

Whether it’s billing errors, an inefficient upgrade or renewal process, or simply a lack of transparency, any negative experience can significantly impact your customers’ perception of your company.

How CPQ software drives customer lifetime value

Maybe your mind doesn’t jump to “CPQ software” when you’re thinking about ways to boost CLV. You’re probably considering ways to retain your customers for longer or create better upsell offers. But CPQ (configure, price, quote) is the solution to all the problems I’ve mentioned above.

Streamlined price calculations and quote delivery

CPQ software uses a rule-based engine to standardize pricing logic. This is particularly useful for businesses with complex pricing structures, like SaaS subscription models with multiple product tiers, microservices, and usage-based variables.

Let’s say you’re a SaaS company selling CRM software. You have three subscription tiers: Basic, Pro, and Enterprise. Each tier offers varying features, user limits, and integrations. Pricing depends on contract length, user count, and custom add-ons like advanced analytics or support packages.

Without CPQ software, your sales reps would manually calculate prices and build quotes — a huge risk for error, especially when it comes to your Enterprise tier (custom pricing).

With CPQ, the automated system prevents them from overlooking discounts like 10% for annual contracts or 15% for accounts with 100+ users. It considers specific configurations like user count, add-ons, and contract length to generate instant quotes.

It can even help you quote customers with ramp schedules or usage fluctuations, so they can predict their costs with accuracy.

Greater predictability = lower churn = higher CLV.

Increased AOV with guided selling

Guided selling is one of CPQ’s most important features. Basically, it works like this:

1. The seller opens the CPQ interface.
2. They answer a few questions about the customer’s needs.
3. As they select options, the system filters out incompatible choices and shows a running quote.
4. According to the customer’s needs, it also suggests complementary add-ons and potential upsells the rep/buyer might not have considered.

For your business, this means additional revenue. And, assuming you keep the same retention length, increasing your average order value (AOV) through these tactics means a higher CLV.

But it doesn’t just mean higher AOV. Upselling and cross-selling add value to the buyer because you’re giving them something they’ll benefit from. When you add more value, you’ll retain your subscribers for much longer.

Enhanced subscription management features

When you automate subscription billing with CPQ, you’re taking a huge weight off your finance team’s shoulders. The software automatically charges each customer according to their billing cycle and frequency, generates invoices for them, and sends them as PDFs straight to their email. Plus, they can access their past invoices and billing information right from within the app.

On the backend, it also takes care of revenue recognition. It tracks your ARR and MRR, so you can see how much revenue you’re earning each month. And it streamlines your accounting, so you can close your books faster and avoid errors.

Keep in mind, though, that not all CPQ systems support subscription management. To create personalized billing experiences for your subscribers, you need a platform like DealHub that’s made for subscription sales and billing processes.

Improved CX with simplified quoting and self-service options

Within your app, users can also configure their own subscriptions. For example, they can easily upgrade/downgrade their plan or add/delete users when their needs change.

More than two-thirds (68%) of today’s B2B buyers say they don’t want to interact with sales reps at all. By giving them the ability to make these changes on their own you’re giving them the self-service options they prefer.

You’re also reducing your overhead since the system generates simple, digestible quotes instantaneously.

Data-driven decision-making

As the center for all your sales transactions, CPQ is also a fantastic source of analytical data. You can look at metrics like:

• Sales cycle time
• Quote-to-close ratio
• Quote accuracy and approval rates
• Most popular configurations/upsells
• Performance by sales rep, product line, or geography
• Average deal size per product line
• Customer and product profitability

You can use these insights to improve your processes in real time. And when you integrate your CPQ with your CRM, your data gets even better.

Maybe customers are consistently declining a particular upsell offer, so you tweak it or replace it with something else.

Or maybe one sales rep is struggling to close deals, so you work with them to address their challenges.

How real companies use the power of CPQ to increase their CLV

To help you grasp the real-world impact CPQ implementation can have on your business, let’s take a look at how a few others have leveraged its capabilities.

Conga

After experiencing internal challenges with fragmented pricing models and inconsistent quoting processes, Conga implemented its own CPQ software to unify its global operations and consolidate its previously disconnected CRM and CPQ platforms. This was known internally as project “Harmony.”

Through the Harmony project and Conga CPQ, the business saved 15% of its annual software budget. In addition to saving the organization millions, it improved data visibility, insights, and processes. This paved the way for scalable growth and a cohesive, customer-friendly ecosystem. They were also able to eliminate 40% of deal desk interactions.

By eliminating manual processes and rogue discounting, Conga improved pricing consistency, empowering its sales teams to deliver enhanced customer experiences. From this, they increased their customer satisfaction levels, which ultimately led to a boost in customer lifetime value​.

Thomson Reuters

By integrating Conga CPQ, Thomson Reuters reduced its order configuration time by 90%. The company consolidated 14 sources of information into a single system, dramatically improving sales efficiency and reducing the number of held orders by 95%.

This improvement in accuracy and speed fostered a more seamless and satisfying customer experience, promoting long-term customer retention and increased CLV.

Explore CPQ solutions to achieve long-term growth

Improving your customer experience, streamlining your quote-to-cash process, and unlocking valuable data-driven insights. What do these things have in common?

You need to implement CPQ to accomplish them.

As a RevOps leader, you can’t afford to keep your sales, pricing, and billing processes siloed and disconnected.

The clock is ticking…Ready to invest in CPQ software? Take a look at our independently reviewed CPQ systems for SaaS businesses to get started.