In the era of digital transformation, businesses are shifting their gears. They’re replacing legacy configure, price, quote (CPQ) solutions with low-code solutions they can easily integrate, customize, and scale.
To meet the demands of today’s subscription businesses, software needs to combine automation, control, and efficiency.
And CPQ software is no different.
CPQ in the age of recurring revenue
For companies monetizing through subscription-based models (think: SaaS platforms and retainer-based services), pricing is a lot more complicated than your average one-time transaction.
There are always tiered, usage-based, and user-based components to subscription pricing. Most of these companies also bundle packages, use custom (quote-based) pricing, and have complex discount policies, too.
And that’s all in addition to one-time fees and flat-rate pricing.
Without a flexible solution equipped to handle complex, dynamic pricing structures, it’s impossible to…
- bring products to market
- run an efficient sales operation
- execute your product-led growth strategy
- make adjustments to your pricing and product catalog
…at the same time.
CPQ implementation is also a nightmare for recurring revenue businesses that aren’t using a modern platform.
As your company grows, so does its need for an automated, agile CPQ solution. It’s not uncommon to see even large-scale sales teams running their whole quoting process through Excel spreadsheet equations (for pricing estimates) and Google Docs (for quote generation).
Strangely enough, it’s also quite common to see companies use unconnected tools (or no tools at all) for digital signatures and document management.
It’s a bit like trying to put together a 1000-piece puzzle without the picture on the box…or all the pieces, for that matter.
Yes, there is a better way. Agile CPQ.
What makes agile CPQ software “agile”?
“Agile” has become a bit of a buzzword in software development. But it’s not just a marketing term for CPQ solutions.
When we say “agile,” we’re talking about software that delivers:
With low-code/no-code capabilities, businesses can tailor their CPQ solution to fit their unique pricing and product setup (and change that setup down the line). The ability to scale up or down, add or remove modules, and customize workflows allows recurring revenue companies to stay flexible in a rapidly evolving market.
Plus, integrations with other tools and platforms are easier to implement and maintain because they’re built with system integration in mind. And if you wind up switching to a new CRM or ERP (or simply adding a new tool to your tech stack), it facilitates seamless data transfer between your old and new systems.
Since they’re self-sufficient, agile CPQ tools eliminate the need for Ops and IT teams or third-party admins. You can manage the entire process yourself (or delegate to a small internal team).
Cross-team workflows within CPQ make agile solutions more efficient from a sales and product delivery standpoint as well.
- For sellers, integrated quote builders and guided selling simplify the quoting and proposal processes and improves sales velocity.
- Every time you’re working a deal, your deal desk team can collaborate within agile CPQ, negotiate with buyers, and quickly get quotes out the door without waiting days for a response.
- More control and visibility into revenue and profitability means better informed decisions for pricing teams.
Plus, CPQ for recurring revenue businesses like high-tech and SaaS have billing and subscription management capabilities built into their platform. They’re designed to handle complex subscription billing with zero intervention.
Modern CPQ solutions support dynamic pricing and product catalog management, which makes it easier to iterate on pricing and packaging experiments.
Some CPQ tools, like PROS CPQ, use AI and machine learning algorithms to continuously optimize prices, give pricing recommendations, or provide alternative product suggestions for upselling/cross-selling purposes.
Agility is particularly important when it comes to subscription billing. Every customer will have their own billing cycle and pricing structure, so maintaining accuracy in your books and ensuring timely, accurate billing requires a flexible billing system that auto-creates invoices, tracks usage-based charges, invoices customers on their timeline, and collects payments — all in one go.
Within an agile CPQ platform, admins can set product rules based on their unique pricing structure. When a sales rep or customer selects a particular subscription tier or bundle, the purchase flow will only show them options and pricing that are valid for the specific customer, location, currency, or an array of other factors.
Your team can also create a product catalog that’s unique to your business needs, with options for tiered pricing plans, usage-based billing, discounts and promotions, custom fields and object relationships. And language support is built-in.
As far as governance and compliance are concerned, agile CPQ comes with audit trails and logs, too. So you can seach for events, track changes, and trace user activity to make sure only authorized users are making edits.
Personalized customer experience
With agile CPQ, you can deliver a fully secure and customizable customer experience. Customers can manage their subscriptions, sign contracts and add-ons to an order, upgrade or cancel a plan — all within your app’s self-service portal.
You can also set up customer-specific pricing based on their usage patterns and SLAs. This will help you create a more personalized experience for customers that involves flexible billing options (like variable pricing), custom invoicing, payment terms, and payment methods.
7 ways agile CPQ can help you grow your revenue
Unifies sales, marketing, and product teams
Everyone talks about “sales and marketing alignment” because the first half of the sales funnel is primarily marketing-driven. But what about the second half of the funnel and beyond?
Your sales reps need marketing materials to send leads and follow up on them. Your product teams need feedback from customers (collected by your sales and marketing teams) to drive roadmap decisions.
CPQ software not only enhances operational efficiency but also fosters cohesive strategy and collaboration across sales, marketing, and product teams by consolidating and streamlining processes.
When it collects data from quotes, orders, and renewals, you’ll have tons of insights into sales velocity and your quote-to-cash process. But you’ll also have info on which product configurations and categories sell the best, at what prices, and for which customer segments.
Your marketing team can use this to write better copy, target their ads better, and drive those leads into sales-qualified opportunities. For product teams, it enables new product/feature development and long-term product-led growth.
Expands your total addressable market
There’s probably a huge gap between what you think your total addressable market is and what it actually is.
By automating processes and making them digital, you’ll reduce sales cycle times, have more time to focus on lead generation and warm outreach, and look into markets you might’ve ignored or never discovered.
A huge way agile CPQ helps you accomplish this is through automated price and product localization. Normally, pricing something according to local purchasing power and price sensitivity takes loads of time and costs your business a ton of money.
With an agile CPQ strategy that’s built on a configuration thread, product managers, marketers, and engineers can streamline their efforts by making a single adjustment to the product model to cater to new national or regional markets.
So, it dramatically increases the speed with which you can nationally or globally expand your subscription business.
Shortens sales cycles
According to insights compiled by Salesforce, modern CPQ software enables 80% faster quote delivery and a 34% boost in approval times. Overall, you can expect sales cycles that are ~28% shorter when you implement an agile CPQ strategy.
In the context of B2B subscription sales, this is pretty huge. Considering the average B2B sale takes 102 days to close, the ability to shave 28% off your sales cycle time means you’re closing deals a whole month faster.
Improves customer order and billing accuracy
Quotes and proposals are the first documents containing customer purchase information. With agile CPQ, quotes are automatically turned into contracts, purchase orders, and invoices.
Customers can choose their subscription tier, enter the amount of users they have, and decide whether they want to pay annually, yearly, or whatever billing schedules you operate on (and whichever day you bill them). Each time the billing cycle renews, they get an email with their automatic payment. And your team didn’t have to do anything.
Agile CPQ also handles complex billing issues like proration on a per-customer basis. For each customer, it auto-calculates how much a prorated charge should be based on when they cancel, upgrade or downgrade, how much time they used in the billing period, and what pricing tier they’re on.
- No manual data entry
- No incorrect billing
- Flexible billing schedules and payment preferences
- Easy order, contract, and renewal management
- Fewer customer inquiries
- Less bad debt
- Simple tax calculation and compliance
Plus, accurate billing means you’ll have better financial data to go off of when you’re making projections. You’ll have an easier time raising money, planning your investments, and optimizing your budget for growth.
Enables product customization, upsells, and bundles
Arguably the best thing about agile CPQ is it allows you to customize products to customer preferences.
Let’s say you’re a SaaS vendor working with an enterprise buyer. Most enterprise customers need custom infrastructure, additional security measures, and complicated software integrations. So, they can’t just sign up for your regular product.
This is where agile CPQ really shines.
You can use it to create multiple configurations of your product, including features and add-ons that are only available to customers who need them.
Then, you can include additional quote-based services like implementation, hands-on training, and maintenance/IT costs.
Even if you aren’t working with a complex enterprise client, CPQ’s guided selling function automatically shows sales reps potential upsells and bundles based on usage patterns (for renewing customers), use cases, pain points, and preferences.
Supports complex pricing models
The hardest thing about subscription billing, as I mentioned earlier, is the fact that every customer is completely different.
Every subscription business has a flat-rate model of some kind. But they also use…
- Tiered pricing to separate features or levels of service.
- Usage-based pricing to quantify the value of actual product use
- User/seat-based pricing to account for additional server costs, customer support demands, and to allocate team permissions
- Perpetual licensing for one-time purchases
- One-time costs like implementation and in-app purchases
- Monthly flat-rate microservices and app plug-ins
One customer might be a small business, so they use the basic plan and you bill them $X every month. But you’ll also have customers with 10 users over the limit at $Y/month and customers with 20% higher usage at $Z/month.
Agile CPQ automatically tracks these things and applies them to each customer with ~100% accuracy.
Reduces time to market for subscription products
Increasing sales velocity and reducing the need for manual effort and rework, by extension,reduces your time to market. Since your sales, marketing, and product teams are alinged, you can also execute a go-to-market strategy and iterate on marketing strategies, sales motions, and product development much more quickly.
For example, purchase data from CPQ might tell you that most customers are upgrading to a higher tier of service because they need more storage, but they don’t actually need the full product at the higher tier.
If you notice that customers keep exceeding their storage limits, your product team can quickly come up with an additional storage add-on and marketing/sales teams can promote it immediately on customer dashboards, within the app, and on you website.
No need to work on the product then wait a month for marketing and sale to catch up.
Agile CPQ and the future of revenue operations
The fact of the matter is you need an agile sales, marketing, and product strategy. Modern CPQ software supports your RevOps team by giving them the tools and data they need to collaborate, work efficiently, and make high-level decisions.
Recurring revenue is already the most scalable model. But the only reason that’s the case is because you can scale your customer base and products quickly while retaining revenue from previous customers.
In short, inefficient and disjointed processes = no more scalability.
And that’s where agile CPQ comes in to save the day.