Ignite Subscription Growth: How CPQ Supercharges CLV

If recurring revenue is your model, CLV is your metric.

Customer lifetime value (CLV) is the estimated amount of money a customer will generate during their relationship with your company. The longer you retain customers, the more valuable they become to your business.

For the subscription model, CLV defines the success of your business. If your CLV is less than 3x your customer acquisition cost (CAC), it’ll be nearly impossible to sustain growth.

So how do you increase CLV?

There are dozens of ways — personalization, upselling, cross-selling. You could also make improvements to your marketing and sales qualification to filter out higher-quality customers. You can even incentivize loyalty and advocacy through referral and rewards programs.

One tool sales teams tend to overlook when it comes to retention is CPQ (configure, price, quote).

The relationship between CPQ and customer lifetime value

Your mind probably doesn’t jump to the quoting process when you think about ways to boost retention and customer value. That’s precisely the point of this article.

CPQ is a tool subscription businesses use to:

• Configure products and bundles
• Determine the price of each component
• Create personalized quotes in real-time

The best CPQ systems for subscription businesses also handle contract mangagement, sales engagement, billing, and renewals.

The relationship between the two is quite simple: CPQ streamlines the sales process, eliminates manual errors, and helps you engage subscribers throughout the customer lifecycle. All of these things drive customer loyalty and expansion.

These three quoting problems are killing your CLV:

1. Delayed quoting

Slow turnaround times negatively impact customer purchasing decisions. With manual quoting, configuring a subscription package and building a quote can take hours.

If it’s a high-value deal, waiting for an approval can take even longer (especially if the team member in charge of approvals is out of office).

35% to 50% of sales go to the vendor who responds first. If there’s too much time between touchpoints, you’ll lose to competitors with efficient quoting processes.

2. Inaccurate quotes

Misquoted pricing leads to customer churn by undermining trust and credibility. Sales reps often make mistakes when calculating the total price of a subscription package during manual configuration. This is especially a problem when bundling products with usage-based pricing.

When a deal that doesn’t have an accurate quote makes it through, the customer will notice a surprise on their bill.

While switching costs are often higher in B2B SaaS (so you might not lose a customer right away), inaccurate quoting leads to billing mistakes. And, over time, that causes customers to churn.

3. Poor alignment with customer expectations

If your subscribers aren’t sure what they’ve actually signed up for, they won’t see your product as valuable. A manual quoting system makes it easy for misunderstandings to occur between the sales team and the customer.

For example, a rep might forget to include certain features in the quote, or a customer may not full understand the terms of the subscription. When they don’t feel that the price is justified, they’ll leave.

It’s also worth mentioning that static quotes are limited in their capabilities. They can’t quote complex products and subscription offerings, such as multi-year ramp deals or usage-based pricing models.

How CPQ addresses these issues

Faster quote generation

According to data compiled by Valorx, CPQ software improves sales efficiency in a few key areas:

• 28% reduction in sales cycle time
• 95% reduction in approval times
• 73% reduction in quote creation times

CPQ streamlines the quote creation process first by automating product configuration and pricing.

Guided selling prompts reps to ask the right questions and configure products correctly. This means every customer will get quoted for a product that’s possible to deliver, compatible with their needs, and feasible for the business.

From there, it automatically calculates the price based on your pricing and discounting rules. You can apply discounts that scale with the contract length or upsell features in a bundle to increase the deal size.

If the quote meets a certain threshold, approval routing is automatically triggered. The appointed member of your sales or deal desk team can approve or reject it with a click.

The interactive quote builder in CPQ makes it easy to create professional, branded quotes with all the details and pricing information laid out clearly. Reps can send these quotes in real-time, so their prospects get them right away.

Improved quote accuracy

Research from Pricefx shows that CPQ eliminates 40% of all human error associated with quoting. And it reduces the number of quote revisions needed by 13%.

The reason for such a significant improvement is that CPQ operates based on rules-based logic. On the backend, an admin programs product rules (e.g., product compatibility, required options, feature dependencies) and pricing rules (e.g., volume discounts, renewal incentives, minimum profit margins).

The system automatically enforces these rules when a rep configures a quote. They’re also dynamic, so they can change based on the customer’s input. If there are errors in quotes, they’re caught in real-time.

CPQ also integrates with CRM and ERP systems, so the data stays accurate throughout your organization. No manual data entry required.

Aligned expectations with subscriptions

CPQ software can create customized, dynamic quotes that include a breakdown of key features, pricing, terms, and conditions. This transparency means your subscribers know exactly what they’re signing up for before they make their purchase decision.

Quoting tools for subscription businesses can easily handle complex quotes with:

• Ramp schedules, co-terming, and overlapping renewals
• Usage-based pricing models, including usage forecasting
• Multiple products in a bundle with different billing periods or discounting rules
• One-time and recurring fees

This level of detail also allows you to upsell additional features or services during the quote process. That could lead to more expansion revenue per customer over time.

The impact of CPQ on CLV 

Increased customer satisfaction

If it’s one thing that today’s buyers don’t want, it’s friction. With fast quote turnaround times and accurate quotes, and a streamlined buying experience, your customers will have no reason to complain.

Leaving a good first impression with an efficient quoting process makes all the difference. It signals to potential customers that your business is trustworthy and organized and values their time.

Moreover, as mentioned earlier, transparent quotes with accurate pricing and terms will lead to aligned expectations throughout the subscription period. That means fewer complaints down the line.

Lower customer churn

When customers are happier with your product, they’ll stick around. And when they know what they’re getting into from the start, there will be fewer surprises and potential misunderstandings that could lead to them leaving.

CPQ also offers flexibility in terms of subscription options, such as customizing billing periods or packages based on a customer’s needs. Your sales reps will have an easier time giving customers exactly what they want, so they won’t have to worry about finding it elsewhere.

Higher average order value

Guided selling doesn’t just help with product configurations. It also recommends upselling, cross-selling, and bundling opportunities to reps. Thanks to this, CPQ users have a 105% higher average deal size compared to their non-CPQ-using counterparts.

Product rules in CPQ protect your profit margins. They ensure that discounts don’t exceed what your business can afford and that reps are pricing items within a reasonable range.

With automation and the right guidance, reps can focus on selling the features that add the most value to a customer instead of worrying about how much they’re willing to pay for it. This leads to higher margins and better revenue opportunities.

Streamlined subscription management and renewals

If you use a complete CPQ solution like DealHub, the benefits  It also helps with subscription management and renewals. The system can track contract end dates, renewal dates, usage data, and more. Your customers are always correctly billed.

• Automated subscription billing charges customers correctly based on their usage and billing period, so you don’t have to worry about any slips.
• Automated renewal reminders and easy quote creation for subscription renewals make the process smoother for both your reps and customers. With CPQ, you can even offer personalized pricing or promotions to entice subscribers to renew or upgrade their plans.
• Customer portal integration enables users to make changes to their subscription and billing information without having to contact a rep.
• Proration and metering capabilities ensure your customers are only paying for what they’re using, making it easier to retain them in the long run.

Since your customers are growing their own businesses, many of them will expand their product use over time. By preventing involuntary churn and facilitating renewals, you aren’t just extending the customer’s lifetime. You’re actively increasing the value of each subscriber through expansion revenue.

Improved usage tracking and analytics

The beauty of subscription-based products like SaaS platforms is you can see exactly how customers are using them. CPQ can integrate with usage tracking software, giving you valuable data for your business. You can see how many users a customer has, how often they use the product, and which features they use the most.

This information is crucial for understanding your customers’ needs and preferences, as well as identifying upsell opportunities. It also helps you refine your pricing strategy by seeing which features are most valuable to different customer segments.

Advanced CPQ analytics can also help you identify at-risk customers. It’ll show you anyone who has stopped using a specific feature, hasn’t logged in recently, or otherwise shows overall disengagement with your product. You can take proactive measures to re-engage them and potentially save the subscription.

Exploring CPQ solutions for your SaaS business

If you’re ready to experience these benefits firsthand, choosing a solution that fits your needs is essential. Not all CPQ is created equal — one that works well for manufacturers won’t have the tools you’re looking for.

Consider factors like:

• Features and interfaces designed for SaaS quoting
• Contract lifecycle management (CLM)
• Subscription management
• Integration with your existing systems (CRM, ERP, billing)
• Ease of use
• Scalability for future growth

Some popular CPQ and quoting solutions for SaaS include DealHub, MonetizeNow, Zuora, Subskribe, and Nue.io. 

Ready to get started? Check out our SaaS CPQ reviews and product comparison guides. Also, read our guide to evaluating CPQ for SMB vs. enterprise needs.