Intelligent Configuration: The Key to Enhancing CPQ Effectiveness

March 20, 2024

Whether you realize it or not, CPQ (configure, price, quote) software is one of the most important components of your sales stack. Using a single tool, you’ll:

  • Arrange products, services, and bundles (or design your own products) to match the customer’s specific needs
  • Set prices for those offerings that are fair, competitive, and feasible for your business
  • Compile everything into a detailed price breakdown that includes taxes, discounts, and any other relevant fees

But it isn’t without its challenges. For businesses with complex pricing structures and customizable offerings, every customer is different.

And that means configuration and pricing decisions require careful deliberation. Deliberation traditional software can’t do.

To guide an otherwise human-driven process, you need software that mimics human decision-making.

That’s where intelligent configuration comes into the picture.

The Revolutionary Features of Intelligent Configuration

Intelligent configuration is an advanced approach to the CPQ process. It leverages artificial intelligence and complex algorithms to help vendors customize and price their offerings in a way that’s (a) aligned with customer needs and preferences, (b) reflective of real-world value, and (c) feasible for the business.

Let’s dive into the key features that make intelligent configuration a game-changer for CPQ effectiveness:

Visual product configuration

With intelligent configuration, 2D, 3D, and/or augmented reality visualizations are seamlessly integrated throughout the sales process, from initial configurations to final offer documents. Detailed product features, pricing guidance, and extended integrations (e.g., CAD) simplify quoting for complex product and service bundles.

In contract manufacturing, where customers either order products for assembly or request them to be designed and manufactured from scratch, intelligent configuration tools significantly reduce the time spent on quoting. Users can build customized engineer-to-order products with interactive visualizations, as well as configure complex bundles or kits.

Advanced configuration logic

To ensure accurate configurations every time, your CPQ will have to apply numerous types of rules-based, knowledge-based, and constraint-based logic. These include:

  • Parametric constraints (e.g., the weight of your product can’t exceed 40 lbs)
  • Feature dependencies (if A is selected, B must be unselected)
  • Pricing rules (if X and Y are selected, Z discount applies)
  • Engineering and production rules (the selected product configuration must be feasible for manufacturing)

Programming your CPQ with a library of rules eliminates potential errors, but intelligent configuration takes it to the next level by automating this process with machine learning algorithms. As your CPQ processes more data and learns from past configurations, it applies behavioral modeling to understand and predict customer preferences and needs.

Dynamic options and personalization

Intelligent CPQ systems utilize customer data and contextual information to present product recommendations that are most relevant to the customer’s specific situation or business needs. For instance, if a business previously purchased software for its small team, it might recommend a corresponding tier of service that scales appropriately.

Dynamic options in CPQ systems can adapt in real time based on the customer’s selections and feedback during the configuration process. If a customer prioritizes certain features or indicates a specific budget range, the CPQ system can dynamically adjust the available options to fit those constraints.

Advanced pricing and profitability analysis

While standard CPQ software can easily apply backend logic to determine prices, AI-powered intelligent CPQ takes it a step further. By pulling from historical sales and real-time market data, it can help your sales team understand:

  • Company margins
  • Customer segmentation
  • Buying patterns
  • Price sensitivity and willingness to pay
  • Deal performance and profitability visualizer
  • Lead scoring

If you’re quoting an enterprise customer for a custom package, a tool like PROS CPQ can even run the numbers on the spot. It’ll compare your cost structure and profitability to the customer’s specific request, then visualize the optimal price and product mix for you.

Guided selling with AI assistance

AI-driven guided selling is like having a virtual sales assistant. It gives reps a step-by-step walkthrough of the configuration process by prompting them with a series of logical and relevant questions based on the customer’s needs and preferences. As they move through configuration, it narrows things down to the most suitable option.

Remember how we talked about configuration logic? Guided selling is where the CPQ system applies it. The AI engine applies all the rules and constraints, then presents the user with options that fit those parameters.

The Impact of Intelligent Configuration

83% of sales professionals are using some form of CPQ. In organizations that do, 26% more of their sales team hits quota (on average).

While smaller businesses might be able to get by with basic quoting software, every organization with a complex product or service catalog needs an AI-powered solution.

Here’s a look at all the ways intelligent configuration can revolutionize your CPQ process and boost your bottom line:

Fewer manual errors

Perhaps the biggest selling point for intelligent configuration systems is that they drastically lower the incidence of human error in the quoting process. By automating the configuration logic and enforcing compatibility rules, they guarantee sales reps don’t accidentally choose incompatible components or overlook essential product features.

Accurate initial configurations diminish the need for subsequent revisions or corrections. And improved accuracy and efficiency in the quoting process can lead to better margin control and profitability per deal.

Direct cost savings from reducing manual errors include lower labor costs (due to decreased need for rework and manual oversight) and reduced material waste (from fewer incorrect orders). As for indirect cost savings, you’ll see higher rates of customer satisfaction and loyalty over time, which is crucial for long-term profitability.

Higher efficiency and productivity

Intelligent CPQ systems drastically reduce the time sales reps need to spend on each quote. Automation of the configuration rules and pricing calculations eliminates the need for manual data entry and cross-referencing, allowing reps to focus more on selling and less on administrative tasks.

As a result, CPQ cuts sales cycle times down by 28%. Compared to CPQ users, it takes non-users 78% more time to generate a quote. And once the deal is closed, an automated CPQ system can automatically trigger backend processes like order processing and subscription management.

Improved sales team morale

Enhanced efficiency and productivity can have a profound positive impact on the morale and motivation of sales teams. When sales reps see their efforts resulting in more successful deals and less time wasted on manual tasks, their job satisfaction and engagement levels typically increase.

A morale boost like this can lead to a continuous cycle — motivated sales reps are more proactive and energetic in their sales interactions, in turn leading to even better sales performance and higher success rates.

Superior customer experience

In a 2023 PYMNTS study on subscription businesses and their new subscribers, 38% of people cited “convenience” as the #1 reason for subscribing to a product or service — a greater share than any other factor. Across virtually every industry, 1 in 4 customers is willing to pay 10% more if they know for a fact they’re getting excellent customer service.

Personalized recommendations with intelligent CPQ make customers feel understood and valued, as the products or services offered align closely with their individual needs and preferences.

Guided selling, facilitated by AI within CPQ, helps sales reps ask the right questions and offer solutions that genuinely address the customer’s problems or goals. This consultative approach demonstrates a commitment to understanding and solving the customer’s unique challenges. And it fosters a sense of trust and partnership.

Customer advocacy and brand reputation

Trust, once established, becomes the foundation of a stronger customer relationship. When customers feel their vendors genuinely understand their needs and offer tailored solutions, they are more likely to engage in repeat business and become loyal advocates for the brand.

Satisfied customers are more likely to become repeat buyers and recommend your company to others, which contributes to a positive brand reputation. Plus, it winds up driving new business.

Smart CPQ: The Future of Intelligent Product and Service Configuration

Smart CPQ transforms how businesses approach product and service configuration. It emphasizes precision, speed, and customer engagement. By minimizing errors, personalizing the buying experience, and increasing efficiency, it makes your company overall more profitable and competitive.

As technology evolves, CPQ’s potential for innovation expands. If you’re gunning for that “market leader” position but need to future-proof your sales process, intelligent CPQ is an essential part of your sales stack.

CPQ Integrations