The 3 Must-Have CPQ Features for SaaS Businesses

November 28, 2023

CPQ was originally built to serve suppliers with 100s of SKUs and contract manufacturers with highly configurable products.

And yes…it still serves that purpose.

But, over the last two decades, the SaaS business model has taken off. With a combination of usage-based pricing, flat-rate subscription tiers, add-on microservices, custom-built infrastructure and one-time fees for training and implementation, SaaS companies have dramatically different needs when it comes to quoting their customers.

A few CPQ vendors have come along to fill that void. They’ve focused on offering modern, flexible CPQ solutions tailored for high-tech subscription businesses. 

In today’s article, I’ll break down exactly what features set SaaS-focused CPQ apart from traditional tools, and why you need them to streamline your quoting process.

SaaS businesses face unique challenges in the sales process…

As a SaaS company, you’re in a league of your own when it comes to sales.

  • Unlike traditional businesses, your pricing model is complex and dynamic. You probably offer multiple subscription tiers with varying levels of features and usage limits. You also have one-time fees for implementation/training and microservices customers can build into their subscriptions.
  • Since you use a recurring revenue model, you depend on customer retention. The only way to recoup your cost of sales, turn a profit, and scale your SaaS company is to retain your customers long enough that their lifetime value is, on average, at least 3x their acquisition cost. So, achieving product-market fit and closing the right prospects is life or death for your company.
  • You also depend on revenue retention. Investors will value your company based on the financial impact of your customer retention efforts. An ‘investable’ company retains more than 100% of its revenue. The only way to do that is through upselling, cross-selling, and upgrades.
  • Sales cycles are considerably longer. According to data from HubSpot, the average SaaS sales cycle lasts 84 days. For ACV <$5K, it’s around 40 days. Enterprise deals >$100K take 170 days to close. While reducing your time-to-close is important, months-long prospect engagement is the more pressing issue for your sales team.
  • SaaS deals include decision-makers from multiple departments. The typical B2B sale requires 6 to 10 decision-makers. Over the several months working a deal, your sales reps will engage technical buyers, procurement, legal teams, and everyday users. They’ll need to tailor their engagement strategy to each one.

The SaaS sales process is contradictory in this way — it depends on efficiency, which, to some degree, is impossible. There will always be long sales cycles, red tape, multiple decision-makers, and complicated pricing models.

…but CPQ can help.

Traditional configure, price, quote (CPQ) software is built for product-centric businesses. They are not designed to handle the dynamic and complex pricing structures of subscription-based products.

Most traditional CPQ vendors have the capacity to handle complex product configurations and pricing models. What they can’t do is handle the ongoing relationships subscription businesses have with their customers.

CPQ for SaaS businesses handles more than just the quoting process. Here’s a look at how exactly you can turn it into your sales superpower:

Fast responsiveness to buyers

Time kills all deals. And you’re already guaranteed to take weeks (or months) to close every deal. The last thing you need is to mess up your quote, or make prospects wait forever to get it.

With CPQ software, you can turn around quotes in minutes. Your reps can pull up configured products, select from existing templates for pricing and proposals, and generate the quote. All without a single spreadsheet or manual calculation.

Intelligent upselling opportunities

Like I said earlier, a healthy SaaS company’s net revenue retention is 100%+. That means you’re generating more revenue from customer expansion than you’re losing from churn.

Some of your expansion will happen naturally. Your customers are growing their businesses, so they’ll eventually add more users and potentially upgrade their product tier to support that.

But if you leave it all up to chance, it’s not going to happen.

CPQ and CRM integration can help your CS reps keep track of customer history, previous purchases and contracts, product usage data, and more. This intel will help them identify the right opportunities for upselling.

Streamlined contract management

With CPQ, you can store all your essential sales documents — quotes, proposals, contracts, SOWs, etc. — on the cloud. And you can set role-based access permissions so only authorized sales representatives and deal desk team members can view and edit them.

Sales reps can also pull up previous quotes in case they need to modify their existing contracts. This way, you don’t have to start from scratch every time a customer wants an upgrade or renewal.

Standardizes quoting for complex products and services

In addition to speeding up quote generation, CPQ for SaaS businesses ensures accuracy every time a rep quotes a customer.

  • Configuration rules ensure pricing and product selections are allowed combinations. This means your reps can’t accidentally or intentionally (we’ve seen both) quote a product your company can’t deliver. And, if they want to offer a one-time discount that’s outside your company’s policy, additional business rules can auto-send it to a sales manager for approval.
  • The built-in product configurator lets reps visually build complex quotes with bundled services and microservices. As they select items from your product catalog, the CPQ software validates their choices against your configuration rules. Immediately, it reflects the total cost of the subscription package on-screen.
  • Pricing templates allow sales reps to make quick edits to price tiers, discounts, and other variables without having to build a quote from scratch.
  • Branded proposal templates save time by automating document creation.

For intricate enterprise deals that require customizable products and months-long phased implementation, CPQ can help sellers optimize pricing strategies. They can account for personnel, hardware and software customizations, onboarding fees, and the cost of offering these services.

Guided selling playbooks

SaaS-oriented CPQ platforms always include a GUI-based, step-by-step guide to help your sales reps…

  • uncover customer pain points and their business goals
  • score leads
  • identify the stakeholders involved in purchase decisions
  • understand your product’s value and how it meets each buyer’s needs
  • recommend the right product mix
  • present upsells and cross-sells that add value
  • share specific content based on the customer’s needs

This helps them move prospects through the sales pipeline faster and with higher conversion rates.

Enables collaboration

SaaS sales is a collaborative effort.

  • Your sales team handles most of the customer-facing interactions.
  • Your deal desk works out the contractual obligations.
  • Your product team weighs in when you’re building custom software.
  • Your finance team ensures price optimization and approves discounts.
  • Your prospect and their decision-makers will view, edit, and sign during the negotiation process.

With CPQ and CLM, your prospects can view, share, edit, and sign quotes and contracts. Internally, your teams can collaborate, process quote approvals, and get insights on deal progress, all while working in the same document.

Automated approvals

Complex deals will always need approvals because multiple teams need to weigh in on profitability and delivery capacity. If you’re waiting days for them, your chances of closing the deal go way down.

With CPQ, you can set approval workflow standards and conditional rules that automatically escalate quote requests to the right decision-makers. That way, your reps can get the sign-offs they need in as short a time as possible.

How does CPQ work?

Whenever someone creates a new sales proposal, they’ll open up CPQ to build it. Based on the customer’s needs, budget, and product mix they want to sell, they’ll select specific services from a digital product catalog.

Using pre-programmed rules-based logic, the software will know which products are allowed and which ones aren’t. It will also provide pricing guidance for any type of advanced customizations that are outside the standard product mix.

If you’ve ever customized an item on Amazon before buying it (e.g., color or size), that’s basically how CPQ works. It’s just a lot more complex and happens on a much larger scale.

From CPQ implementation to actual use, here’s a quick step-by-step rundown of how it works:

  1. A CPQ admin sets up product, pricing, approval, and customization rules.
  2. A sales rep logs into the CPQ system and selects a subscription package from the product catalog. They will also select one-time fees.
  3. The platform checks for validation against rules and calculates pricing.
  4. It generates a quote document — usually a PDF — with all necessary details, including terms, conditions, and delivery dates.
  5. If there’s room for negotiation (e.g., discounts), the deal desk will review and approve it.
  6. The sales rep sends the quote to the customer for review and e-signature.
  7. Once signed, it’s stored on the cloud for future reference.
  8. When renewal comes around, you can auto-renew or renegotiate terms with your customer.

On your website/in-app portal, your customer may also be able to configure their own subscription. Some product configurators can integrate with your website’s self-service portal to generate a customized quote.

Top 3 SaaS CPQ features to grow your subscription revenue

Although I’ve already outlined what your CPQ software should do (yes, it should do all of those things), here are the top three features to prioritize if you want to grow your subscription revenue and keep sales/sales ops time in check.

Subscription, renewal, and order management

The most important feature of any CPQ for SaaS businesses is the ability to manage subscriptions and renewals. If it can’t do this, it’s just like any regular CPQ software.

As your customer base grows, so does the complexity of managing all those recurring revenue streams.

A good SaaS CPQ platform will enable you to:

  • Automate subscription billing, invoicing, and payment collection
  • Manage entitlements and usage-based pricing models for customers on annual or multi-year contracts
  • Configure renewal terms and pricing changes based on usage and customer behavior
  • Handle cancellations, upgrades, and add-ons without disrupting service or causing billing errors

Advanced CPQ solutions will also be able to identify at-risk customers and recommend strategies to retain them based on user engagement data.

Multi-dimensional pricing models

As a SaaS vendor, you’ll use:

  • Tiered pricing
  • User/seat-based pricing
  • Usage-based pricing
  • Customized package pricing
  • Discounts and promotions to move customers toward packages that deliver the highest LTV and ROI for you (and your customer).

Besides monthly or annual fees, you may also have one-time fees like…

  • Implementation costs
  • Setup and onboarding fees

If your pricing model is inconsistent or hard to understand, the customer experience will suffer. Long-term, you’ll see customer satisfaction rates drop. Eventually, this will impact your revenue and retention rates.

In addition to subscription billing, you need to choose a CPQ solution that supports all your different pricing models. It needs to quote and execute on them in a way that’s easy for your customers to understand.

Cross-team collaboration

Your CPQ solution should also support collaboration between teams, especially across sales, finance, and the deal desk.

The perfect CPQ for your SaaS business will support communication in two ways:

  • In-app
  • Via your company’s messaging app

In the app, you should be able to edit quotes and contracts, review approvals and notes, and see updates in real-time.

Tools like Slack or Microsoft Teams can help you retain historical data and speed up approvals by notifying the right people directly for sign-off. A few CPQ vendors — namely DealHub and Salesforce — integrate with Slack, so stakeholders can manage approvals without switching between apps.

BONUS: Integrations

“Integration” is a word that’s thrown around a lot, so I should clarify: you need CPQ software that offers seamless integration with your current tech stack.

It does you no good to use CPQ if it’s not integrated with the other tools your teams use every day. To create automations and eliminate errors, you need your software to share data with each other.

Look for the following integrations when you’re comparing C:

  • CRM
  • ERP
  • Billing/subscription management
  • CLM
  • Document management
  • E-signature
  • Communication/collaboration (e.g., Slack)
  • Revenue intelligence

When CPQ is built into the rest of your operational workflow, you can automate everything from sales pipeline deals to customer billing and revenue recognition.

If you’re evaluating SaaS CPQ vendors, check out my other article on tips for selecting a CPQ software.

CPQ Integrations