The Sales Superpower: CPQ Transforms Subscription Businesses

June 19, 2023

In today’s B2B landscape, there are two customer expectations: personalization and self-service.

Buyers now expect similar personalization to their B2C counterparts, but they aren’t talking to sellers like they used to. Instead, they do their own research, reach out to sales when they’re more than halfway through the sales process, and spend about 5% of their time with your sales team.

This raises the stakes for subscription businesses — what used to be a seller-dominated process now revolves around buyer enablement and autonomy.

The role of the modern sales team is to simplify product complexity, connect prospects with products that benefit them most, and give them the product information they can’t find on their own (quickly).

In a world where sellers are seen as a hoop to jump through, CPQ makes the sales process faster and easier for subscription-based businesses.

What is CPQ for Subscriptions?

Configure, price, quote (CPQ) software streamlines and simplifies the sales cycle by providing sellers with personalized product configurations, accurate pricing estimates, and automated quotes. For companies that partially or completely monetize their product with subscriptions, CPQ helps them make the most of every sale.

For subscriptions, critical CPQ features include:

  • Product configuration for various feature sets and pricing tiers
  • Product bundling that supports upsells and cross-sells
  • Automated quote, contract, and warranty generation
  • Guided selling that helps selles move their prospects through the sales pipeline quickly
  • Automated subscription billing to manage different plans, packages, and payment methods
  • Subscription renewals and auto-reminders for upcoming expiration dates
  • Integrations with existing ERP, CRM, and ecommerce systems
  • Website integrations for customer self-service portals

Most B2B subscription business models are built on either microservices and pricing tiers (e.g., SaaS companies, utilities, digital services) or complex products (e.g., industrial machinery, medical equipment, B2B manufacturing).

CPQ software supports these businesses far beyond the configure, price, and quote process — it’s a solution that drives recurring revenue, customer retention, cost reduction, and sales efficiency.

Taming Subscription Business Challenges with CPQ

Subscription revenue models are the most predictable and scalable, which is why so many B2B organizations have incorporated them (at least in part).

But they also come with a unique set of challenges:

Sellers can’t keep up with buyers’ demands.

At their core, the needs of B2B buyers are straightforward and comprehensible.

  • More personalized experiences
  • A frictionless sales process
  • Resources for self-service

Paradoxically, more than 80% of B2B buyers say they want the same level of personalization as their B2C counterparts, but they’re 57% to 70% through the sales cycle by the time they talk to sales. Since most of them talk with multiple vendors, they’re spending only a small fraction of that remaining time with your salespeople.

Buyer enablement (e.g., SEO and website content) can fill the gap for the first half of the process, but it doesn’t make it frictionless by any means. 77% of them still say their sales process is too difficult — they spend 15% of their time deconflicting information.

When the seller comes into the picture, their role is to examine, clarify, and lead the buyer through the process. CPQ software complements this role by allowing sellers to quickly configure product options based on firmographics and expressed needs, provide accurate pricing estimates, and generate contracts with any custom clauses that require manual input.

Sales cycle length and complexity are killing deals.

The average B2B sales cycle takes more than two months and involves an average of 11 stakeholders. That’s too long and complicated for most buyers — plenty drop out (or forget) before the sale is finalized.

CPQ tackles this by speeding up the process, providing automated reminders, reducing miscommunications in quotes, and creating “what if” scenarios that show customers how different product configurations would affect their total cost.

DealHub CPQ is the perfect example of a platform that drives sales cycle efficiency. In addition to standard CPQ software features, DealRoom — its sales engagement tool — centralizes customer data and communication, keeping all buyers on the same page while automating and streamlining the quote-to-revenue process.

Product complexity makes it hard for buyers to understand their subscriptions.

Companies that sell complex products and services run into three problems when engaging customers:

  1. When every customer has a unique configuration, providing transparent pricing upfront is nearly impossible.
  2. Without visual cues, understanding product configurations and what they mean for the end user proves difficult.
  3. Even if buyers understand the product, they often don’t know how to use it or why they need certain features.

For instance, a medical device company may have dozens of features and hundreds of configurations, but most customers don’t know which ones they need. Since these products are sold privately on a contractual basis, the vendor can’t even list a baseline price on their website.

For customers who are doing their research, reordering certain materials, or managing their subscription, CPQ software with 3D product configuration and subscription management takes all the difficulty out of this process.

The 3D product design tool from PROS Smart CPQ, for instance, helps customers visualize and configure products, complete with real-time pricing estimates. Most importantly, it can integrate directly into a company’s website and customer portal, eliminating the need for sales intervention whenever a customer wants to purchase a product.

Involuntary churn costs businesses dearly.

Involuntary subscription churn — that is, churn from customers who want to stay but can’t because of issues with the service — accounts for as much as 40% of all churn.

It stems from several issues, most of them internal:

  • Expired credit cards
  • Insufficient funds
  • Incorrect billing and invoicing information
  • Processing failures due to software glitches
  • Poor customer service (e.g., missed requests)
  • Inability to collect payment (e.g., withdrawal issues, unsupported payment methods)

CPQ software helps subscription vendors avoid involuntary churn by providing automatic billing-related reminders, automated renewal processes, and payment processing features that enable customers to pay with any of their preferred methods.

If a customer defaults on a payment, the billing team doesn’t need to worry — CPQ notifies the customer of payment issues before they become a problem.

Unleashing the Benefits of CPQ for Subscription Businesses

Although CPQ plays a vital role in any business dealing with quotes, contracts, and product configurations, it is especially important for subscription businesses.

CPQ software does more than accelerate the quote-to-cash process — it increases customer retention, reduces involuntary churn, and maximizes profits through accurate pricing estimates.

Optimized Subscription Management

From start to finish, CPQ helps companies selling subscription products streamline their internal processes.

  • During onboarding, customers set up payment information and schedule renewals, reducing the chances of unexpected payment issues.
  • Each payment period, CPQ automation helps the billing team send out invoices and remind customers to renew.
  • When customers need to make changes, CPQ integration with online portals allows them to manage their information, preferences, orders, and subscription tiers with ease.
  • Automated dunning processes help businesses minimize involuntary churn and maximize their revenue streams.
  • At the end of the subscription cycle, CPQ helps companies generate accurate renewal quotes with updated pricing and rewards for loyalty.

Although business professionals don’t typically consider it, implementing CPQ is one of the quickest ways to improve customer satisfaction from within.

Improved Customer Experience

Every step of the way, customers benefit tremendously when companies use CPQ.

Nobody wants to be “sold to.” But sellers using CPQ’s guided selling and automated quoting solutions can educate buyers about product options and their associated costs, meaning sellers get real value from sales engagements.

Post-purchase, a new customer doesn’t need to worry about remembering to pay their subscriptions on-time or keeping their information up-to-date — the company’s subscription management platform does the legwork and lets them know if something comes up.

When it comes time to renew, buyers might be rewarded for their loyalty with special discounts and offers.

Increased Quote Accuracy

Humans make mistakes. Software doesn’t.

When dealing with complex pricing models and a combination of products (not to mention multiple prospects and existing customers), it’s easy to forget something or make a mistake.

CPQ takes that risk out of the equation by automatically producing accurate quotes and contracts.

Even if there are errors, CPQ software’s built-in audit log helps customers (or their internal teams) detect any discrepancies before anything is sent out.

Improved Sales Efficiency

The average sales rep spends less than one-third of their time actually selling — a concerning figure considering that’s the activity that gets them (and the company) paid.

CPQ eliminates some of the most time-consuming tasks from the sales process, freeing reps up to focus on closing deals and delighting customers.

Instead of wasting hours on manual quoting, contracting, and sifting through the product catalog, reps can complete these tasks in minutes. Then, they can get back to prospecting, delivering demos, and talking to potential customers.

Integration With CRM and Billing

Integrating CRM and CPQ creates a unified view of the customer. Billing software works with subscription management for revenue recognition and financial reporting.

The backend process looks something like this:

  1. CPQ creates quotes and sends them to the customer
  2. The customer accepts the quote, triggering an order in CRM
  3. A sales contract is generated with billing information from CRM
  4. Payment or initial deposit is collected according to the billing schedule
  5. An invoice is sent out at regular intervals (generally monthly or annually)
  6. A payment reminder is sent out in the event of a failed payment
  7. When payment is received, the billing platform updates it in accounting

This is especially helpful when it comes to managing subscription renewals — if a credit card fails and the customer doesn’t answer their phone, CPQ automatically sends out a reminder with the necessary steps to complete payment.

Every customer interaction is reflected in CRM, so the billing team won’t contact the customer too frequently.

Decoding CPQ – What to Look for in a CPQ Solution for Subscriptions

Not all CPQ solutions are created equal. Although many share similar features, they aren’t all suited to subscription businesses.

Companies using a subscription model should look for the following features in a new CPQ solution:

Guided Selling

Guided selling tools help sellers quickly create accurate quotes and contracts that comply with company policies.

The product catalog includes detailed information about every item, including customizable options, pricing models, and discounts, which help sellers identify the right products for their customers.

On the backend, company leadership can configure policies and accessibility to ensure compliance across the board.

Flexibility for Various Subscription Types

There’s no one-size-fits-all subscription model — companies need a CPQ solution that can accommodate different renewal cycles, payment plans (including installment payments), and usage models. 

Flexible billing options let customers switch between plans and upgrade or downgrade their subscription levels without an intermediary, improving retention and satisfaction.

The right CPQ solution should also allow companies to add custom fields and discounts and set up payment gateways that support various currencies.

Easy to Configure and Change Products and Pricing

Drag-and-drop product configuration simplifies the process of creating and updating quotes.

This streamlines the sales cycle when a customer wants to make changes, as well as when reps need to update pricing information.

During CPQ implementation, company data will sync with the CRM and billing platforms, ensuring accurate updates.

Revenue Analytics

A good CPQ software for subscription businesses supports multiple sales channels, gathering and centralizing their data to inform revenue forecasts and trends analyses.

Since the software is already programmed to understand different customer segments and their preferences (otherwise, how would it generate quotes and configure product bundles?) it’s easy to extract valuable insights about customer behavior and find additional revenue opportunities.

Data Synchronization

When CPQ fits into the bigger picture of a company’s IT infrastructure (i.e., it fits in with the existing tech stack and company processes), it should contribute to the overall data flow.

CPQ’s integration with CRM and billing allows it to pull data from multiple sources, so companies can get a complete view of their customers and accurately track subscription renewals.

Plus, when changes are made to pricing models or discount structures in CPQ, the adjustments are automatically relayed across other platforms.

Automated Renewal Opportunities

The easiest way to ensure a long-term customer relationship is to make sure the customer’s subscription never lapses. This requires proactive management, which can become tedious if done manually.

The right CPQ solution for a subscription business automatically emails customers who are up for renewal, reminding them to update their payment information and/or renew their membership.

Many subscription businesses continue to charge their customers until they manually cancel subscriptions. In these cases, emails regarding their payments can also save companies from chargebacks and massive billing headaches further down the line.

Integrates with ERP, CRM, and Billing

A CPQ software solution must integrate with a company’s CRM, ERP, and/or billing software. Otherwise, they’ll work independently (a subscription business’s worst nightmare).

CRM integration is generally the first factor to look for, as that’s the software nearly every company uses. Companies in manufacturing, wholesaling, and retail use ERP to manage their inventory, and billing integration ensures timely and accurate financial reporting and revenue recognition while preventing revenue leakage and involuntary churn.

Low Code Solution

Coding is usually the biggest barrier to entry for new software buyers. Of course, enterprise applications will almost always require some sort of custom coding for complete integration, but a low-code solution can help companies save time and money by doing most of the heavy lifting themselves.

The right CPQ software should fit into the existing workflow without requiring anyone to write a single line.

CPQ Integrations