CPQ: Auf Wiedersehen Preisfehlern, Hallo genauen Angeboten

27. August 2024

In the sales process, accurate pricing is absolutely critical. Without it, sales reps lose deals and damage their relationship with customers. Not to mention, they look unprofessional.

RevOps and sales operations teams have serious problems with manual pricing and spreadsheet-based quoting, especially if they’re selling complex products and services. It’s time-consuming, error-prone, and ruins the customer experience.

CPQ (configure, price, quote) software streamlines the quoting process by providing accurate pricing and product configurations.

Pricing errors seriously impact revenue growth.

There are plenty of reasons for pricing errors:

  • Outdated pricing catalogs
  • Incorrect product configurations
  • Miscalculated pricing and discounts
  • Improperly applied pricing rules and strategies
  • Lack of visibility into pricing data
  • Challenges updating pricing to reflect market changes

All these things have one common denominator: manual processes. When sales reps rely on spreadsheets, emails, and paper-based systems, mistakes are bound to happen.

These errors can have serious consequences for businesses:

  • Lost deals due to incorrect pricing or lack of competitive pricing
  • Poor margins with underquoting and misapplication of discounts
  • Additional resources required to correct errors and amend quotes
  • Damaged customer relationships and loss of trust
  • Inaccurate forecasting and revenue projections
  • Reduced customer trust and satisfaction

Not to mention, you’ll have limited ability to update your pricing strategy in response to market dynamics, customer preferences, or changes to product value.

CPQ software mitigates pricing errors.

CPQ software is specifically designed to eliminate pricing errors and improve the quoting process. By automating the configuration, pricing, and quoting processes, CPQ software ensures that sales reps have accurate information to provide customers with a quote.

Its core functionalities include:

  • Product configuration (with guided selling and rules-based validation)
  • Automated pricing calculations and discounts
  • Proposal and quote generation, editing, and review
  • Approval routing for complex or high-value quotes
  • Contracting and e-signature
  • Integration with CRM and ERP systems for real-time pricing and inventory information

Best of all, it has its own pricing engine. A pricing engine is a sophisticated algorithm that takes into account various factors — product cost, market demand, customer segmentation, and competitive intelligence — to generate optimized prices that align with your company’s goals.

Your system will either have an internal pricing engine or integrate with an external one.

Internal pricing engine

Internal pricing engines are powered by artificial intelligence (AI) and machine learning (ML) algorithms. They use historical data — transactions, customer behavior, market trends — to calibrate pricing decisions in real-time, right within the software.

This means that your pricing is always optimized based on the most current market data.

External pricing engine

External pricing engines rely on third-party data source integrations for market insights. Based on your pricing rules and strategies, these engines generate prices that align with your objectives.

This is the better option for busiensses with intricate pricing structures and product portfolios. It’s also well-suited to any business that needs advanced plugins (like real-time competitive intelligence, or price sensitivity data) to support their pricing strategy.

In both instances, CPQ serves as the centralized hub for all pricing-related processes and information.

How CPQ helps businesses configure their pricing

CPQ plays an essential role in pricing decisions. As the starting point for all sales transactions, it’s the only software that captures all pricing data and processes in a single platform.

Sales reps can easily access the latest prices, discounts, promotions, or contract terms. And pricing teams can look at sales data retrospectively to see the impact of previous pricing changes on business performance.

Der Prozess sieht folgendermaßen aus:

1. Integration with pricing systems throguh APIs

CPQ solutions like Salesforce and Oracle CPQ expose objects and data through REST APIs. This type of API (application programming interface) facilitates integration by adhering to HTTP standards, allowing for simpler and more efficient API calls.

For example, Salesforce CPQ utilizes a range of APIs to manage quotes, configure product bundles, and retrieve pricing details. Similarly, Oracle CPQ uses REST APIs to support the entire quote-to-cash process, guiding users through optimal product configurations and applying relevant discounts and promotions.

APIs in CPQ systems connect with:

  • Pricing engines. CPQ systems can call pricing engine APIs to retrieve the latest pricing rules and calculations. This ensures that the quotes generated reflect the most up-to-date pricing models.
  • ERP systems. Integration with ERP systems allows CPQ to pull data related to inventory, procurement, and financials, ensuring that pricing is aligned with the overall business operations.
  • CRM systems. By connecting with CRM systems, CPQ can access customer data, such as purchase history and customer-specific pricing tiers, enabling more personalized and accurate quotes.

2. Defining rules for pricing execution

On the backend, an admin can configure pricing rules within the CPQ system. These rules inform the software when and how to apply discounts, promotions, and bundles.

Examples of rules include:

  • Volume discounts. CPQ can automatically apply discounts based on the quantity of products being quoted. When customers purchase in higher volumes, they enjoy a lower per-unit price. 
  • Contract pricing and tiered pricing. CPQ can recognize when a customer is eligible for special pricing, such as through a contract or specific tier level. This ensures that only the appropriate discount is applied in the quoting process.
  • Product combinations. CPQ can manage product bundles by applying appropriate discounts or special pricing for bundled items. It can also require certain items to be selected for a bundle.
  • Minimum profit. To ensure profitability, admins can set a minimum profit margin for each product or group of products. CPQ will use this rule to prevent reps from setting a price too low, even if they have the freedom to personalize pricing.
  • Approval routing. For deals with custom pricing or those above a certain threshold, CPQ can automatically route quotes to your deal desk, who will verify that all prices align with business objectives.

These rules can be a simple set of conditions (e.g., “if the customer is in a specific region, apply regional pricing”) or complex algorithms that account for multiple variables and considerations.

The former is standard for just about every organization. The latter is more commonplace in companies with complex products, like B2B manufacturing or pharmaceuticals.

3. Collecting data through real-time data feeds

One significant advantage of CPQ systems is their ability to leverage real-time data feeds from pricing engines or databases. That way, quotes are always based on the most current pricing information, eliminating discrepancies caused by outdated data.

For instance, if a pricing engine updates the cost of a raw material, the CPQ system can instantly reflect this change in new quotes, maintaining accuracy and consistency across the sales process​. This also allows businesses to take advantage of real-time market data and adjust their pricing strategies accordingly.

Benefits of using CPQ for accurate pricing

The benefits of using CPQ for pricing go beyond just ensuring accuracy and consistency. Here are a few more key advantages you should consider:

  • Time savings and streamlined processes. With all pricing data centralized in one platform, sales reps no longer need to manually search for pricing information or consult various systems and departments. This reduces the overall sales cycle time by 28%.
  • Error reduction. The more manual steps involved in a process, the greater the risk of human error. With CPQ automating pricing calculations and applying rules consistently, there’s practically zero room for mistakes.
  • Better visibility into sales data. By tracking all quotes generated by the CPQ system, businesses can use this data to identify patterns and trends in customer behavior or product performance.
  • Increased efficiency in managing complex pricing models. Businesses with intricate pricing strategies often struggle to manage their models effectively without dedicated software support.
  • Higher customer satisfaction levels. Custoemrs want frictionless sales expereinces. And that’s precisely what CPQ delivers. With accuracy and consistency in pricing, businesses can build trust with their customers and improve the overall buying experience.
  • More revenue. CPQ protects your margins by making pricing accurate and enforcing your pre-defined rules. You’ll also close additional revenue thanks to reduced sales cycle times and higher win rates.

Getting started with CPQ for real-time pricing

Real-time pricing is a dynamic pricing strategy where the price of a product or service changes based on market conditions, demand, competition, and other factors. This approach requires businesses to havce a robust pricing strategy and the right tools to execute it effectively.

CPQ enables real-time pricing by bringing all the necessary pricing data together in one user-friendly platform. In industries where pricing changes constantly, like manufacturing, pharmaceuticals, hospitality, and technology, the ability to dynamically adjust pricing is crucial.

What to look for in CPQ software

When selecting a CPQ solution for real-time pricing, you have to consider a few key factors:

  • Integrations with other systems. CPQ only works as it’s supposed to when you integrate it with your CRM and ERP. If it can’t, it won’t be able to share the data required to optimize pricing calculations and generate accurate quotes.
  • Ease of use. CPQ is meant to streamline sales processes and pricing. If it’s complicated or challenging to navigate, it defeat the purpose and could lead to low adoption rates among your sales team.
  • Vendor integration. In some industries, companies work with multiple vendors to source different products. Vendor integration gives your CPQ up-to-the-minute pricing, profitability, and availability information. For example, ConnectWise CPQ does this for IT service providers.
  • Reporting and analytics capabilities. The ability to track and analyze sales datsa is a vital aspect of CPQ. It allows businesses to identify areas for improvement and make informed decisions about pricing strategies.
  • Customization options. Every business has unique pricing models and rules. Your CPQ solution must be flexible enough to accommodate your specific needes.
  • Seamless quoting and proposal generation. Your system should make the quote generation process easy, fast, and accurate. Look for a solution that offers customizable templates, allows electronic signatures, and integrates with e-commerce systems.
  • Approval workflows. You need to be able to set up approval workflows to ensure your deal desk reviews quotes before your sales team sends them out to customers.

Steps for implementing and integrating your CPQ software

Once you’ve chosen a vendor and finalized the purchase, they’ll work with you to get up and running with the system. CPQ implementation and integration are critical steps to ensure the success of your real-time pricing strategy.

Here’s a brief overview of the process:

  1. Prep your team for the changes.
  2. Build out your product catalog, and map out every possible/allowable configuration in the system.
  3. Define your pricing and discounting rules.
  4. Program approval workflows within the system and assign personnel.
  5. Integrate CPQ with your ERP, CRM, and billing systems.
  6. Train your team members on how to use the new CPQ.
  7. Test everything to make sure it functions properly.

For a more in-depth look, check out my comprehensive guide to a smooth CPQ implementation.

Best practices for training sales reps  on CPQ

If you want to maximize your ROI from CPQ investment, you need your team to use it properly. To guarantee high adoption rates and return on investment, here are a few best practices to keep in mind:

  • Start early. Involve your sales team in the product selection process. And get them involved in the implementation process from the beginning.
  • Focus on user experience. If it’s easy to use, your reps will be more likely to adopt it.
  • Provide hands-on training. Hands-on learning allows trainees to practice using the system and get comfortable with it before they’re go-live.
  • Tailor training for different roles. Depending on their job functions, different reps may need to use CPQ in specific ways. Develop training materials that cater to these roles for maximum effectiveness.
  • Provide ongoing support. Even after training, make sure your team has access to resources and support for any questions or issues that may arise.
  • Incorporate CPQ into sales meetings. Focusing on CPQ during sales meetings can help sales reps see the value of the system and collectively understand how to use it effectively.

Guarantee pricing accuracy with modern CPQ.

CPQ is perhaps the most crucial part of the sales tech stack. It’s a core sales tool with significant implications for pricing strategy, quote accuracy, and, by extension, customer satisfaction.

This is especially the case if you’re selling an enterprise SaaS product, custom-manufactured goods, or managed service with a complex quote process.

In these cases, you can’t run your sales operation without real-time pricing data, automated pricing calculations, and quote generation capabilities.

Ready to start looking at CPQ solutions for your team? Check out my guide to evaluating CPQ for enterprise vs. SMB needs. Also take a look at our CPQ comparisons and comprehensive software reviews.

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