What is CPQ? The acronym stands for: Configure Price Quote and labels a sales software solution that helps businesses with either complex products and solutions or complex cost structures to configure, price and generate a quotation for their customers.
Gartner defines it as an "integrated set of software applications supporting the configuration, pricing and quote generation activities that accompany solution and negotiated selling." CPQ comprises "pricing engines, proposal generators, quoting systems, and rules or constraint engines, and are complemented by approval and authorization workflows."
In other terms, CPQ is a software solution that sales people in B2B environments use to automate the central component of their customer relationship - the sales quotation following an RFQ (Request for Quotation) or RFI (Request for Information).
Other names for CPQ software
CPQ is often named diversely, depending on the industry and the focus of the usage.
Other labels for a Configure-Price-Quote solution may be:
- pricing-to-quotation tool
- sales configurator
- proposal/quote generator
- quote-to-cash software
- costing tool
Which industries benefit from a CPQ solution?
So which businesses are most likely to benefit from the efficiency-driving capabilities of CPQ? Businesses selling complex product configurations or that do have complex pricing and costing scenarios such as:
- contract manufacturing, original design manufacturing (ODM)
- discrete manufacturing
- precision engineering
- high-tech & semiconductor industries
- electrical engineering
- machinery manufacturing
- mechanical engineering
- construction equipment manufacturing
- automotive and transportation
- medical manufacturing
- B2B service industries like insurances, health care and social assistance providers
The Configure Price Quote Dilemma
Businesses of these industries are typically caught in the following configure price quote dilemma :
- The complexity of products, components and thousands of configuration options inhibit a high risk of quoting errors which could result in unfeasible configurations and high correction costs
- Complex cost calculation might lead to inaccurate pricing due to outdated product prices or faulty costing calculations
- Balancing customer budget restrictions and negotiations and margin pressure might lead to under or overpricing, both of which can cause serious damage to a business
- The need for quote collaboration with engineering, purchasing departments and other specialized departments slow down the entire sales process and are another source for errors
Which benefits can be expected from a CPQ solution?
The power of a Configure-Price-Quote (CPQ) system lies in the direct elimination of errors and inefficiencies. The software enables sales teams to swiftly produce accurate, professional quotes and proposals for every individual customer. Having a streamlined and much shorter pipeline lowers the entire cost of sales. Additionally a smart CPQ system presents predictive up- and cross-selling opportunities to increase deal sizes and empowers a smooth collaboration of sales and engineering and purchasing teams via automated routing and approvals.
These are the benefits you can expect from implementing a CPQ system:
1. Reduced sales cycle time through a streamlined configure-price-quote process
2. Efficient quote contribution of specialist parties like engineering and purchasing via workflow routing & automated approval processes
3. Increased deal value through custom-fit configuration and further upselling opportunities presented by a smart system
4. Avoided pricing and costing errors, higher deal margins
5. Avoided configuration errors, saved correction costs
6. Increase of customer-facing activities raising customer satisfaction
A CPQ system streamlines the entire configure-price-quote process and enables sales teams to create accurate, professional proposals for every single customer within hours instead of weeks. A reasonable Configure Price Quote solution integrates seamlessly into existing CRM and ERP systems to allow a seamless end-to-end sales process. Beneficiary industries are all manufacturing and engineering industries as well as the B2B service sector with complex products/solutions or cost structures.
*This article has been updated for accuracy and timeliness.
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