What is CPQ
For us, CPQ (Configure, Price, Quote) is more than a marketing term. It is a way of doing business that we fully embrace. It is therefore not for nothing that we have derived our company name from CPQ. Because in our opinion (almost) every company should be involved in implementing a CPQ solution. Because it delivers many benefits that every organization strives for: more sales, lower costs, smaller margin of error, higher conversion percentages and a clearer view of the margins. In this blog we explain exactly what CPQ is, what the added value is for companies and how CPQ can be applied using a configurator.
What is Configure, Price, Quote?
CPQ stands for Configure, Price, Quote, in Dutch we make it Configure (compile), Price and Quotation. Now these are everyday things that practically every organization is working on. Configure products or services according to the customer’s wishes, determine a price and then make a quotation. So what makes CPQ a separate thing that you can apply within your organization? The strength lies in automating the configuration options of your product(s). Errors are limited because within the CPQ software only parts can be selected that actually work together and are available. Subsequently, the price is adjusted for the configured product and a complete and good-looking quotation document rolls out.
A comparison: You can water a garden with a watering can or a garden hose. But this has to be done manually each time, and each time you have to think about which plants need more or less water. You can also install automatic irrigation, which determines once which plants need water and how much. Watering the garden is now reduced to turning on the tap. This is what CPQ software does for quote creation.
To clarify CPQ even further, we explain per component the difference between the normal situation and the situation with CPQ software.
Configure – Composing is no longer done on the basis of product knowledge of the representative or using Excel sheets, but with a product configurator. This defines configuration rules so that every customer, seller, dealer and the anonymous visitor to your website can only make producible choices. This reduces the margin of error to zero.
Price – the pricing is linked to the configuration rules. As a result, a (profitable) price is automatically determined when composing a product or service. Sellers, dealers or customers always have insight into the correct prices. It is even possible to include (gradual) discounts or local price agreements in the configuration rules and thus the pricing.
Quote – After you have put together the correct product with the configuration rules and the correct price has been calculated, you can easily record this information in a document. Although this already saves a lot of time and energy, CPQ software goes one step further. It offers extras to make your quotes even more personal and appropriate for your customers in an instant. Think of images, conditions, manuals, installation diagrams or whatever you think of can easily be added and / or formatted. Because the quotation document is automatically generated by means of configuration rules, a different layout can be used for each dealer.
What can CPQ do for your company?
By automating the three components of CPQ, the margin of error is reduced to zero right at the start of your business processes. You determine the possibilities and impossibilities yourself. As a result, it helps sellers, dealers or even customers to easily and accurately arrive at the price of (complex) products or services. And that without errors or products (or services) that cannot be produced.
And this quality improvement of your quotation process has an effect on the other business processes. For example, engineering will be required less often to correct incorrect configurations. Production only receives manufacturable orders and therefore never have to go back to the sales department to ask what has been agreed with the customer. The finance and purchasing department also know exactly what needs to be invoiced and purchased.
Faster turnaround time
In addition to reducing the margin of error, CPQ software also ensures a much faster turnaround time for quotations. Applying CPQ can, in times of personnel shortages, ensure that you can do more work with the same number of people and still continue to grow. The correct implementation of CPQ ensures, among other things:
- Visual purchase guidance for the customer
- Guaranteed correct offers (quotes always producible)
- Less failure costs
- Shorter lead time (from quotation to production)
- Clarity for sales team and customer about the standard and the limitations per product or service
- Complex products are displayed simply and clearly
- Possibility to configure (and sell) online
- Control over the content of the quotation document
- Easy to expand
- Direct insight into costs and delivery times of variations
- Connects with various eCommerce platforms
- No IT or programming knowledge required
The CPQ philosophy can be applied to both products and services. It supports all processes between your CRM and ERP application(s). Where these applications fall short in functionality to support the quotation and order process, CPQ applications do.
Product configurator to implement CPQ
Configure, Price, Quote revolves around the question of what solution you offer the customer, for what price, with what delivery time and under what other conditions. All conditions to arrive at this information can be stored in a product configurator.
Although implementing a product configurator within your business processes sounds like a far-reaching and especially technical step, in reality this is not so bad. No programming knowledge is required, product knowledge from the various departments is sufficient to create a well-functioning product configurator, after which you will immediately experience the benefits of the CPQ software.
In short
Thanks to the product configurator, your employees, dealers, resellers or even your customers can easily go through all the options. This way they can make choices about the product per step. Any associated products or services such as delivery, assembly or a service contract can also be included in the configurator. The product configurator helps to prepare error-free quotations, which relieves the workload in all other departments such as purchasing, sales, stock, production, design or finance.
Of course we are happy to think along with you to apply CPQ within your organization as well. Contact us today without obligation, or request a demo to test our CPQ software yourself to see the work.