What is CPQ? An Expert Guide (Without the Jargon)

Growing your business will inevitably create complexity. Whether you’re simply looking to increase your customer base at a steady rate, or rapidly scale to take advantage of a new market opportunity…the infrastructure, processes and people you’ll need to add into the mix will create new challenges, adding to the complexity of your operations.

It’s natural to feel a bit overwhelmed at certain stages of growth, especially considering that most organizations start facing issues when their legacy processes and tools start falling behind business growth.

Part of the complexity of B2B sales today stems from how much non-selling work must be done to get the sale. In fact, Hubspot’s 2024 Sales Trends report found that salespeople spend just a third of their time actively selling. While this directly impacts revenue, there are also a lot of hidden costs that may be less obvious; making salespeople focus on administrative, information gathering, and other non-selling work means they’re also not spending as much time researching and engaging with prospects or getting to know your products better.

Automating administrative and non-selling work wherever possible helps get your salespeople out of this trap. This is where CPQ software comes in, helping to streamline and automate sales processes for organizations with configurable products and services. Investment in CPQ has risen steadily over the last decade, and it shows no sign of stopping anytime soon. In fact, the CPQ market hit $2.2 billion globally in 2022 and should reach $7.3 billion by 2030.

What is CPQ?

CPQ stands for Configure, Price, Quote. At a basic level, CPQ software enables organizations with configurable products or services to accelerate and simplify the sales process by automating parts of the quote and order operations. For many organizations, CPQ software is a vital part of their technical infrastructure, representing a critical business investment.

The best CPQ solutions offer more than just basic efficiency gains, however. Many CPQ solutions provide the capabilities needed to enhance the customer experience, improve analytics and reporting, and empower sales teams to do their jobs more confidently. In fact, some Experlogix clients leverage CPQ to enable full-fledged digital transformations and maximize their investments in upgraded CRM or ERP platforms.

But for a deeper look into CPQ, let’s examine its individual components and explore the ways that CPQ software adds value to the sales process.

Configure

For many organizations, configuring quotes can involve a lot of complex steps, several people, a lot of manual effort, in both the actual configuration process and in follow-up tasks…like getting approvals before sending it to a customer. CPQ software simplifies complex product configurations by applying configuration logic to product data, which can be pulled from a CRM, ERP or other system. The exact way your processes change will vary a little depending on the CPQ solution you choose. However, the general idea is to replace multiple spreadsheets, the inclusion of other individuals, and manually copying/pasting information with a more intuitive, integrated interface.

In Experlogix CPQ, both the administration interface and product configurator are designed to be highly accessible to business users. Rather than requiring coding, Experlogix lets you build your configuration rules using logic similar to what you’d use in Excel, instead of restricting you with rigid, pre-built templates or building blocks, you get to completely tailor-make the rules to fit your business and the teams that need to use the software.

Advanced features like guided selling can take this even further, by providing recommendations for upsells and cross-sells throughout the configuration process. This shortens the time it takes for salespeople to reach their full potential, since CPQ has all the information they need to sell effectively…instead of relying on tribal knowledge, you have the important information built right into the process.

Price

Similarly to configuring products, pricing can be a headache for many organizations, especially those that rely on complex formulas, or offer a variety of products and/or services or that sell in different regions. Pricing in CPQ software takes away the need for manual calculations and pricing spreadsheets, pulling the latest information directly from your CRM or ERP platform and allowing you to implement pricing rules and calculations within the solution.

We’ll talk more on this later, but changing processes in this way has a few key benefits: it ensures your orders use all the latest pricing information…and that this pricing information is correct. For organizations that offer products in different regions, with different currencies, as well as products that rely on advanced formulas, this can translate to considerable time savings.

CPQ can also help to remove the headaches in related processes, like discounting. For example, the software can automatically send requests for discount approval to the appropriate stakeholders, who can then sign off with the click of a button.

Quote

The quoting component of CPQ software enables organizations to automate the steps between configuring the product and sending the customer a quote. The sophistication of the quoting function in a CPQ solution can mean the difference between losing and winning a deal…it’s what determines the quality and accuracy of the quote that the customer ultimately sees, after all.

Automating the quoting process allows you to ensure that all quotes look professional and are consistently on brand.

One of the advantages of having both CPQ and Document Automation together is that you can really take quoting further. A fully integrated solution makes it possible to easily build dynamic quoting templates and automate related workflows, like routing to a customer for e-signature.

Benefits of CPQ Software

“CPQ is a business amplifier that scales with you,” says Jeff Holway, Experlogix Vice President of Sales. “It does a lot more than just make you act more quickly… it also adds clarity and consistency to your processes, so that you can scale more effectively.”

While efficiency is one of the biggest benefits of CPQ software, it isn’t the only one. The right solution has the potential to drastically transform processes and provide benefits across the organization, from increased revenue to greater visibility into sales performance…and much more.

Let’s get a closer look at some of these major benefits and explore the role that CPQ can play in transforming the organization.

Consistent Strategy and Processes

CPQ software enables organizations to consistently enforce pricing by using predefined pricing rules based on factors such as product configurations, customer segments, and contract terms. Bringing consistency to your sales process ensures that customers receive the same quality of service, no matter where they buy from you. It also enables you to improve and create a better framework for following best practices.

In the most complex products, there are several individuals that are part of the quoting team to ensure correct components and services are selected or removed. These individuals are often technical resources who are distracted from other work to progress your organization. CPQ software frees up time and ensures that everyone is following the same strategy.

The best part? The added consistency doesn’t come at the cost of personalization. We’ll cover more on this later, but automating processes like discounts and approvals, as well as quoting, also makes it easier to improve the customer experience.

Institutionalization of Tribal Knowledge

In every organization, there is a lot of knowledge that isn’t written down anywhere because it exists in people’s heads. Whether it’s the nuances of a technical product or a particular sales strategy, this is the information that veteran salespeople have from selling your products or services; the stuff that takes a while to learn.

With CPQ software, you can build that knowledge directly into the system, so that even newer salespeople can take advantage of your institution’s collective know-how and sell your products more confidently. This increases revenue by increasing the effectiveness of everyone on the team.

It also mitigates lost revenue due to employee turnover. While losing veteran team members has always been a major cost to organizations, it became especially clear during the peak of the COVID-19 pandemic just how many organizations face it. In the data and analytics world alone, 96% of organizations lost critical tribal knowledge in 2020.

This gets even more severe if you have partners or dealers selling for you, since they don’t have access to the same people and resources. However, building tribal knowledge into a CPQ solution allows organizations to institutionalize best practices and create a consistent strategy, regardless of who’s selling.

Accelerated Sales Cycle

Removing manual work from the equation impacts the sales process in a variety of ways, but, ultimately, the efficiency gained translates to closing deals faster.

It’s no secret that today’s customers highly value speed. CPQ makes it possible to meet and exceed those expectations, without sacrificing any of the things that differentiate you from the competition. In fact, you might be able to use the extra time to better engage your customers. For example, many Experlogix clients use the time saved to provide customers with more information about the products or enable their sales team to be more readily available to answer customers’ questions.

Reduced Sales Onboarding Time

CPQ software enables organizations to build product knowledge and automate sales processes, making it easier for newer salespeople to learn the ropes. This takes away the reliance on pricing spreadsheets and “tribal” knowledge that isn’t written anywhere.

Instead, your team has all the information they need within the configurator, and it’s accessible via an elegant user interface. You can also create rules that prevent impossible configurations from being made so only those products that can be made and services that you offer are sold. Other features like guided selling reduces the knowledge gap between new and experienced salespeople.

More Accurate Quotes

Humans are great at a lot of things, but even the most detail-oriented person in the organization is bound to make a mistake at some point. CPQ software makes quoting more accurate by automating the process of transforming a quote into an order. CPQ software inspects every selection made by a salesperson and compares it to pre-defined rules. So, if a certain combination of components is incompatible, or if a certain product can’t be sold in a specific region, it’ll be impossible to select it.

This not only reduces waste by reducing the number of quotes that must be revised, but it also creates a more positive customer experience. As a result customers won’t experience delays from inaccurate orders or receive the incorrect product. In other words, CPQ solutions lets you capture lost revenue, avoiding the rework involved in correcting quotes or sending the correct product to a customer after an incorrect one has been shipped.

In Experlogix CPQ, it’s also easy to create manufacture ready configurations with bills of materials and routings, so that production teams have all the important they need to manufacture the product with confidence that it’s accurate.

Improved Customer Experience

Successfully implementing CPQ software results in a better overall customer experience by removing friction from the process, ensuring fewer delays in delivering the initial quote and less revising quotes due to errors.

Research shows that the first quote a customer receives is often the one that wins the deal. CPQ gives you a competitive advantage, since delivering the right quote faster can generate additional revenue.

What Business and Industries Use CPQ?

While it has a considerable audience in manufacturing, CPQ software provides advantages for any business that provides configurable products or services, regardless of industry. This makes CPQ valuable in areas including professional services, renewable energy, research, media and many more.

Looking for more examples? Here are just a few ways that our clients from different industries have used CPQ:

CPQ for High-Tech Manufacturing

Organizations in high-tech industries rely on products with exacting specifications, and many of the materials used must have precise physical properties…meaning that the cost of even small errors can be significant for both manufacturers and their customers.

At the same time, sales teams in these industries must learn a lot of information for products that are at the forefront of innovation around the world. Finally, the complexity of configurations and pricing in this sector often means that it can take hours to put together a single quote.

CPQ software enables high-tech manufacturers to institutionalize some of the knowledge that separates new and experienced salespeople, while also making the process simpler and easier to follow…this makes it possible to rapidly take advantage of new opportunities as market shifts occur (in a very disruptive market).

For example, one client reduced the time it takes to create a customer-ready quote from several hours to a few minutes using Experlogix CPQ for Microsoft Dynamics 365.

CPQ also adds a lot of clarity to the sales process, by allowing sales to easily show side-by-side product configurations, so it’s easy to compare prices and features between multiple variations.  This means that customers have a clearer idea of what they’re buying, so there are fewer miscommunications and incorrect products being delivered.

CPQ for Agriculture

Agricultural products, ranging from seeds and fertilizers to machinery and irrigation systems, often require intricate configurations tailored to specific farming needs — which can vary by the type of crop grown, soil used, typical weather and a wide range of other factors.

By centralizing product specifications and customization options within a CPQ platform, organizations in agriculture can ensure consistency and accuracy across sales channels. Whether it’s selecting the right seed variety or configuring a precision farming solution, CPQ software empowers sales representatives to offer personalized recommendations that align with customers’ requirements and generate awareness for the breadth of the company’s products.

CPQ for Healthcare

In healthcare, patients with a variety of conditions depend on custom products that are highly tailored to their needs — ranging from factors like age and body shape to stylistic preferences.  For example, a medical footwear manufacturer needs to make products that specifically fit a patient’s body while still feeling comfortable.

These and many other scenarios often require individual patient consultations and measurements, so taking a long time to create an order significantly impacts the patient experience. Plus, any order errors could lead to a patient’s care being delayed or lower quality than expected.

Improving the ordering experience will both drive more efficiency and help create a lasting positive impression for patients and providers alike. For example, a medical device manufacturer would have more time in its process to answer customer questions and ensure they know how to best use their products. This is also a great area for automating the quoting process and related documentation.

If we go back to the medical device manufacturer example, this could translate to being able to provide more follow-up documentation like care and maintenance instructions or relevant health reminders.

CPQ for Data and Research

Configuring data and research products can be a highly complex task, requiring knowledge of different pricing structures, that often vary by the type of data or even particular data set being sold. These organizations also tend to offer an array of services, such as expert consulting, to help customers get the most out of their products and research.

For instance, a market research firm may offer access to real-time data tracking advertising, custom market research reports, as well as syndicated research reports. Each of these could rely on different pricing strategies, have different service pairings and rely on a lot of custom formulas.

CPQ software can dramatically reduce complexity for these organizations; integration with ERP systems is especially important here, so that up-to-date pricing information can be pulled automatically into a configuration.

CPQ for Education

CPQ software allows education organizations to configure and customize educational programs based on factors such as course offerings, class schedules, curriculum modules, and pricing structures. Institutions can tailor educational programs to meet the specific needs and preferences of students, employers, or corporate clients.

For example, universities may offer customized executive education programs with flexible scheduling options and specialized course content to corporate clients. Pricing educational programs can be especially complex, especially for institutions offering a wide range of courses, programs, and services.

Looking for more ways to use CPQ? Check out our CPQ client success stories.

Impact of CPQ Software

At a very basic level, the ROI of CPQ software  is easy to estimate:

  • Estimate the average value of each quote.
  • Estimate the total number of quotes you generate per month/year/etc.
  • Increase quote value by 20%
  • Increase the number of quotes you produce by 25%
  • Multiply the new quote value and number of quotes produced.

It’s important to note, however, that this is only the beginning. The impact of CPQ software extends beyond sales operations, influencing various facets of business. With seamless integration capabilities, CPQ aligns sales processes with other critical functions such as inventory management, order fulfillment, and financial systems. This integration fosters collaboration across departments, enables you to scale more efficiently and, ultimately, improves the customer experience.

As we previously mentioned, institutionalizing product and sales knowledge comes with major benefits. Once the processes are defined and easy to follow, the information transitions from someone’s head to a system that is maintained and accessible. This keeps the knowledge in the company. It doesn’t walk out the door, and it leads to salespeople doing what they are good at: building relationships with prospects and customers.

CPQ also provides benefits at every stage of the process, so you get direct ROI in multiple ways. For example, one Experlogix client reduced the number of quote revisions by 43%, in addition to improving the efficiency of putting together a quote in the first place.

Here are several more ways that it can positively affect your business:

  • Streamlining the ordering and configuration process.
  • Making it easier to create data for new products.
  • Accelerate workflows for approval processes like discounts and engineer change requests.
  • Reducing the amount of rework that needs to be done later.
  • Providing more visibility into sales performance via improved analytics and reporting.

In evaluating intangible benefits, companies must consider the qualitative aspects of CPQ software implementation. Enhanced customer experience, improved sales effectiveness, and strengthened competitive positioning are invaluable assets that contribute to long-term business growth.

Integrating CPQ with CRM, ERP and Other Business Technologies

Integration is a key part of what enables CPQ to provide the value that it does. Although some CRM systems come with basic CPQ software, they don’t all provide the same level of customization or depth as a standalone CPQ solution that integrates with all your key platforms.

Integrating CPQ with CRM allows organizations to gain a better understanding and handle of their customer data. In addition to efficiency, this helps to provide visibility and ensure that all the right information makes it to the appropriate place. Integration with your key systems also helps to ensure that only products that can actually be built are sold; when relying on manually copying/pasting information, it’s easy for even veteran salespeople to add configurations that include incompatible components. Instead, CPQ can use information from your ERP to prevent incompatible components from being put into a configuration together.

Integrated CPQ systems can leverage CRM or ERP data for rules in configurations. With Experlogix, for example, it’s easy to customize product recommendations and requirements by different regions — this is invaluable for offering accurate, customized quotes. For example, an organization that sells in different areas across the United States or in different countries could build customized rules for selling product components based on where the customer lives.

This is valuable, not only for elevating the customer experience, but for ensuring compliance with specific state regulations. Products with variable components based on regional weather trends can automatically be customized based on what the weather is like in a customer’s region. Similarly, an integrated system can prevent products from being sold in regions where it’s against regulations, which is helpful in areas like gambling, finance and healthcare, where regional differences can drastically impact regulatory compliance. 

Choosing the Right CPQ Solution

“The first step is to think about the problems you’re trying to solve, then define and measure them” says Jim Meyer, Experlogix Senior Business Applications Manager. “If you don’t know the current state of things, you won’t be able to prioritize requirements in a CPQ solution as effectively. If you’re wondering whether CPQ is worth it, just ask yourself: What’s the cost of changing nothing?”

CPQ software represents a major business investment, so it’s important to select the solution that is truly the best fit for your needs and think about a few things that’ll help implementation go smoothly.

While there’s no one-size-fits-all set of recommendations to follow, there are some key areas of your business that you should be thinking about:

1. What problem are you trying to solve?

At the heart of selecting the best CPQ software is the core business problem you need to solve. Effective implementations require more than just a basic understanding, though. It’s critical to ensure that the problem is also well defined, or you have no way to measure success. Are you trying to simply improve speed and accuracy, or are you looking to overhaul your processes and systems completely?

This will not just help in the selection process, but it can also help define the scope of the implementation.

2. Who will be using the software?

Thinking about the end users is a great place to start for defining your requirements for CPQ when you start thinking about implementation.

For example, will it just be your internal sales team using the solution, or will other teams also use it? If it’s the latter, you’ll need to consider the systems and tools those teams use and ensure the solution you choose can integrate with them. When a lot of varied teams need to use a solution, it also needs to be flexible enough to accommodate a wider range of workflows, products and/or services.

End users should also be involved in the selection and requirements process…not only can they ask the tough questions of vendors, but they can also bring a lot more specific process and/or product knowledge to the table. The scale of implementation also matters, so it’s important to consider the total number of users, and whether any external partners or customers, need access — this will inform decisions like how important it is to be able to create and manage dealer and customer portals.

3. What are your documentation needs like?

The “Q” might be the last letter in CPQ, but it’s no less important. The quote is the last thing a customer sees before deciding to buy. Take some time to consider how to improve your documentation game.

For example, many organizations in areas like technology and healthcare use the efficiency gained through CPQ to provide more robust information to customers, helping them understand the features, benefits and other key information related to the products they’re buying.

You don’t need to have complex document needs to benefit from evaluating your quoting process. Even creating a basic quote template can help to elevate efficiency and provide a more consistent customer experience. After all, virtually any organization can benefit from evaluating the quoting process, and what their typical quote looks like.

4. What is your product or service ecosystem like?

When thinking about your product ecosystem, there are a few different factors to consider when evaluating CPQ software:

  • The number and types of products you offer.
  • Whether you offer products, services, or both.
  • If applicable, how are different products/services sold together?
  • What currency or currencies do you need to support?

Every business has unique products, services, and pricing models, and the CPQ solution should be able to adapt to these specific needs. Organizations should assess whether the software allows for easy configuration of product catalogs, pricing rules, discount structures, and quote templates.

It’s also about more than purely technical and process considerations. When thinking about your products or services, how much knowledge does a salesperson need before they can sell effectively? Most organizations rely on some knowledge that is built through experience and learning from other people — features like guided selling in CPQ allow organizations to build this kind of knowledge right into the process.

5. What are your reporting needs like?

One of the most common challenges we hear from clients is: They have tons of data and no easy way to use it. The good news is that CPQ software may be able to help with that, too. By bringing together data from CRM and ERP, and combining it with the logic in CPQ, organizations gain more visibility into sales performance, product configuration trends, profitability and customer behavior.

Enabling Business Transformation with CPQ Software

Increasing customer expectations and global disruption across numerous markets has made it more important to consider the agility of your operations. Product configuration and quoting are key areas where automation can have a dramatic impact, and CPQ software brings even more to the table than just basic efficiency.

CPQ software is a powerful enabler of business transformation. By driving agility, enhancing customer experiences, improving operational efficiency, optimizing pricing strategies, and providing actionable insights, CPQ software empowers businesses to unlock new growth opportunities, outperform competitors and thrive in an increasingly competitive world.

Ready to start transforming your processes and the custome experience? Contact us today for a demo of Experlogix CPQ!

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