Pricing errors can be expensive for any business. With a CPQ solution, you can centralize pricing rules and make them instantly available to your team.
A CPQ system helps your sales teams stay organized and up-to-date with accurate product configurations and pricing. This is especially important when dealing with complex products or services.
What is CPQ?
If your salespeople need help with advanced product configurations, inconsistent pricing concessions, non-compliant contracts, and other issues that lead to quote-generation bottlenecks, a robust technology-enabled configure, price, and quote (CPQ) process may be in order. Start by interviewing key stakeholders to understand their pain points and determine the features you must have in a CPQ solution. Once you have a requirements document, use it to evaluate CPQ vendors.
Top-notch CPQ solutions empower your sales team to customize and present quotes tailored to individual customer requirements. Additionally, they incorporate automated mechanisms, streamlining manual processes and minimizing the potential for errors, especially in CPQ pricing.
For example, the Starbucks app allows you to customize a drink by selecting the size and type of cup and the add-ons you want to purchase and then calculating the total cost using an algorithm. The final proposal includes the prices of the selected items, terms and conditions, and a signature block to bind the agreement. Ideally, CPQ systems integrate with your CRM to deliver seamless processes from lead generation through the sale.
What is a Quote?
A quote is a sales document that puts a fixed price on work and binds the company to do that under those terms. It may also be called an estimate or a proposal.
A CPQ process helps sales teams streamline their quoting process by automating pricing and configuration models and creating a system for generating quotes. It also helps ensure that all quotes are accurate and consistent. This can significantly shorten the sales cycle and improve the quality of quotes.
Typical CPQ processes include product catalogs with configurable options, pricing tables, and discounting models (e.g., volume, term, slab) based on a product’s features and components, what can or cannot be bundled together, and other product parameters. A CPQ solution can also enable the customization of products for different customers and support multi-language quoting.
CPQ solutions enable sales operations to create personalized, professional quotes in minutes and hours that match the company’s branding and style. They also help sales reps and channel partners follow a standardized playbook and present a consistent, high-quality image to potential clients.
What is a Proposal?
A proposal is a document that summarizes a sales deal and includes the pricing, terms, and conditions. It should include a cover page with the proposal number, submission date, company name, address, phone number, and email logo. The proposal should also include a table of contents and chapter titles.
CPQ benefits sales teams by reducing the time to respond to quote requests and by enabling them to create high-quality quotes that are accurate and consistent. It also supports a buyer-centric sales process and reduces overall costs.
A CPQ solution can also automate discount management, protecting margins and only applying appropriate discounts. It can also help improve the customer experience by enabling cross-sell and upsell recommendations tailored to each buyer’s needs.
When selecting a CPQ solution, looking beyond the basic functionality and considering hidden considerations is essential. These may include the complexity of implementation, the time to value, and the ability of the solution to scale with your organization.
What is a Contract?
Businesses use contracts to formalize new relationships and set out the terms & conditions that govern commercial activity. They also serve to establish the obligations of each party. While individuals may occasionally sign contracts – for example, when buying a house or accepting a job offer – they are mainly businesses that enter into contractual agreements regularly.
Contracts are legally enforceable when they contain six key elements: an offer and an acceptance, awareness, consideration, capacity, and legality. These elements demonstrate that the parties have a meeting of minds, which is necessary to create an enforceable agreement.
For a CPQ system to work well, the data that drives it needs to be accurate and up-to-date. Ensure that any systems your business uses to generate quotes and proposals are integrated with the CPQ solution to update real-time product data. This will prevent discrepancies that could lead to inaccurate pricing. It’s also essential to balance the need for a flexible, agnostic CPQ with the requirements of your unique sales processes and channel operations.
What is a Pricing Strategy?
A pricing strategy is a framework and technique companies employ to determine the costs of goods and services. It involves considering various factors, including business goals, product features and audience, and the competitive market environment.
For example, a business may employ a cost-plus pricing strategy, which adds a small profit margin on top of the actual production and distribution costs. This strategy is popular for retailers, manufacturers, restaurants, and distributors. They can increase earnings and decrease customer complaints and price resistance simultaneously.
Bundling is another common pricing strategy. This involves selling multiple products or services at a discounted rate, such as insurance and home maintenance packages from Progressive or haircuts and styling from your favorite salon. This type of pricing creates a perception of added value and convenience for customers, which can help increase sales.
Businesses also consider their audiences’ sensitivity to price fluctuations and may adjust their strategies accordingly. This can be done by evaluating the responses to previous price changes and estimating how much a price change will encourage or discourage buyers from purchasing their product or service.