The Evolution of CPQ Software

Effective CPQ software should be able to handle complex contract structures, allow finance to invoice and recognize revenue accurately, and manage subscription modifications. It should provide the needed flexibility and guardrails for sellers to close deals rapidly.

Let’s explore how CPQ software has evolved to meet the demands of modern business and the benefits it can deliver to SaaS companies.

What is CPQ, and how does it work?

CPQ stands for Configure, Price, Quote. CPQ technology helps businesses streamline their sales process by automating the configuration of complex products, determining accurate pricing based on various factors, and generating customer quotes. It integrates with native CRM and ERP to enable customer self-serve.

But what exactly does that mean for modern businesses? Let’s break down the core components of CPQ software:

Configure: During the sales process, CPQ tools enable users to choose and customize various components, features, and options according to specific customer requirements.

For instance, suppose you’re a customer looking to purchase a computer. You have specific requirements regarding processor speed, memory capacity, storage options, and graphics capabilities.

A CPQ solution provides a user-friendly interface to configure your ideal computer system.

You start by selecting the base model, and then you can customize it by choosing the processor, memory, storage, graphics card, and any other desired features.

As you make each selection, the CPQ software ensures that the chosen components are compatible with valid options for your chosen base model.

It also provides real-time feedback, displaying the updated price and specifications of the configured system.

Price: CPQ software automates the pricing process, combining recurring or subscription, usage-based, and one-time pricing models in complex hybrid methods such as consumption-based, prepaid, drawdown, or minimum commit plus flat fees. The power of CPQ is clear when calculating complex price changes for contract modifications.

Quote: Once the product has been configured and priced, CPQ software generates a custom quote that includes all relevant details, such as product features, pricing, and terms and conditions.

CPQ guardrails ensure that quotes are accurate, comply with company rules, and follow required internal approval processes before being sent to the customer for review and approval.

When should you use CPQ software?

CPQ software proves valuable in various scenarios, particularly where traditional CRM systems struggle. It makes the quoting process exceptionally fast and easy.

A CPQ is particularly useful if your company has:

High-complexity configurable products

CPQ software shines when handling products that offer numerous customization options, variations, and interdependencies. Its systems are specifically designed to tackle the challenges posed by product complexity. Companies can use CPQ to simplify and automate customizing and pricing these complex products.

Multi-channel sales

When a company operates through multiple sales channels, such as direct sales, resellers, and e-commerce platforms, it can be challenging to keep track of all the moving parts. Salespeople face many challenges, such as inconsistent pricing, fragmented customer data, channel conflicts, and inventory management challenges.

CPQ tools help them tackle these challenges by:

• Providing a centralized platform to ensure pricing and quoting consistency across these channels.
• Integrating with various systems to ensure real-time inventory visibility and streamline order management.

High-volume quoting

As companies scale, requests for quotes (and the sales team’s workload) increase. CPQ comes to the rescue by automating various aspects of the quoting process, reducing the time and effort required to create each quote. This enables sales teams to scale more efficiently, even when faced with a high volume of quoting tasks.

Reduced sales performance

If your sales team’s performance is suffering even with an influx of leads, you might need a CPQ tool to make their workflow more efficient.

With a solid CPQ tool, your sales team can focus more on selling and less on generating quotes. This will improve their overall performance and drive more revenue.

How can CPQ help improve the sales process?

Good CPQ tools can do much to improve the sales process. According to Aberdeen Group, businesses that use CPQ software often experience a 28% reduction in time required for product configuration and 49% higher proposal volume.

Here are other specific ways using a CPQ tool can boost your sales process:

Sell more quickly

The Gartner report shows that sales reps have only 5% of a customer’s time during the buyer journey. CPQ systems speed up the sales cycle and increase revenue by reducing time waste. This means that sales teams can focus on closing deals faster. Here’s how CPQ achieves this:

1. Maximize client interaction to reduce wasted time: CPQ solutions streamline time-consuming administrative tasks by providing a straightforward, error-proof process for configuring and pricing products or services.
2. Build sales momentum: CPQ helps maintain momentum by enabling quick response times when prospects request quotes or information. Providing relevant materials quickly keeps prospects engaged, which is crucial as market conditions and customer needs can change rapidly.

Delays in the sales cycle create opportunities for agile competitors to seize prospects’ attention. CPQ solutions simplify the sales cycle, reducing delays and ensuring a continuous flow. This reduces the risk of lost prospects and increases profits.

Streamline the approval-deal process

The B2B sales cycle is notoriously long and involves several decision-makers. Integrating CPQ into your sales process can improve and shorten the deal-approval process for operational efficiency.

The following CPQ features expedite approvals, enhance collaboration, and ensure efficient operations:

• Automatic approval notifications: Many CPQ tools notify stakeholders and decision-maker when a deal reaches the approval stages. This  eliminates the delay caused by manual communication.

• Comprehensive deal details: CPQ presents comprehensive deal details such as pricing and specific terms and conditions on one screen or in concise emails, facilitating informed decision-making.

• Deal-approval visibility: CPQ tools support transparency by tracking approval progress, which enables effective communication and prevents delays.

• Compliance and audit readiness: CPQ software provides sales teams with a detailed audit trail which can be invaluable for scrutiny and regulatory oversights.It also allows sales teams to evaluate the decision-making process, showing who, when and why a decision was made.

Related guide: How to bridge the gap between sales and finance

Enhance sales with accurate branded proposals and quotes

Creating accurate proposals or quotes with corporate branding and personalization can improve your business sales. According to a survey, branding equals more customers’ trust as 46% of U.S. consumers are willing to pay more for a brand they trust, up from 30% in 2021.

For many salespeople, a quote and proposal are all about accuracy — they care little about how aesthetically pleasing the documents are to their clients.

This could lead to seemingly small, but reputation-damaging errors  in customer-facing documents, such as outdated or low-resolution logos and images, misspellings, inconsistent adherence to brand guidelines, and amateurish layouts.

But with the right CPQ solution, you can access a comprehensive document tool tailored to your brand compliance. This tool enables your salespeople to provide customers with accurate quotes or proposals and visually appealing documents that present your brand as it is.

Enable guided selling

CPQ systems automatically simplify customer needs by examining them through simple, user-friendly questions. Once the customer enters their response, the CPQ intelligently presents the seller with suitable choices.

This method follows a well-defined logic connection between a customer’s needs and product selections.

Here’s why it is useful:

• Selling is initiated purely by relying on customer-centric questions rather than product knowledge — leading to more conversion.
• It also facilitates onboarding and minimizes the cost of training new salespeople since salespeople don’t need to memorize an extensive list of product names and codes.
• It leaves almost zero room for wrong product selection.

Ensure error-free orders

One of the biggest selling points of CPQ is that it ensures error-free orders. A CPQ eliminates the need for manual orders. For example, it integrates with the CRM system, allowing sales teams to access customer information directly. It also configures the accurate product such that feasible product combinations are presented to customers, eliminating the risk of errors in the order.

Simplify subscription management

With CPQ subscription-based revenue, companies can manage their customer subscription without going through the pains of manual processes.

CPQ systems effortlessly enable tracking of customer renewal dates, adjustment of pricing based on different subscription tiers, and handling upgrades and downgrades.

It also supports renewals, up-sells, and cross-sells, increasing revenue and profits. This makes it easier for businesses to identify opportunities to offer additional services or upgrade subscription plans.

CPQ software accurately calculates pricing adjustments. It can then send instructions to supporting systems to remove or alter MACD (Move, Add, Change, Delete) records, ensuring accurate pricing changes and updates.

These features allow businesses to minimize errors and provide a streamlined subscription management process.

How CPQ tools integrate with your modern tech stack

The right CPQ software can unify sales, revOps, and finance into a streamlined process integrated with the rest of your tech stack. The most common integrations and downstream operations of CPQ are:

Billing/payments solutions

CPQ should integrate with a business’s billing and payment systems to avoid manually re-keying orders into the accounting systems. While most CPQs can send a new order contract to a billing system, many struggle to amend an existing contract.

That requires CPQ to pull data from the billing system, modify it within the CPQ tool, and push it back to billing after approvals. Zuora CPQ is the only quoting software purpose-built for quoting any combination of subscriptions, products, and services for the entire subscriber lifecycle.

Related: How CPQ supports complex contract modifications and drives NPS

CRM

Leading CPQs integrate natively and deeply with CRM, with a bidirectional data sync deep enough to handle complex upgrades and midterm changes. Simplifying the sales process in CRM, sellers quote on a single screen in their CRM tool with Zuora CPQ.

Product catalog

CPQ software is only as strong as the integrated product catalog. Many SaaS businesses lack the tools to support contract terms on the contract such as ramps, start dates, and renewals. They cannot construct complex recurring products with multiple rates plans and elements such as one-time fees, usage-based fees, and tiered pricing in their product catalog.

Zuora boasts an incredibly flexible and powerful product catalog that is purpose-built to handle modern business.