These days, business clients expect instant price estimates when they contact manufacturers for quotes. Providing a quote upon initial inquiry has now become much more streamlined and is no longer a significant bottleneck in the sales cycle. This is due in part to the rise of configure-price-quote (CPQ) software.
We’ve created this guide to help you understand what CPQ software is and how it can benefit your business. In this guide, we’ll cover:
(Click on a link below to jump to that section.)
CPQ software is used by sales professionals to provide cost estimates for custom orders, typically in the context of a built-to-order manufacturing operation. With a CPQ solution, a salesperson can use requirements, order volume and other details from the client to generate an estimate on the spot. It is critical for streamlining the sales process and ensuring that sales prospects do not fall through the cracks because they did not receive a prompt estimate.
CPQ software often integrates with a manufacturer’s customer relationship management (CRM) system, and in some cases with their material requirements planning (MRP) system, further streamlining the sales-to-manufacturing process. In other situations, the CPQ solution might be one module within a broader CRM or MRP suite.
Although each system is likely to have its own unique characteristics that may make it a better or worse fit for your business, there are a handful of core features common to most CPQ solutions. In the table below, we take a look at those common features you’ll find in most products:
|Analytics||Provides detailed reports and data, typically in a dashboard format, of sales KPIs and other business metrics of how the CPQ system has been used in the past. Some platforms can do forecasting or other predictive analytics to gauge what future sales and configurations will be like.|
|Guided selling||Sales professionals can easily find suitable products automatically, based on the client’s needs and requirements.|
|Price and quote||The core feature of a CPQ system, price and quote sets the price based on a client’s requirements and delivers the quote to the client.|
|Renewal management||Assists sales professionals in maintaining standing orders or renewed orders with their clients.|
|Product configuration||Allows businesses to set logic rules for how products can be configured and what degree of customization a customer can choose.|
|Mobile compatibility||Many CPQ platforms offer mobile compatible apps for sales professionals that are on the go. These apps are usually just as fully featured as their desktop counterparts.|
Salesforce Steelbrick price quoting on iPad. Source: SteelBrick.com
CPQ software is most often used by midsize and larger organizations with extensive product lines or those that offer a large degree of customization for customers when ordering.
The types of businesses most likely to deploy a CPQ solution usually have large sales teams who must be continuously kept in the loop about product changes and development. CPQ software is also used by sales teams that have trouble managing and neatly organizing a large volume of custom sales orders and inquiries.
That said, smaller businesses that are growing rapidly may wish to deploy CPQ software, as it can give them a competitive edge by enabling them to quickly turn around price quotes back to customers.
Most modern CPQ systems are cloud-based and typically priced as a monthly subscription, based on the size of the buyer's business or the number of named users. The advantages of cloud-based systems include:
However, some CPQ software vendors might offer CPQ software that is hosted on-premise and priced as a perpetual license. Typically with perpetual licenses, however, annual fees for support and maintenance still apply.
There are benefits and drawbacks to both pricing models. Smaller organizations tend to be attracted to the lower upfront costs associated with monthly subscriptions.
However, be aware that the total cost of ownership (TCO) of subscription-based products tends to converge with that of perpetual license-based products over time. While you'll pay less upfront for a subscription, the subscription fee recurs monthly, whereas with a perpetual license, recuring fees are much lower and tend to be less frequent (e.g. annual fees for maintenance or upgrades). Check out our TCO calculator tool to learn more or compare costs of specific products.
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