Many B2B software as a service (SaaS) sales teams find themselves in a difficult position: Their companies offer a compelling suite of products and services, but they struggle to generate accurate quotes rapidly enough to sustain customer interest. Add to that complications around product dependencies and approvals, as well as complex pricing models, and you have a recipe for inefficiency. Fortunately, CPQ software makes it possible for software as a service (SaaS) sales teams — and sales teams in any industry, really — to produce professional sales quotes within minutes.
What is CPQ?
CPQ, which stands for Configure, Price, Quote, is software that enables sales teams to quickly generate accurate quotes for complex products. Each part of the acronym represents a key component of the modern sales process:
- Configure: You’re probably more than a little familiar with the old business mantra that “The customer is king” — and today’s consumer expects products and services tailored to meet their specific needs, especially in the realm of SaaS sales. This level of personalization requires sales teams to configure custom packages, which, in turn, requires them to figure out which products and services to bundle, whether those bundles need to be approved, and how those bundles will be delivered. As you can see, things can get complicated pretty quickly.
- Price: The “one-size-fits-all” pricing model is outdated and, frankly, unrealistic for SaaS sales. From volume pricing to bundle pricing, and all of the special discounts in between, there’s an overwhelming number of facts and figures to keep track of — and misquoting any one of them could cost you a valuable customer. Sales teams need a way to keep these variables straight so they can provide accurate and consistent quotes.
- Quote: Any official quote generated by your sales team needs to clear and precise, must look professional, and must accurately reflect the price quoted to the customer by a representative during the sales cycle. After all, a customer is likely to be put off by a quote that makes it difficult to understand just how much they’re paying or what the terms of their contract are, and even more frustrated if they’re expected to pay a different price than they were originally quoted.
How does CPQ software work?
CPQ software enables sales teams to address the challenges presented during each stage of the sales cycle through a combination of process automation, guided selling, and quote management.
With a CPQ tool and subscription management software, you can automate the entire quote-to-cash process by preprogramming custom rules for bulk discounts, approvals, customizations, and more. Once a sales representative initiates the sales process, CPQ places guardrails around them to ensure that they operate within the specific set of rules your company has established for pricing, discounting, approvals, and so on. This enables your sales team to be more agile and can help streamline the sales cycle.
At VennScience, we like to think of CPQ as a sort of bridge between your front-end sales and back-office finance teams. CPQ is a sales tool, not unlike a customer relationship management (CRM) system, but it also involves things like discounts, contract terms, and billing terms, which are more closely related to an enterprise resource planning (ERP) solution. In this way, CPQ fills the gap that exists between CRM and ERP systems, allowing for a higher degree of interdepartmental collaboration and makes it possible to expand your stakeholder set.
What are the benefits of CPQ software?
The benefits of investing in investing in CPQ software are manifold:
- Never lose a sale due to bad intel. Imagine the following scenario: A prospective customer tells one of your sales reps that they’re interested in buying two different software licenses but would like to purchase them as a bundle at a discount. The rep tells the customer that this is possible and submits the bundle for approval, only for approval to be denied. The rep then has the unfortunate task of going back to the customer and telling them that, contrary to what they originally said, they cannot bundle the products and loses the sale as a result. With CPQ, you can prevent this scenario from happening by building in automated business rules and logic — with CPQ, the system would’ve automatically indicated that that particular product bundle was not allowed, and the sales rep could have worked with the prospective customer to find a different solution to their business challenge.
- Get a better understanding of the customer through guided selling. The success of any sale largely depends on a representative’s ability to connect with the customer, but it’s hard to make that connection if you aren’t asking the right questions. CPQ solutions use guided selling to ask customers targeted questions to evaluate their specific needs. Once its gathered this data, your CPQ can use it to automatically produce recommendations tailored to that customer. Your sales team can also use guided selling to identify upselling and cross-selling opportunities. For example, your CPQ might indicate that most customers who purchased a particular software package also purchased a support package and recommend that the customer purchase both packages as a bundle, thereby increasing revenue from the sale.
- Generate complex quotes with ease. Most SaaS companies have a complex price book, with multiple pricing tiers and dependencies for each tier. Guided selling uses the same business logic and rules mentioned earlier to help both sales teams and customers make sense of these intricate pricing structures by automatically updating the quote as products and services are added. Since everything is done through automation, you can eliminate the risk of human error and ensure more accurate, consistent pricing.
- Streamline the sales cycle. CPQ software eliminates most of the manual data entry associated with sales, thereby shortening the sales cycle. According to a 2013 survey from the Aberdeen Group, the average sales cycle for CPQ users was 3.42 months; by comparison, the average sales cycle for non-CPQ users was 4.68 months. Given that CPQ solutions have become even more sophisticated in the years since that survey was conducted, it’s likely that the average sales cycle for CPQ users is even shorter today.
- Increase sales team performance. A sales team is only as good as its performance metrics indicate, and teams that have adopted CPQ solutions have shown especially promising results. According to the Aberdeen Group, CPQ adopters consistently report higher attainment of sales quotas, higher lead conversion rates, higher average numbers of proposals delivered, and higher average deal size than non-CPQ users, as shown in the table below. CPQ makes it easier for sales reps to identify upsell and cross-sell opportunities, thereby increasing their average deal size. CPQ solutions also streamline the ordering process for complex products — even enabling customers to generate quotes and place orders on their own — making customers more likely to complete their orders.
|Sales Effectiveness Metric||CPQ Users||Non-CPQ Users|
|Percentage of Sales Reps Achieving Quota||58%||46%|
|Overall Team Attainment of Sales Quota||56%||52%|
|Lead Conversion Rate||35%||30%|
|Average Deal Size||$432k||$211k|
|Average Number of Proposals per Month||20.9 proposals/month||14.0 proposals/month|
- Gain more control over quote document generation. Certain CPQ solutions enable organizations to generate quote documents featuring custom components and company branding. By producing a quote document that is not only accurate and easy to understand, but aesthetically pleasing and professional, your sales team can make a lasting first impression and guarantee a better overall customer experience.
How can I tell if my business needs a CPQ tool?
Deciding whether you should purchase CPQ software isn’t an exact science; that said, there are a few key indicators that CPQ might be a smart investment for your business. CPQ might be right for you if:
- Your product or service has a complicated pricing model
- Your product or pricing information is outdated
- It takes your sales team days to put together a quote
- Your sales team struggles to identify upselling and cross-selling opportunities
- You lack visibility into your sales process
- You experience a high degree of manual errors in your sales process
- Your current quoting functionality no longer meets your needs
- You require usage-based billing capabilities
Should I invest in an on-premise or cloud-based CPQ tool?
Although the polite answer to that question is that it depends on your business needs, the reality is that if you’re still using on-premise business applications, you’re living in the Stone Age. When it comes to flexibility and scalability, cloud-based solutions simply can’t be beat. A cloud-based CPQ, such as Salesforce CPQ, also spares your IT department the effort of having to update your system every time a new upgrade comes out and makes it easy to access your solution from anywhere, at any time.
What can I do to make sure my CPQ implementation goes smoothly?
The first step to any successful CPQ implementation is to understand your sales team and its needs. Before kickstarting your project, you need to solicit feedback from your sales reps to learn what pain points they’re experiencing and what they hope to achieve with a CPQ solution, so your implementation partner knows what to focus on. A truly qualified implementation partner will go the extra mile to take this responsibility by working directly with your sales team to get a better understanding of what capabilities would best enable it to perform at the highest level.
The second — but no less vital — piece is to know your customer. From where in the world they’re located to which channels they use to shop, having a comprehensive understanding of your customers’ preferences and a view into their buying habits will give you an idea of how to configure your products and services so they move at a higher volume. From there, you can identify dependencies and build custom approval workflows within your CPQ to optimize your sales cycle.
Once you have a clear sense of what your sales team needs and what your customers want, you need to implement your CPQ solution into your existing software ecosystem. This is more easily achieved with the help of a CPQ implementation partner with proven integration experience; an implementation partner can also be invaluable when building and automating custom workflows and ensuring the quality of the data you enter into your new system.
The final key to a successful CPQ implementation is to invest in proper training for your sales team. Eager though your sales representatives might be to get their hands on a CPQ tool, you shouldn’t let them loose on a new system without the training to effectively utilize it. Whether you develop your own CPQ training curriculum or rely on pre-existing training programs, such as Salesforce Trailhead, teaching your sales team the skills it needs to get the most out of your CPQ software will guarantee a better overall experience, both for your business and for your customers.
Why should I invest in Salesforce CPQ?
First and foremost, if you’re already bought into Salesforce, Salesforce CPQ is a no-brainer, since it’s natively built on the Salesforce platform and is on the same update schedule as other Salesforce products. Although it’s true that there are other CPQ solutions built on the Salesforce platform, Salesforce CPQ is more closely tied to other Salesforce products, making it easier for Salesforce consultants to customize your implementation to meet your business’ unique needs. Salesforce CPQ also has an innovative billing feature that enables you to automate contract amendments, usage pricing, and renewals, view all subscriptions and entitlements from a single interface, and more in order to make it easier to manage recurring revenue.
Does Salesforce CPQ sound like a sure bet to you? If it does, we’re happy to hear it — and we hope you’ll make VennScience your Salesforce CPQ implementation partner of choice. Our team of experienced, Salesforce-certified consultants brings visionary thinking and an iterative, constituent-focused approach to every project we take on, so that each of our clients get a bespoke solution that is aligned to their business goals and needs. From strategy and design to Salesforce CPQ implementation, we specialize in crafting custom experiences for SaaS clients. To discover what VennScience can do for you, reach out to us today.