Imagine you’ve got a customer ready to order your products. But as you create their custom quote, they move on to one of your competitors!
There’s no need to be embarrassed if this has happened to you! I’ve seen small businesses everywhere lose potential customers because the quotation process takes too long.
Hi! I’m AJ! I recently sold my business for multiple seven figures. One thing that helped me find success was timely responses to my current and potential customers!
If you’re fed up with losing customers and want to learn how to boost productivity, keep reading about CPQ!
Key Takeaways
- CPQ stands for Configure, Price, Quote.
- CPQ software automatically sends customers their invoices, reducing human-made errors.
- CPQ tools can reduce the length of your sales process.
Related Reading: Best Small Business CRM
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What is CPQ?
CPQ is a sales tool that allows companies to quickly and accurately create quotes for orders.
CPQ has existed for several decades, so many consider it an old business practice.
However, technological advancements have led to CPQ software.
CPQ solutions can automatically generate quotes and product proposals based on each configuration.
As a result, there are fewer mistakes, and sales reps have reliable information to send to customers.
What Does CPQ Stand For?
Now it’s time to learn what CPQ stands for!
Let’s check out the three aspects of CPQ solutions.
Configure
The “configure” in CPQ refers to setting up a product or service according to customer requirements.
In the context of a sales operation, this could mean customizing a product’s features, dimensions, or other variables to meet a customer’s specific needs.
Configuration can become complex when dealing with intricate products with multiple variables.
However, a CPQ system simplifies this process by providing predefined configurations and rules that ensure compatible and feasible product specs.
Price
Without CPQ software, pricing occurs after the product configuration stage.
However, with an advanced CPQ tool, you can update prices in real-time as users make choices and customize the product according to their needs.
For instance, one example of a customizable product is purchasing a car.
There are specific features you can include in your car, including:
- Heated seats
- Wi-Fi connection
- Rearview cameras
- Leather seats
- Rims
As a customer builds their ideal car, the price changes whether they add rims, technological additions, etc.
With a CPQ system, the price changes in real-time as the customer chooses the desired features.
Quote
The last piece of CPQ stands for “quote.”
Once a customer has configured and priced their product, the CPQ system will generate an accurate quote.
These comprehensive quotes include all the details about the customer’s configured product, from pricing to delivery dates.
Creating a comprehensive quote allows customers to have peace of mind, knowing that they have the exact specs and prices for their orders.
How Does CPQ Work?
Imagine you’re building a custom skateboard.
There are lots of parts you can choose from, including:
- Different wheels
- Boards
- Grips
- Design
- Materials
- Color schemes
Now imagine a computer program that helps you pick and choose these parts.
This program makes sure all the parts you pick will work together.
Also, the software changes the total price as you add or remove parts.
Finally, it gives you a detailed summary (a quote) of your custom skateboard with all the parts and prices.
That’s pretty much how CPQ software works!
Configure, price, quote software is a tool businesses use to customize their products, calculate prices, and generate customer quotes!
CPQ solutions speed up the sales process and ensure there are fewer mistakes that sales teams deal with.
What is the CPQ Process?
The CPQ process is more extensive than most people realize, meaning it goes beyond “configure, price, quote.”
Let’s look at the ten aspects of the CPQ sales process!
Configuration
The first step is for users to configure their product.
In this article, I’ve used cars, skateboards, and computers as examples of products consumers can customize.
In reality, there are numerous customizable products!
The CPQ process begins with this customization so production and sales teams understand how to move forward.
Price
The second step is to determine pricing or cost.
Figuring out pricing could mean figuring out how much a customer will pay for a product or how much it costs to produce it.
Pricing and costing are essential aspects of CPQ processes since they heavily influence each other.
For instance, a company must follow pricing rules to ensure they’re making a profit.
Quote
The next step is sending the consumer the quote for the product.
In some instances, quotes are negotiable.
However, for other products, the price is the price!
CPQ software ensures customers receive their quotes quickly.
Proposal
The proposal step is similar to the quote stage but more detailed.
A proposal includes the following aspects:
- Information about the product
- Terms and conditions
- Payment plans (if applicable)
- Details about warranties and services
Companies usually send proposals to customers if they’re making big purchases or for long-term agreements with a company.
Negotiation
For some products, customers can negotiate quotes and proposals.
Negotiating happens when customers have room to ask for discounts or other incentives.
Typically, a company is more willing to offer discounts and incentives to long-term customers or bulk orders.
CPQ software can help with negotiations since sales reps have access to the product configuration during their conversations with a customer.
Approval
An integral step in the CPQ process is getting the customer to agree on a quote or proposal!
The customer’s decision must go up for approval from an authority within the company.
For instance, approving a large order could require approval from upper management.
CPQ solutions also help here since they can provide visibility into contracts and approvals.
Order
If the customer agrees to a quote or proposal, the next step is for them to place an order.
The order should include all of the details about the product and payment.
For instance, if you’re purchasing a car, your order would include the following information:
- Color
- Model number
- Types of wheels
- Interior material
- Technological additions
- Any customizations
Production
The process continues with the production stage.
At this stage, a company delegates manufacturing to a third party or handles it themselves.
Either way, a customer’s product is finally made at this stage!
Delivery
Once the product is manufactured, it’s ready to be shipped.
Delivery is a crucial step since customers expect to receive their products promptly.
A CPQ tool can help the delivery stage by providing visibility into order statuses and tracking information.
Installation
The final step in the CPQ process is only applicable to some products.
Installing products for the customer is more critical than some businesses realize.
Proper and timely installation can differentiate between loyal and dissatisfied customers.
CPQ Benefits
How do sales teams benefit from CPQ software?
Does this technology actually make a difference in the sales process?
Let’s look at the primary advantages of a CPQ solution!
Increased Sales Team Collaboration
CPQ software facilitates greater collaboration amongst sales teams by providing a centralized platform where all members can access and update customer information, product configurations, and pricing models.
This shared access ensures sales reps are on the same page, reducing misunderstandings and miscommunications that could otherwise lead to errors.
Additionally, a CPQ solution allows your sales team to collaborate in real time, even across different geographical locations.
Real-time collaboration has the following benefits:
- Faster decision-making processes
- Ensures a unified approach to customer interactions
- Enhances overall productivity and efficiency
Reduce Configuration Errors
A configure, price, quote tool also reduces the likelihood of configuration errors.
Recording configuration details manually can result in natural human errors for numerous reasons.
For example, if a sales rep is especially tired, that could result in them recording the wrong color for a customer’s car.
CPQ software ensures the configurations are 100% accurate, resulting in better customer satisfaction.
Reduce Pricing Errors
Pricing errors are another common issue in the sales process.
With a CPQ solution, pricing mistakes can be automatically eliminated since the software uses pre-set rules and algorithms to determine pricing models.
Additionally, a CPQ tool allows sales reps to adjust prices based on market conditions or customer requests quickly.
Increase Forecasting Accuracy
Offering more accurate sales forecasting is one of my favorite aspects of CPQ tools!
These solutions use artificial intelligence algorithms to automatically analyze sales data and automatically offer more accurate forecasts.
Further, sales forecasting helps sales organizations anticipate customer needs better, allowing them to make better decisions that drive success.
Reduce Quote Time
A CPQ solution reduces the time it takes for your company to get a quote to a customer.
Customers who are forced to wait days or weeks to receive a quote might move to a different company!
However, when your sales team can send a quote in minutes, customers are happier and likelier to keep buying your company’s products.
Reduce Quote Approval Time
Another benefit of CPQ software is that it helps reduce the amount of time needed to approve quotes.
Since a CPQ tool centralizes quote data in one place, approval processes are much faster since all information is stored there.
Centralized sales quotes also reduce errors that can occur during the manual approvals process!
Reduce Sales Cycle Time
Lastly, a CPQ solution can reduce the length of your sales cycle.
You can significantly shorten your company’s sales cycle by offering faster quotes, quicker approvals, and more accurate customer data.
Reducing your sales cycle time means you close deals with customers faster and deliver products sooner!
Does a Small Business Need CPQ Software?
Every business doesn’t need CPQ software.
For example, your prices are probably set in stone if you run an e-commerce company that resells shoes and clothing.
Therefore, you don’t need a CPQ solution to generate customized quotes for each person who shops with you.
However, some types of companies that benefit from CPQ software include the following:
- Manufacturing
- Construction
- Technological-focused companies
- Customizable fashion
- A sales organization
- Organizations that sell complex products or services
CPQ software is designed to make the sales process easier for every organization.
If your business has a long and complicated sales pipeline, this technology can help you close deals faster and generate more revenue!
Also, if your business manufactures customizable products, a CPQ solution can be incredibly beneficial.
So, while only some businesses out there need CPQ technology, several industries benefit from its abilities.
CPQ Examples
One example of a CPQ platform in full effect is a manufacturing company that produces wooden planks for decks.
Customers have several customization options when it comes to choosing deck materials.
Therefore, this manufacturer offers the following customizations:
- Various types of wood
- Length of the cut
- Width of the cut
- Customizable shapes of the wood
When a customer is ready to order wooden planks for their deck, the manufacturer’s website allows the user to enter and select their customization options.
Therefore, the planks are the exact length and material the customer needs.
After entering their details, the manufacturer’s CPQ software creates a quote for both the customer and the sales rep assigned to the account.
This quote is sent via email, allowing the customer to approve the price whenever they’re ready.
After a customer approves the quote, the software sends this notification to the manufacturing team, and the wooden planks enter the production process!
Then, the wooden planks are shipped to the customer.
The manufacturer needs to send the order immediately after they finish the production process.
That way, customers are satisfied with every aspect of manufacturing and production.
Although this manufacturing company doesn’t install the wooden planks, they deliver them to a designated area.
As you can see, successful CPQ deployment speeds up various aspects of the business and pricing process.
The manufacturer can more easily create wooden planks to the customer’s specifications!
What is CPQ Software?
CPQ software is a sales tool designed to help companies do the following things:
- Produce accurate and highly configured quotes
- Utilize their product catalog effectively
- Create accurate pricing algorithms and rules
This technology considers optional features, customizations, quantities, and discounts, allowing sales teams to quote prices accurately and quickly.
Also, the powerful tool eliminates manual processes and errors and enhances speed, efficiency, and business productivity.
Benefits of CPQ Software
There are numerous benefits of adding CPQ capabilities to your sales operations.
Some of these advantages include the following:
- Increased sales efficiency
- Accurate quotes
- Fewer errors
- Improved visibility
Let’s look at each of these advantages closer!
Increased Speed
Most CPQ solutions offer their users a significant increase in speed and efficiency.
By taking manual processes out of the equation, sales teams can focus more on customer service activities that improve satisfaction.
In addition, CPQ tools allow sales representatives to produce accurate quotes with fewer errors quickly.
CPQ boosts sales operations because the system alters and creates real-time pricing.
Therefore, as a customer creates their configurable products, CPQ systems generate the cost and price for these items as the customer is online.
Improved speed is critical for several reasons.
One of the biggest reasons speed is crucial to consider is that it benefits your customer base significantly.
That said, consumers want their products as fast as possible, even if they’re customizable.
So, improving speed wherever you can is crucial to making customers happy.
Improved Accuracy
One of the main advantages of CPQ software is its ability to create accurate quotes.
The more accurate your sales teams are, the better experience your customers have with you.
All quotes must include every discount, feature, and customization option offered.
For example, if a customer requests a product with a specific color, this should be included in the quote.
A CPQ solution can reduce errors and improve accuracy by automating pricing and discount processes.
Fewer Errors
As previously mentioned, CPQ can help your sales team minimize errors.
Since the system automates pricing processes, you don’t have to worry about human mistakes affecting customer service and satisfaction.
With a CPQ solution, every quotation remains accurate regardless of who handles it!
Although your sales reps may not mean to mess up a customer’s quote, it’s natural to make mistakes (we’re only human).
And while minor mistakes may seem like no big deal, they can actually cost your company significant time and money.
For instance, if a sales rep accidentally recorded the wrong color for a custom awning and the customer refuses to accept the order now, you’re stuck with an extra awning.
Plus, you must create a new awning for the customer!
As you can imagine, mistakes eat up a lot of time and money, even if the error is minor.
Improved Visibility
Lastly, CPQ software can offer visibility into your business operations.
The ability to track sales progress is essential for measuring success and determining areas of improvement.
When you have accurate data from the CPQ process, your team can make better decisions about optimizing sales operations.
For example, if you realize that your sales reps are spending too much time on manual pricing processes, you can make a change.
You can adjust the system to automate more of the process and save time.
In addition, visibility into sales progress offers insights about what products customers buy most – allowing companies to create better marketing strategies!
CPQ & CRM
CPQ (Configure, Price, Quote) software and CRM (Customer Relationship Management) systems can seamlessly integrate to supercharge your small business operations.
When combined, these two powerful tools create a robust sales platform that streamlines the quote-to-cash process and improves customer relations.
A CRM system tracks customer interactions, providing valuable insights into customer behaviors and preferences.
When fed into the CPQ software, this data allows for more personalized and accurate sales quotes, enhancing the customer experience and boosting sales.
On the other hand, the data from the CPQ about customer purchases and preferences can enrich the CRM database, enabling the sales and marketing teams to fine-tune their strategies.
For instance, if a product configuration sells well, the marketing team can promote it more aggressively.
Similarly, the sales team can focus on cross-sell and upsell opportunities based on the customer’s past purchases.
Essentially, CPQ and CRM systems are excellent tools on their own.
However, combining them results in higher sales, sales productivity, and satisfied customers!
Best CPQ Software Solutions
Finding a configure, price, quote system can be tricky if you don’t know where to start.
But don’t worry! I’m here to let you in on two of the best companies.
Let’s look at what HubSpot and Salesforce CPQ can offer your small business!
HubSpot Sales Hub
First, we’ll review HubSpot’s Sales Hub. HubSpot is one of the most popular CRM providers.
Therefore, you can trust the company’s Sales Hub will offer top-notch services.
What Users Like
Here is a list of the most-liked features HubSpot includes in its Sales Hub software:
- There is a free version available
- You can test the software with a free demo
- There is a broad range of plans
- The software is easy to use, even if you have no prior experience using CRM technology
- The software promotes productivity
- The software grows with your business
HubSpot Sales Hub Pros and Cons
Now, let’s check out the pros and cons of HubSpot Sales Hub.
First, we’ll start with the aspects people like about HubSpot:
- There are numerous features included in the free plan
- The software is intuitive
- HubSpot supports third-party integrations
- There are CPQ capabilities and coaching tools
- There are real-time lead updates
- You can create personalized email sequences
Still, there are some downsides to be aware of, including the following aspects:
- The higher-tiered plans aren’t feasible (price-wise) for some small businesses.
- You can only create one email per contact
- The pricing tiers get expensive quickly
If you want to learn more about HubSpot, check out our extensive HubSpot Sales Hub review!
Salesforce CPQ
Salesforce’s CPQ software is a powerful tool that can create product configurations regardless of the scenario.
Therefore, Salesforce is a very flexible tool that companies in various industries trust.
What Users Like
Some of the things people like about Salesforce CPQ include the following aspects:
- The platform is easy to use
- There are various CPQ applications to choose from
- Users can access the platform on any device because it’s cloud-based
- Connecting Salesforce’s CPQ and CRM platforms is effortless
A cloud-based platform allows users to access the necessary information whenever and wherever they need it!
Mobile access is a HUGE advantage to consider.
Salesforce CPQ Pros and Cons
Some of the pros associated with Salesforce include:
- You can try the program for free
- It promotes higher returns on investments
- There are several third-party integrations
Regarding the cons, it’s essential to consider the following ones:
- Salesforce can be expensive for start-ups and companies on a tight budget
- Customer support can be slow to answer questions
CPQ Closing Thoughts
CPQ is an integral aspect of business operations for industries that send quotes and produce customized products.
Inaccurate sales quotes can lead to frustrated customers, poor reviews, and slower sales processes.
If you’re ready to make life easier for your sales department, CPQ technology is the way to go!
What CPQ software will your company use? Let us know in the comments section below!