The Ultimate Guide to CPQ Pricing – Everything You Need to Know

CPQ is software that helps salespeople create and send accurate quotes to customers. It automates pricing calculations based on variables like discounts or volume purchases.

CPQ is essential for businesses that need help with complex pricing models, product bundles, and time-consuming quote-creation processes. It can significantly value the business, sales team, and customers.

Product Configuration

Whether you are selling products that require customization, or services that can be configured, your salespeople need to capture customer requirements and quickly and easily create quotes accurately. Using a CPQ solution with a product configurator allows salespeople to do this while ensuring the quote is valid and legally compliant. For example, if a salesperson offers a discount that makes the deal unprofitable for your company or doesn’t comply with any other regulations, you could lose money on the sale.

The right CPQ software can automatically calculate pricing for complex products and services, such as those with multiple price points based on variables like volume, tiers, and subscription models. It eliminates manual spreadsheet pricing calculations and ensures your quote process is accurate and efficient.

In addition to calculating prices, the right CPQ solution will help salespeople ensure their quotes are accurate and compliant by incorporating validation rules into the quoting process. For example, suppose you have a rule that says that a particular feature cannot be combined with another or that accessories must always be purchased with specific components. In that case, a CPQ solution will enforce these constraints when creating a quote. In addition, the CPQ software should offer a range of approval workflows to ensure that all key stakeholders are involved in the review and validation process before any quote is sent to a customer.

Pricing Rules

A CPQ system combines product and pricing rules to simplify the configuration of engineer-to-order products into carefully optimized customer-specific selections. It reduces the number of options and the time needed to create a quote while also delivering better quotes to customers. A CPQ solution also eliminates the back-and-forth between sales and engineering, which can lead to delays in quoting and cost overruns.

When evaluating CPQ solutions, it’s essential to consider the needs of each business department. For example, sales management and operations needs must be considered alongside those of finance and legal. Identify what problems a CPQ solution must solve to succeed in each department.

CPQ pricing rules enable businesses to change and update the values of fields in a quote line, quote line group, or quote record based on specific determinants. Unlike out-of-the-box tools, pricing rules can be used to update any field in the record, not just price. Pricing rules use an IF/THEN format to evaluate conditions and take action.

When a CPQ pricing rule is created, administrators can configure the rule using a variety of settings. They can specify the name, variable name, and value type. They can also configure the linked pricing model and decide whether or not to allow dynamic pricing.

Pricing Variables

Product options and features aren’t the only things that influence pricing – factors like delivery charges, taxes, discounts from suppliers, markups, and other special offers also impact prices. With CPQ, sales reps can easily configure products to include these factors and determine accurate pricing in real-time. The software automatically calculates the price of each configured product using the rules and calculations set in place, ensuring quotes are always precise, fair, and compliant.

The right CPQ solution will enable your sales team to use a centralized repository of configurations, pricing rules, discounts, and other factors that will be used to generate error-free, professional quotes tailored to each customer. A centralized repository eliminates the need for manual spreadsheets and ensures the entire quoting process is standardized, efficient, and consistent across your sales teams.

Although CPQ is often associated with business-to-business (B2B) deals, it’s used in retail whenever you customize your coffee order. That’s a basic CPQ system in action! CPQ is the foundation of many predictive revenue models and is an integral part of your quote-to-cash process. It can help you create a frictionless buying experience, simplify complex product configurations and discount models, improve collaboration across your sales teams, and optimize recurring revenue with subscription and usage billing options. 

Quotes

For organizations with complicated products, complex discounts, or product bundles, CPQ software tools can significantly improve their quote-to-cash processes. CPQ software can also automate upselling and cross-selling, create pricing rules for recurring services, and streamline contract management with eSignature.

A quote is an electronic document that lists the products and services included in a deal, their prices, any discounts or specials, and the terms and conditions of the sale. It can be generated automatically by a CPQ solution or manually prepared by salespeople or a team of quote specialists. The quote is then sent to the customer for review and acceptance, with a link to an online form to collect the signature to complete the sales process and generate the revenue lifecycle.

A CPQ solution can benefit sales, finance, and operations by simplifying the selling of complex products with numerous features, options, and accessories, reducing the number of errors during the quoting process, and generating professional-looking quotes that represent a consistent corporate image. It can also shorten the sales cycle by allowing reps to respond quickly to customers and produce proposals that are likely to be accepted. It can even help control margin erosion and rogue discounting by creating advanced approval triggers. It can also provide reporting and analytics to ensure that a company uses its pricing policies consistently and appropriately.

Samantha

Samantha hails from Virginia and is a proud wife to a retired Deputy Sheriff and mother to two amazing little boys named Jack & William. A veteran product reviewer; Samantha has been reviewing products for 8 years and offers high quality product reviews with original photography.