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The Top 3 Problems CPQ Solves

The Top 3 Problems CPQ Solves

Kevin Geraghty
11. Mar 2021 | 7 min read

The Top 3 Problems CPQ Solves

Traditional quoting processes often rely upon disjointed systems and silos of knowledge that means the quoting process is slower, prone to error and expensive to maintain. 

In these circumstances, it is difficult for sales teams to convey the maximum value of their company’s products and services. Forecasting is difficult, inaccurate and frequently out of date, increasing business planning risk.

Service teams are reactive, needing to spend extra time researching what the customers are entitled to under their service contract, and ensuring companies are delivering what has been agreed upon. The opportunity to sell highly profitable spares and service contracts is restricted.

These bottlenecks and the inherent risks in traditional quoting are key reasons why companies are turning to CPQ software to help them create accurate, compelling quotes quickly and with greater control. 

Let’s have a look at three typical issues / areas of friction that CPQ solves.

 

1. Complexity

CPQ allows your organization to cope effectively with the increasing complexity of products and services offered to clients.

Customers demand greater flexibility to tailor products and services for their precise need

As competition increases and product differentiation becomes harder to maintain, customers seek higher levels of personalized service and faster response to questions about product capability, pricing and support. After an initial purchase decision has been made, there is also highly profitable aftermarket revenue to be gained through proactive spares sales and extended service contracts.

Shareholders demand control of costs and generation of profit 

From a shareholder perspective, growth is of crucial importance. This can require entry to expanding or emerging markets, and necessitate the early identification and development of new or modified products and services (and how they are priced) to meet current and future customer demands.
   

Systems need to be agile to match the demand for innovation 

One effect on organizations seeking to keep up with the speed of change in their markets is that numerous new products and services are being launched. These frequently involve only incremental changes on previous versions, and systems must be able to quickly and easily accommodate these changes.

The frequency with which new variations, options and configurations are made available can cause existing systems, bills of material (BoMs) and pricing structures to become unmanageable. The challenge then is that the frequency and speed of change just keeps increasing.

2. Spreadsheets

Many companies still rely on spreadsheets to fill the ‘quoting gap’ between their CRM and ERP.

However, spreadsheets do not constitute intelligent solutions. They are often out of date, costly, cumbersome, and require training, as they are not intuitive to use. Errors are common, particularly when revisions are needed. Multiple versions are typically in use, which will inevitably lead to inaccurate pricing.

Moreover, spreadsheets are difficult to integrate with existing CRM, ERP and eCommerce systems. They cannot effectively be shared across an organization or with field-based personnel and customers. They cannot hold complex compatibility rules or aid learning. They cannot be used to link other data, produce documentation or help automate sales order processing.
 

Costly pricing errors are difficult to identify

Analyzing margin and identifying pricing errors can be challenging within spreadsheets – particularly as complexity increases. Firstly, costs and prices must be up to date. Then the components that are used in the quote must be compatible. Only then will any calculations stand a chance to be correct. If discounting is applied, an approval process can be difficult to run – particularly if multiple personnel or departments are involved and if the quote runs through several different versions.

Spreadsheets are not built for collaboration or iteration across teams

Coordinating inputs from many people is hard, and gets exponentially harder as quotes are revised. And where spreadsheets are shared, it’s a one-size-fits-all approach, i.e., everyone sees the same and is invited to use the spreadsheet in the same way – which is not always appropriate or desirable.

In summary, spreadsheets fall short. Using outdated tools to configure products, calculate prices and generate proposals means that you incur avoidable costs, leaving money on the table with every deal, thus constraining your growth. Your ability to scale is restricted, as is your flexibility to change.

3. Constraints

Using a CPQ solution will help you eliminate common bottlenecks that constrain your quote to contract process.

Unable to easily grow the business

As businesses grow, this will often be felt most where expert knowledge is required to build and price solutions. Many departments can be expanded quite quickly to accommodate growth, expert knowledge, however, is the hardest and most expensive area to introduce greater resources. CPQ systems can be used to automate, often very complex business knowledge. 

Lack of succession planning

Dependency upon key personnel can restrict the potential of individuals and also introduces potential points of failure should that person leave or be unavailable. In small businesses, it might simply mean that the founder is unable to reduce their time within the business.
 

Quotes take longer than they should

Quote turn-around is slow as peer review is needed to reduce risk of mistakes. Manually reviewing all quotes to ensure accuracy is a recipe for an inefficient sales organization. Plus, it doesn’t scale. A constraint exists, and when this person is out of the business, a blockage occurs. When your sales teams are regularly waiting for approvals, your customers could lose patience or even look elsewhere.

Reliance on manual processes

If your business relies on manual processes to get quotes to contracts, you’re probably experiencing some acute pains. Your quotes take too long and have errors in them. Lack of automation increases the need for approval / peer review.

Conclusion  

If consistent growth is in your plan, automating and systemizing the quote to contract process will help lift all your team to ‘A team’ players and enhance your revenue opportunities sooner. Each day you delay is costing you money.

Gain an unfair advantage over your competitors by arming your sales team with the tools to respond faster and improve quality. With the right CPQ software solution, sales teams and buyers alike have updated specialist information available to them through any device at all times, reducing the time it takes to create an accurate quality quote from hours to minutes and even seconds.

Kevin Geraghty

Kevin Geraghty

Kevin's passion is helping companies become easier to buy from. He is a pioneer and thought leader in CPQ (Configure, Price, Quote). Quick to spot how technology (in particular CRM and product configuration software) enhances sales team performance, he was instrumental in the development of cloud based CPQ applications. He co-founded BlueprintCPQ in 1999, and built this to become one of the most powerful and flexible CPQ platforms. BlueprintCPQ was acquired by Xait in December 2020 where Kevin is Head of CPQ practice and Managing Director of Xait Ltd where he continues to apply his innovative thinking and experience to drive sales efficiency.

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