What is CPQ (Configure-Price-Quote)?

Not every customer is the same, and they certainly don't have the same product or service needs. As such, pre-configured bundles may be a reliable place to start but are often not the best solution to meeting customer requirements. Guided selling through CPQ software allows sales representatives to move away from pre-configured bundles and instead adopt a consumption-based selling model where the customer only pays for the resources that they use.
 
CPQ systems can take customer data and consumption history into account to automatically design bundles that are specific to the needs of the user. Artificial Intelligence (AI) guides the user to identify their needs and match solutions to available products or services. It then analyses the answers and helps narrow down the selection of options to those that fit the provided criteria. In essence, the CPQ can take the role of an experienced sales agent to work with the client to discover exactly what they need and then pair them with the correct solution.

Dynamic configuration goes hand in hand with guided selling. As the sales representative works with the customer to discover their needs, they traditionally must manually select different product or service attributes to create a user-specific product configuration. Again, a reliable CPQ tool streamlines this process, making the configure aspect of configure-price-quote much easier and less time consuming.

CPQ applies automated rules and takes predefined attributes into account along with hierarchy-based configuration to customise products in real time. Once again, AI plays a central role in this process, using historical data and other relevant information to create a highly personalised product. The result? Easy, dynamic configuration that helps reassure customers that the product or service that they are considering is a match for their unique requirements.

A business should not have to retrofit its monetisation mechanism to its tools. Top CPQ solutions allow for flexibility in pricing, supporting tiered pricing, flat-subscriptions, outcome-based royalty, consumption-based pricing and more. Sales teams can likewise apply price, discounts and any changes to subscriptions terms directly in the tool, giving their clients a clearer picture of actual prices.
 
Pricing flexibility in CPQ also means the tool must be capable of allowing for dynamic pricing based on changing market conditions and supporting extremely complex pricing rules. The best CPQ systems likewise simplify the distribution of pricing data across point-of-sale systems and channel partners.

CPQ software has the capacity to blur the line between tool and agent. Using AI capabilities, CPQ helps oversee and coordinate many aspects of the deal itself. This can include identifying opportunities, tracking deals as they progress through the pipeline, generating actionable reports, and automating key tasks and processes from start to finish.

Smart deal management with CPQ creates consistency in the deal process while also providing clearer visibility and oversight that managers can use to quickly locate and address potential problems before they derail the sale. Customers likewise benefit from smart deal management as they enjoy more streamlined deal processes and a more direct focus on their needs.

Waiting for offline approvals can slow even the most fast-tracked sale down to a crawl. CPQ systems that apply workflow-based management ensure that approvals are ready when they're needed, reducing approval times and further streamlining the entire sales process. With the correct business rules, CPQ tools can also allow for multiple approvers while automatically rerouting approval requests when necessary.

Specific solutions and other situations where prices may vary depending on partner qualifications can apply auto-approval workflows to further reduce the lag associated with the approval process.

For subscription-based services, renewals are a major source of recurring revenue—one that can make or break an organisation's earnings. But renewals can also be tricky; without the right information in place at the right time, an otherwise dependable renewal can easily fall through the cracks. 
 
CPQ replaces error-prone manual renewal processes with automated solutions. This helps ensure that when renewals come up, reliable quotes are already standing by with updated contract terms and pricing. This reduces customer churn and cuts down on the risk of lost clients from mishandled renewals.

The capability that CPQ is best known for, quote generation automates all the various inputs and rules that help define the price of a configurable product or service. This has the capacity to completely revolutionise the sales process, eliminating bottlenecks and other clutter from the sales pipeline that can easily result in lost deals.  
 
CPQ can also be applied to existing contracts in the form of amendments. Amendments allow sales teams to make adjustments such as adding products or changing quantities while tracking changes and maintaining a complete auditing trail.

Organisations that rely on subscription models can benefit from CPQ-enhanced asset-based ordering (ABO). The CPQ system allows sales teams to assign hardware and software as 'assets' throughout the sales and support cycle, thus providing the organisation with a more-complete picture and accounting for every product or service being purchased by the customer.

At its core, CPQ is about collecting, evaluating and retrieving relevant customer and pricing data. This information can be used in forecasting future opportunities and renewals. Based on buying patterns and consumption history and infused with Artificial Intelligence, the CPQ tools can accurately predict orders before they come in and help identify opportunities before they happen. Forecasting can also be applied to renewal management, providing alerts when contracts are nearing their end.

Substantial amounts of data pass through CPQ systems. Hidden in that data are valuable customer and business insights. These insights may be applied to sales or customer management strategies or turned inward to improve the CPQ process itself. Most CPQ solutions include their own built-in analytics tools and reporting options, but for those who prefer to work with their data on their own, data-export options make it easy to transfer the entire dataset to a data warehouse or separate business-intelligence tool.

CPQ makes it possible to quickly create quotes built on a range of variables that would otherwise be difficult and time consuming to account for. This is particularly useful for businesses that provide a range of products or services, or that demand significant customisation on product bundles. With CPQ, pricing may be defined for each feature with the ability to further revise the closing price through discounts and other changes at various levels. By modularising and automating the quote process, organisations that use CPQ tools see better support for their diverse products and pricing.

Errors in manually quoted prices not only slow down the sales process; they may also wear away the confidence customers have in the business' brand. CPQ eliminates human error from the equation, enhancing sales processes by allowing users to select from individual product and service combinations and then automatically creating an accurate price quote. Discounts can also be capped and predefined margins set, so that no quoted prices ever fall below the level of profitability.

A major factor in most CPQ solutions is automation. Automating essential steps in the sales process, such as renewals, quote generation and deal analysis, significantly shortens the average sales cycle. This and other CPQ capabilities make it possible for sales teams to 'strike while the iron is hot', maintaining sales momentum and helping guide their prospects forward at a sustainable rate. Even the most complex product configurations and pricing rules can produce accurate quotes in a matter of minutes.

A single sales representative following manual pricing processes can only focus on a single deal at a time. Top CPQ systems have no such limitations; these tools can process a near limitless number of quotes at scale. Sales teams can likewise improve their quoting capacity on individual levels, through guided sales processes to produce more quotes per representative without sacrificing quality.

CPQ is a tool designed to simplify complex processes; it wouldn't be much use if the learning curve for using it were prohibitively difficult. Built-in rules make even the most complex configuration and quoting tasks simple. In many cases, little to no training is needed for unaccustomed users to become acquainted with the basic functionality of the CPQ system. This can be a major boon when expanding a department and bringing in new employees; it can also optimise the success rates of cross-selling and up-selling initiatives that sales representatives may not be fully proficient in.

All these benefits taken together speak to a single, overarching advantage for CPQ users: Increased profit.
 
CPQ systems have the capacity to shorten response times, eliminate quoting errors and guide users through otherwise difficult sales processes. This means reduced operational costs, fewer lost deals, better upselling and cross-selling success, and the capacity to accomplish more in less time. These attributes make CPQ a major area for cost reduction and revenue enhancement in modern business.

The advantages of CPQ come down to the support it offers in collecting, analysing and retrieving customer and pricing data to reduce costs and improve returns. And, when coupled with advanced AI capabilities, CPQ can go even further. ServiceNow Customer Service Management (CSM) combines innovative automation capabilities and Artificial Intelligence to create a highly targeted approach to price configuration.

Built on the industry essential Now Platform^®, CSM empowers your business to deliver a seamless customer service experience at lower cost. Streamline your operations with CSM AI functions. Empower customers with self-service portals. Anticipate and respond proactively to trends and identify gaps for continuous improvement. Provide AI-guided assistance to give agents the resources and contextual insight they need to create personalised customer interactions. Gain a 360° view of agent productivity. And through it all, accelerate the growth of your business as you boost the efficiency and effectiveness of your sales and service agents.

Give your agents the support they need, so they can focus on doing what they do best. Click here to learn more, and see how ServiceNow CSM can improve your service operations across the organisation.