Are you getting maximum value out of your CPQ?
In our CPQ Analysis Workshop that we run with every new customer, we recommend to track three important KPIs. This will help you to see how your CPQ system is performing. KPIs provide measurable metrics, as opposed to subjective feedback from sales reps or customers.
But what are meaningful KPIs? Here’s our top three:
A tool is only effective when it is used. This KPI is the number of quotes created through CPQ vs. being created manually outside CPQ, as a percent of all the quotes sent to customers.
A common misunderstanding is that “if the CPQ tool is good, all sales people will want to use it for every quote”. That’s not necessarily true, because even if a CPQ streamlines the process, it will also limit the sales rep in what they are allowed to do.
A seasoned sales rep may prefer to do their quotes manually, not because it’s more efficient – but because that gives the full control in what they are selling and to which price. The manual quote might not be good for the company (and it’s operating margin), but it may be good for the sales rep.
Our recommendation is to add value in the CPQ which the seasoned sales rep cannot get anywhere else, e.g. automated drawings. The manual quote will never have the drawing and hence will have a lower chance to win – and the seasoned sales rep will know that.
Ideally you would have a 90+% rating here, where only the really custom (Engineer-to-Order) orders go outside CPQ.
This is your percentage of quotes sent to customers that have an error—it could be missing items in BoM, incompatible options, wrong pricing, etc.—vs. the total number of quotes issued.
How do you reduce errors? By using a CPQ that ensures that the end user selects compatible options to build configurable product.
Another important aspect to keep in mind is master data, the CPQ is never better than the rules and data in the system. And by integrating the data with the source, you decrease the risk of manual errors.
Often, more than 30% of quotes issued have at least one error before using CPQ. You want to get this down as far as possible obviously.
This is the number of hours (or even days) from when a customer requests a quote to when they receive it.
How fast are you replying to your potential customers? Being first with your quote means that by the time the competitors respond, you’re already at the 2nd or 3rd iteration of your quote – making the competitive quotes irrelevant.
A good CPQ solution enables your sales team to quickly create accurate quotes for your customers. And even better CPQ solution give’s the customers the chance to create the quote themselves.
Typically, you should see time reduction rates of 80+% by using CPQ.
Of course there are many more KPIs, but we find that if you have too may KPIs you may loose focus from the most important ones.
If you’re not getting the results you want with your KPIs, get in touch with us!