Definition The meaning of CPQ is Configure Price Quote. The acronym is used to describe a system to...
Definition
CPQ stands for Configure, Price, Quote. The CPQ process includes selecting components (configure), handling prices and discounts (price) and generating various documentation (quote, technical specifications, 2D- and 3D-drawings).
The CPQ process has a long history with manufactures of complex products, but with the introduction of SaaS (software as a service) the market is currently expanding into service offerings and less complex products.
The CPQ process
- supports a simple way to select valid product combinations with respect to product rules and limitations
- prices the product according to bundling and discounts (manual or automatic)
- creates an accurate and persuasive quote documents based on configuration and pricing information information
CPQ software connects front and back end systems and automates the lead-to-cash process.
What is a CPQ process?
What’s normally included in the CPQ process? Is it all automated and in what way is it adoptable and flexible?Configure (the C in the CPQ process)
The overall problem is that complex products often have limitations in the way a product can be configured. This can be physical limitations how options can be combined. It’s also very common that there are sales/marketing reasons for limiting availability of certain product combinations.
A modern CPQ process simplifies the interaction by asking high-level questions about requirements. This is often referred to as guided selling.
The magic bullet when it comes to the CPQ process is the ease of maintenance. The time it takes to do updates as the product portfolio evolves is the real differentiator between a “good” and a “not so good” CPQ process.
Price (the P in CPQ process)
The pricing can, if you let it, be just as complex as the product itself. Manufacturing costs, geographies, competitive situation, and local protocols all comes into play with a clever pricing strategy.
More and more companies are currently moving to a more value-based pricing. What value does your superior product offer deliver to a specific customer? This requires some heavy lifting when it comes to analysis but once that’s in place the CPQ process can really leverage the bottom-line profit and still keep customers loyal to your brand.
Price adjustments is also an important part of the pricing step in the CPQ process. This can be set up to be automatic but should also offer flexibility and advice for sales tactics.
More and more companies are currently moving to a more value-based pricing. What value does your superior product offer deliver to a specific customer? This requires some heavy lifting when it comes to analysis but once that’s in place the CPQ process can really leverage the bottom-line profit and still keep customers loyal to your brand.
Price adjustments is also an important part of the pricing step in the CPQ process. This can be set up to be automatic but should also offer flexibility and advice for sales tactics.
Quote (the Q in the CPQ process)
Once the product is configured and prices correctly, respecting both product limitations and pricing rules, the result is presented in one or more documents. These documents describe the product and is often personalized to resonate with various stakeholders it should be presented to.
The documents generated in the CPQ process describe the product an includes texts, illustrations, data sheets and sometimes drawings, all customized for each offer generated.
The documents generated in the CPQ process describe the product an includes texts, illustrations, data sheets and sometimes drawings, all customized for each offer generated.
The level of details can be personalized, and document generation should be fully automated.
