Guide to CPQ

8/11/2019 Guide to CPQ

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APTTUS

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Expert Guide to Configure Price Quote

When it comes to complex quoting processes based on large catalogs,

complex price lists, configurable products, or rule-based discounts, Customer

Relationship Management (CRM) isnt always the right tool for the job.

Configure Price Quote (CPQ) helps you bridge the gap between your front an

back-end systems, elevate the accuracy of your quotes, and keep approving,

bundling and discounting up-to-date.


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CPQOverview

If youre familiar with customer relationship management (CRM)

tools, such as salesforce.com, you know that CRM effectively tracks

the activities that move a lead to an opportunity to a closed deal. Its

also great for managing the customer relationship once the deal is

closed.

However, when it comes to complex quoting processes, CRM often

comes up short. Many companies that have invested a lot of time and

money bringing a sales team onto a CRM platform find quoting still needs to be done outside the CRM,

especially if tools like Excel and Word are used to get parts of the process done. And when quoting is done

manually, without the safeguards CRM provides, errors, unnecessary risk, lost deals, and angry customers a

right around the corner.

For organizations facing these challenges, configure price quote (CPQ) can be a lifesaver. CPQ picks up wher

CRM leaves off by making all of the complex product, pricing, and business rules centralized, automatic and

available in real-time, so sales has everything they need at their fingertips when trying to configure and quo

a deal. CPQ puts guardrails in place that ensure your sales teams only sell to the latest approved pricing and

discounting rules, and that approvalswhen necessarycan move quickly along without holding up your

deals.

CPQ Drives the Modern Multi-Channel Strategy

CPQ isnt just for making your internal reps effective and efficient, it also is an essential part of a successful

global, multi-channel selling strategy. CPQ provides real-time, up-to-date product catalog visibility to every

approved user, whether inside or partnering with your company, so all your channels are on the same page.

CPQ grants you full control over which partners, groups, or channels can access certain pricing or product

information, with role-based access, discount locks, and portals, so you can manage revenue share, exclusiv

discounts, or pricing and shipping fees. It also allows you to manage different strategies for different channe

or different geographies by giving you full visibility into sales trends and channel effectiveness, so executives

LEAD ACCOUNTMANAGEMENT

OPPORTUNITY CONFIGURE PRICE QUOTE

With CPQ, your reps and

partners are more efficient,

more effective, and have

the tools they need to move

the deal along, get the

quote approved, and get to

a signed contract.


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can course-correct when needed. Finally, CPQ enables channel consistency so customers can find the same

product everywhere you offer it, and for a price you control, so you get maximum value out of all of your

channels.

How Configure Price Quote Defines the Sales CycleCPQ is an integrated business process that starts with guided selling, and ends with quote creation and

approval workflows. CPQ presents enormous opportunities for added efficiency, at every step of the sales

process.

Connecting Goods to Customers with Sales Configuration

Configuration, the foundation of CPQ, is the engine that ensures your

business rules are accurately and automatically represented in your

quotes and contracts, and that your reps are selling the best mix of

products at the best price.

Configuration Makes Your Reps More Efficient

Leading analysts estimate that the average sales rep only spends 10%

of their time selling. Imagine what would happen if everyone in your

company was only doing their job 10% of the time. Thats an exorbitant

amount of wasted time! You probably wouldnt bein business for long.

While there will always be some things that take Sales away from

managing deals, CPQ is the best weapon against unnecessary

administrative steps in the sales process that eat your reps time.CPQ

can eliminate a manual quoting process, make things like product

training and onboarding more efficient, and put more hours back into

the day.

When Sales isnt bogged down by junk, they canget back to what they

do bestbeing in front of the customerwhich makes them moreeffective, and shortens the sales cycle too.

How Do Your Reps

Spend Their Time?1. Wading through

outdated productcatalogs

2. Waiting forapprovals

3. Schedulingcustomer calls andappointments

4. Learning salesscripts

5. Complex Excelspreadsheets

6. Fixing mistakes


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Configuration Reduces Rep Mistakes

For those who arent in sales, you may not appreciate how difficult it is to memorize a dense catalog and sell

a complex set of products and features, especially when your products include things like:

Multiple Delivery Options Warranties And Manuals

Service Packages Compliance Issues

Third-Party Components Status-Specific Pricing

Discounting Offers Product Dependencies

And across a range of industries, like manufacturing, life sciences,

communications, technology, and many others, there are even more

factors that can add to the complexity.

Trying to manage your product rules in an excel spreadsheet can, and

usually does, drive Sales, Sales Operations, Product Management and

even Engineering crazy. As you can imagine, when reps are trying to

manage a million SKUs, and hundreds of different product lines that all

change seasonally, there are some real pain points around configuration.

When you're managing your product, pricing, bundling, and channel

rules with real configuration, you dont have to worry about the

complexity of your business, or how often it changes, because its very

easy to make sure your business rules are automatically reflected in

every proposal or quote.

By making your business rules automatic, and enabling 100%

compliance for your sales team, not only do you reduce errors, but you

reduce the time spent in approvals because your teams quotes will be

close to perfect when they're submitted. If you add a business rule into

the system, your reps will have to follow it if they want to get their

quote approved. So with CPQ, its even easier to encourage Sales to do

what gets them paid.

Automated configuration will allow you to manage advanced pricing

strategies and maintain uniformed pricing rules across all deals and

product channels.

The Cost of Inaccurate

Quotes:

Sales quotes products

that cant be built

Errors in contracts,

invoices, and orders Added costs from

refunds/returns

Slower sales cycles

Bundles are

quoted/shipped with

missing elements

It takes too long to

monetize new products


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Capturing Maximum Value with Intelligent Pricing

In terms of product configuration, one of the most complicated aspects that you need to define in your

business rules is pricing.

In the CPQ world, pricing refers to the set of rules that tells sales how they can price a deal, offer creative

incentives, and what approvals should kick in when they go outside the preferred price parameters.

The perfect price for a product is influenced by market demand, competitive pressures, your business

strategy, your position in the sales cycle, and your necessary margins. But pricing is also influenced by a

whole set of variables that are constantly in-flux, so even if you come up with the perfect price today, if you

dont have the flexibility to make frequentbut controlledchanges to your pricing if needed, your pricing

strategy will fall short.

Typically, if you see a drop in margins, it is usually tied to pricing. Whether its rogue discounting, or

inconsistent pricing across channels, little mistakes can amount to big costs.

Pricing as a Strategic Advantage

When pricing is a strategic initiative, and youre looking at things like market

conditions, prospect and buyer demographics, close rates, geography-based

factors, and pricing history, you can get some incredible insights that enable you

to offer smarter discounts and price points based on what works, and avoid

making mistakes that cut into your margins.

The first rule is, one-size-fits-all pricing rarely works, especially if your business

is spread across geographies, or leverages a variety of channels. At its core,

pricing strategy is about making informed, data-driven decisions to effectively

manage behavior, whether its the market, the customers, or your own sales

reps.

For example, if you notice that smaller customers spend more when they perceive a lower per-unit cost, wh

enterprise organizations spend more on hardware if the services are discounted, you might decide to target

smaller customers with volume pricing and offer discounted services to the enterprise.

Pricing is the MOST immediate way you can impact revenue and margins.

If you are selling without a pricing strategy, you are undoubtedly leaving

money on the table.


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Maybe you have excellent renewal rates, so you offer a subscription with a cheaper first year fee. In both

those scenarios, youre encouraging your buyers to do the things that make sense for your business.

How to Influence Buyer Behavior with Smart Pricing

Promotions

Promotions are probably the easiest way you can influence customer

behavior. Weve all been enticed at one point or another by a Buy

one, get one freeoffer. In fact, promotions are what most companies

turn to when they try to use price to control a deal. But promotions

shouldnt ever be haphazardly offered. They should always be created

with a clear idea of whose behavior you want to modify.

Is it buy one get one free because you need to move more

inventory?

Is it an extra 3% discount for paying under 30 days because

you need cash in the bank?

Is it 25% discount on service with 50 seats because you want

to encourage larger deals?

Figure out what you want then customer to do first, and then build

your promotion around that.

Volume Discounts

Volume pricing is another way you can influence behavior, and this is

an extremely compelling lever to pull for high volume manufacturing,

where the cost of selling one additional unit is very low. Or say youre

selling a license key for a piece of software or another virtual giftit

doesnt cost you a thing to get someone to buy more. Not only are you

getting the customer to buy more, but you're actually more profitable!

Geography-Based Pricing

And then of course there's geography-based pricing. You might do this to mitigate exchange rates, or you

might do this because you know the market in one area will bear a much higher price. For instance, the cost

of living in Fresno or Sacramento is drastically different than the cost of living in New York City or San

Francisco. If you want to take advantage of the ability to price for a specific geography, youll needa flexible

mechanism for pricing.

Things You Must Consider:

Real Cost

Customer Demand

Competitive Prices

Business Strategy

Business Cycle

Market Demographics

Other Pricing Techniques:

Subscription Pricing

Contract-Based Pricing

Usage-Based Pricing

Ramp Pricing

Flat Fee

Channel Pricing


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Bundling

Bundles are another way you can make a significant impact on revenue and margins with fairly little effort.

They enable you to increase your sales and still give your customer a great deal. For instance, you can sell a

laptop for $1,500. But if you sell it as a part of a bundle (the laptop + an external hard drive, mouse and ke

board) for $1,800 you might see an uptick in sales for your ancillary items and increased revenues.

Lets say it actually cost the customer $2,000 to buy all the items separately. Your customer perceives they

saved $200. But you dont take a $200 hit; you actually just got $300 more than what you would have if you

hadnt offered this bundle.

The rule of thumb with bundles is this: As long as your bundle covers your product costs and gives you a

margin, youll increase your revenue.Its a lot easier for a

consumer to buy just what they want, but entice them with

savings and youll see howmuch more they will spend with you.

How to Make Quoting Easy with CPQ

If you have centralized up-to-date product and pricing information,

and enforceable discounting rules, the quote should be the easiest

part of the CPQ equation.

The quote is really the first chance you have to make a good

impression on the customer. If a customer asks you for a quote,

and you can deliver an accurate and professional document within

their time frame, youve just indicated that you are easy to do

business with.

Another point to consider is that often, the company that first

delivers the quote has the advantage in the negotiation. By the

time the competition has responded, youre already moving down

the negotiation path and its hard to catch up.

Like pricing, there's a lot of opportunity in quotes, but there's also a

lot of risk. Quotes are often a subject of pain, frustration, and

conflict. For example, one high-tech manufacturing firm took weeks

to respond to a quote, because manufacturing, services,

engineering, and delivery partners all had to get involved. Because

The Value ofEffective Quoting

Make a positive firstimpression!

Get the first mover

advantage

Set the starting pointfor negotiation

Get the customer tocommit


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there was no standard process around quoting, everything had to be manually approved by 7 different

stakeholders spread across the globe. In a scenario like this, while you are going around in circles trying to

collect approvals, your competitors will be closing the deal.

Quoting is a Battle of Speed and Accuracy

When quoting becomes a problem, its usually because the quotes aren't getting to the customer fast enoug

or the quotes are full of errors.

When it comes to speed, your goals should be, to deliver within

the timeline expectations of the customer, and to beat your

opponent. Slow quotes are caused by a number of factors,

starting with poor product knowledge on the sales side. When

reps have difficulty finding the product and pricing information

they need, quotes stall.

Another problem is caused by accessibility. Do reps need to be in front of their computer or in the office to

put together a quote? If there are about to get on a plane, or are driving down highway 101, or on a

networking retreat on a tropical island with no signal can they get the information they need to create quote

on the fly, and then sync the quote when theyre back online?If so, thats huge efficiency gains.

Poor Product Knowledge + Accessibility Challenges + Unorganized Approvals

= SLOW QUOTES

On the flip side, it doesnt help to be fast if the quote is wrong or incomplete. Plus, if you dont make it easy

for prospects to see what they're paying for, or if you dont send a formal proposal and just bounce product

and pricing info through emails, this can cause problems too. When the space is extremely competitive, and

all the players have strong products, sometimes it comes down to little mistakes that are the difference

between winning and losing.

Even if errors arent a deal breaker and the customer still buys, errors in your quotes lead to a whole string o

problems you dont have the time to deal withproblems like incorrect products being ordered, returns, and

lots of unhappy customers.

Quoting errors are like

resume errors if youve

got them, dont be surprised

when you dont get the job!


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Why Quotes and Contracts Need to Connect

Finally, one of the biggest hiccups in quoting is that quotes are detached from the contract or in some

cases, from the order management system. Whats the value of having an accurate, speedy quote, if you jus

run into bottlenecks when its time to make it official? Or if you have to copy all of the quote information

manually into a new system, you re-expose yourself to errors, and lose all of the accuracy provided by your

CPQ solution.

If it takes weeks to negotiate terms and conditions and get a signed contract, you ve nullified many of the

advantages of a CPQ solution. Instead you need to have a quote flow seamlessly into a contract, so you can

close deals and get them on the books as fast as possible.

Dont let the contracting process bottleneck your quotes. Implement your CPQ capabilities within a full Quote

to-Cash solution that will link all of your critical business processes end-to-end. Here are some of the real

business values of an automated CPQ suite.

The ROI of Configure Price Quote

105% larger deal size

49% higher proposal volume

28% shorter sales cycle

26% more reps achieving quota

17% higher lead to conversion rate

What Apttus customers have experienced:

30%deal size increase for new deals

20%increase in renewal contract value

25%reduction in rogue discounting

80%faster time to quote

80%faster contract process

Data acquired from Aberdeen GroupsBreaking the Laws of Physics:

Shortening the Last Mile throughWorkflow Automationby Peter Ostrow

(April 2013)


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Apttus CPQ Case Study:Full article:http://customerthink.com/cpq_advance_pipelines_with_apttus/

From Customer Think,CPQ: Advance Pipelines With Apttus by Adam Honig

Summary

CPQ helps you bridge the gap between your front and back-end systems, elevates the accuracy of your

quotes, and keeps approving, bundling, and discounting up-to-date. CPQ picks up where CRM leaves off by

making all of the complex product, pricing, and business rules that captured in your CRM tool centralized,

automatic and available in real-time. With CPQ, your reps and partners are more efficient, more effective, an

have the tools they need to move the deal along, get the quote approved, and get to a signed contract.

CPQ allows you to manage multi-channel strategy, capture maximum value with intelligent pricing, guide

selling, eliminate rogue discounting, connect goods to customers with advanced sales configuration, and

accelerate your quoting process without sacrificing accuracy. Configure Price Quote is a key component of thQuote-to-Cash process.

About Quote-to-Cash

Quote-to-Cash is the vital business process that connects a customers interest in a purchase to the

realization of revenue. It includes creating a quote, responding to RFXs, submitting a proposal, negotiating

and managing a contract, fulfilling orders, recognizing revenue, ensuring compliance and tracking payments

all within visible and controlled workflow. Quote-to-Cash solutions include Configure-Price-Quote (CPQ),

Contract Lifecycle Management (CLM), and Revenue Management applications.

Quote-to-Cash is the single link between top-line results, bottom-line results and customer satisfaction. No

other process is as critical for maximizing the value of capturing revenue in a profitable way as well as

meeting the needs of customer sales requests. This process relies on the collective intelligence of the

enterprise. The impact of accurate quotes, proposals, contracts and orders make the flow of all data and

processes within an enterprise work smoothly, thus creating value for enterprises and their customers.

In the past few years, however, a number of software application vendors that specializein automating configure, price and quote (CPQ) processes have emerged. One such

vendor is Apttus, whose product is built on a modern, cloud-based platform that makesan excellent choice for businesses that want to tap CPQ capabilities.[]

In short, using manual processes to handle configuration, pricing and quoting is wasteful

and expensive, and thats what tools such as Apttus are focused on addressing. Using

CPQ also helps businesses tame product or bundle proliferation, in part by letting

salespeople create unique combinations of products or services for any given customer.
http://customerthink.com/cpq_advance_pipelines_with_apttus/http://customerthink.com/cpq_advance_pipelines_with_apttus/http://customerthink.com/cpq_advance_pipelines_with_apttus/http://customerthink.com/cpq_advance_pipelines_with_apttus/

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Guide to CPQ