What is CPQ Software?

What does CPQ mean? CPQ stands for Configure, Price, Quote. Let’s take a closer look at why companies use CPQ software and what each word in the acronym means.

What is CPQ making sense of product configurtion

Why use CPQ software?

CPQ software enables your sales team to quote complex products and services quickly and accurately. When salespeople use CPQ software, it reduces errors and turnaround time for quotes. Companies that implement CPQ remove friction from the buying process and set better expectations for their customers.

One alternative to CPQ software is a manual process, which requires salespeople to fulfill customer requirements by pouring over complicated spreadsheets or reaching out to different departments. They may need to send customer specifications to an engineering department to determine what the requirements are for the project and reach out to supply chain management for pricing. This process can take days or even weeks before the salesperson can provide a quote to their customer—the more complex the product and process, the greater chance for human error or miscommunication to occur.

Another alternative to the CPQ is a standalone configuration tool. This enables users to design the product they need based on rules or parameters set by the manufacturer. A configuration tool often has less inputs than a CPQ, they typically don’t include raw materials costs into the calculation. A configuration tool is quite powerful none the less, typically offering a 3D preview of the product, dynamic dimensions, rules-based pricing calculations and CAD or BIM file outputs.  These are particularly useful to manufacturers of electrical components, electronics, mechanical components and architectural products.

 

Let’s take a look at what each word in the phrase Configure, Price, Quote means.

 

Configure

Configure, in Configure, Price, Quote, stands for a set of parameters to choose from within CPQ Software that enable salespeople to assemble a complex product or service on-the-fly. These parameters can be product requirements, features, upgrades, and more. A ruleset governs which options work together to ensure that the salesperson selects only the product features that can be fulfilled by the company’s implementation team.

When using a tool like this, salespeople don’t require the same training and expertise to quote a complex product or service.

Price

Price, in Configure, Price, Quote, stands for a ruleset that automatically generates pricing based on a final configuration of a product or service within CPQ Software. The pricing rules within CPQ software can be pulled from a static price list or dynamic market pricing. Advanced CPQ can generate pricing based on the cost of specific materials, like aluminum, based on today’s market pricing.

Quote

Quote, in Configure, Price Quote, stands for the ability of CPQ software to generate a dynamic sales quote based on a specific configuration, including the price. Dynamic quote generation empowers salespeople to meet customer needs in real-time and allows the conversation to go from the world of thoughts and ideas to solid numbers.

 

Is CPQ worth the money?

CPQ software is effective because salespeople can give accurate pricing to prospects and guide them towards the solution that best fulfills the prospect’s needs and budget. Customers also don’t have to wait for weeks to get a quote on projects. In the end, CPQ software makes it easier for customers to do business with you if you have a complex product or service.

If you sell complex products that take a lot of effort to generate a quote and require dynamic market pricing, CPQ software is often a worthwhile investment. These products are often large machinery or equipment, which can be configured but often no two are the same. 

BUT, CPQ is overkill for a lot of product offerings. If you sell products that don’t require dynamic pricing and benefit from a 3D preview, a stand-alone online 3D configurator may be a better fit.

 

Online 3D configurator vs. CPQ Software, which is better?

Online 3D configurators are better than CPQ software for products that don’t require dynamic market-based pricing. Online 3D configurators are typically best for component manufacturers, architectural manufacturers, and customizable machinery with standardized options.

Will an online 3D configurator meet your needs? 

Learn about product configuration:

The following two tabs change content below.

Adam Beck

Director of Marketing at CADENAS PARTsolutions | A Marketing graduate from the Miami University, Farmer School of Business in Oxford Ohio, Adam has years of experience in marketing and design for a variety of industries.