April 22, 2020
CPQ Insights — Five Trends for 2020
CPQ Insights — Five Trends for 2020
CPQ Insights — Five Trends for 2020

CPQ (Configure-Price-Quote) refers to a suite of applications that helps to configure complex products and services. The major benefits of CPQ platforms are to provide accurate quotes based upon a defined set of business rules, personalized pricing and discounting, compatible products, and approval hierarchies.

CPQ is experiencing tremendous growth as every aspect of Customer Relationship Management is becoming more complex, faster and more context-driven than ever before. CPQ strategies continue to bring greater accuracy & speed to all the aspects of product and sales lifecycle.

“Read more on how CPQ is a Supreme Tool for Sales Process.”

Quick Facts on 2020 CPQ Market

• The CPQ market was worth $878 Million annually in 2016 and has been growing steadily at 20% year on year.

• Sales teams with CPQ solution are having 28% shorter sales cycle and 105% larger avg deal size.

• Cloud-based CPQ revenue is accelerating and in 2020 outperforming on-premise solutions.

83% of sales professionals are using some form of a CPQ system.

CPQ users perform better on quota attainment and proposal volume. CPQ enables sales to send prospects and customers 49% more contracts, proposals, quotes and RFP responses.

Why is CPQ Growing so Fast?

Following are the primary reasons for this continuous growth of CPQ:

Accuracy


• Business rules, product rules, account rules, and the ability to implement multiple pricing methodologies to create an accurate quote.

• Versioning and the differences between each version are measurable.

• Accurate view of the forecast as well as accurate bill of materials (BOM) for fulfillment systems.

Speed


• Modern solutions are evolving from mere Sales Transaction tools into Sales enabling systems like machine-driven insights utilizing Artificial Intelligence (AI), Machine Language (ML) and Visualization/Augmented Reality. Also, Machine Learning is enabling real-time decisions by combining predictive analytics with business rules.

• Approval workflows and “e-Signature” integration reduces approval time.

• Standardizing sales training for complex products.

Flexibility


• Configurable business rules by region, business unit, currency and geography.

• Ability to support multiple revenue models including subscription pricing, recurring billing, partner and channel pricing, and loyalty programs.

• Artificial Intelligence and Machine Learning to create predictive, customer focused quotes.

Immediate Return on Investment


• CPQ platforms are now cloud based allowing for a faster implementation cycle.

• Omni-channel commerce is enabling better communication channels. Customers and sellers, both can benefit from digital collaboration in all aspects of a commercial transaction.

• The reduced upfront costs associated with the acquisition and deployment of Cloud CPQ software is introducing new participants to the market.

With the focus on buyers and sellers to work directly to configure a deal, the focus is no longer exclusively on complex product sales. This has resulted in several new use cases, and new vertical industries that are realizing the potential of CPQ solutions.

Five Top CPQ Trends for 2020

Trend 1 — CPQ Cloud and Omni-Channel

The commerce channel which traditionally covered simple configuration or list-based pricing, can be paired with CPQ for complex pricing and configurations. Today, CPQ cloud can work across CRM, Commerce, PIM, and Service systems enable channel-specific pricing, rebate management, deal management, team selling, and revenue-sharing programs.

Trend 2 — Visualization and Augmented Reality

Visualization technologies tied to product rules help configure products virtually. Example — A heavy industrial manufacturer can be implementing a spare parts ordering system where a channel partner can configure the spare part dynamically. Visualization will become more important as product configurators get exposed to channel partners and customers.

Visual configurators are driving more leads and deals. They are closing product configuration gaps, improving fulfillment speed, product quality, creating greater customer loyalty and follow-on sales. Engineering, manufacturing, and sales are collaborating in real time.

Trend 3 — Partner and Self-Service Enablement

Self-service quoting is another trend that will continue to grow. 67% buyers prefer doing their own product research and configuration over getting the information from a product support representative.

Purchasing complex products online is no longer daunting as more self-service options for the customer to configure, price and quote products are more customer friendly. Example — A high tech company has integrated CPQ into their external portal so that their channel partners can research the product and quote their customers directly. The speed to quote is exponentially reduced.

Trend 4 — CPQ Analytics

CPQ data can be mined with data analytical tools, integrated with artificial intelligence to understand the levers and drivers behind a successful product configuration & quote acceptance. Metrics like last price paid, comparative product pricing combined with AI can provide guidance on discounting and deal structuring. This saves time, money and provides knowledge on the customer and the product.

Trend 5 — AI & ML Driven Deal Optimization

CPQ companies are offering quotes, quote success rates and discount/margin structures using ML. Quotes are scored through various business rules and pricing guidance can be visualized to sales managers. Through AI, the CPQ systems can also suggest deal structuring to maximize the likelihood of deal success, within pre-specified profitability ranges.

CPQ Myth Vs. Reality

Myth: CPQ is complex.

Reality: The quoting process is complex. A good implementation simplifies the process.


Complex products have complex quoting processes, often undocumented and misunderstood within the organization. A CPQ system transformation will help document quoting, standardize the process across business units, and empower sales personnel through the CPQ system to deliver direct value.

Myth: CPQ is a cold process.

Reality: The salesperson has more time to sell.


The perception is that a system driven quoting process reduces the human element in selling. As a result, many sales personnel resist CPQ implementations. In fact, the opposite is true. Sales personnel typically spend over half their time in non-selling activities such as quote creation, researching product configurations, calculating pricing, reporting, training, etc. A CPQ system will drastically reduce these activities thereby allowing the sales personnel to focus more on customers.

Myth: CPQ cannot be used with AI

Reality: Few CPQ professionals know AI


The number of AI experts around the world today remain alarmingly small. Therefore, most companies do not know how to leverage this powerful tool. CPQ technologies have in-built rules to leverage AI and ML. A good integrator will be able to translate business constraints into rules. AI expertise within an organization does not need to be a barrier to the CPQ technology adoption.

Final Thoughts

The business climate is much more agile than ever before, and digital technology has forced companies to rethink what, how and whom they sell to. Omni-channel B2B portals have also changed purchasing processes and buyers expect direct interaction.

CPQ implementations will keep increasing due to the rapid ROI they provide by speeding up quoting, simplifying the sales process, and shortening the quote to cash cycle. CPQ implementations will increasingly draw upon visualization technologies and AI to predict successful pricing deals. In fact, 76% CPQ users say they already have AI or plan on implementing AI soon. However, just having AI expertise in-house is not adequate. Strategy and AI implementation experience are needed to tie CPQ to the power of AI.

The success of a CPQ implementation will be driven by having a clear vision, managing change, simplifying and standardizing quoting processes, and transforming complex quoting into a simple, easy to follow CPQ system.

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This blog was written by Shankar Sitapati, Vice President, Technology at SoftClouds. He has a background in driving better digital customer experience through transformation projects. He has delivered global CX, CRM, and ERP solutions. His experience lies in Manufacturing Industry with a specialization in B2B e-Commerce. Shankar was honored with Oracle Retail CIO of the year in 2012.

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