BearingPoint Finland blog
The importance of customer specific product and service offerings has grown across a range of industries due to ever evolving customer expectations. To withstand market pressure, it is essential for companies to execute the increasingly complex quoting process as effectively and efficiently as possible. Companies are required to create solutions and quotes faster than competition while still meeting the customer's specific requirements and safeguarding sufficient margins. Configure, Price, Quote (CPQ) solutions have been created to address these challenges.
In the past, CPQ solutions have typically been used in industrial manufacturing to configure complex products. Over time, the utilization of these solutions has expanded to almost every other industry and well beyond just the “C” of CPQ.
Companies are supplementing their traditional product offerings with additional services and solutions to remain competitive and to overcome the commoditization of products. This increases the complexity of sales process even in industries, which are manufacturing more standardized products. Companies need solutions to manage the increased complexity in their pricing logic while salespeople need solutions helping them to be more productive and making more informed decisions. Thus, highlighting the importance of “P” and “Q” of CPQ.
With the evolving business environment, it is no surprise that the CPQ software market has continued to grow rapidly. According to Gartner, the CPQ application market grew by 15.5% during 2019 to an estimated USD 1.42 billion. Similarly, Technavio estimated in their latest report the market to grow by USD 1.14 billion during 2020-2024.
Success in CPQ solution implementation can bring significant business benefits for companies. These include for example shorten time to quote, increased quote accuracy rate, improved quote conversion rate and higher ratio of self-service quotes within sales or by customers. In addition to these hard metrics companies can achieve many qualitative benefits such as better alignment between sales, finance and operations functions, higher customer satisfaction and faster time to market with new product and service offerings.
However, a significant number of CPQ implementation projects cost too much, take too long, fail to meet expectations, or just completely fall short. Based on our experience, companies can avoid the most common CPQ solution implementation pitfalls by adhering the following four steps before kicking of their CPQ implementation projects.
Despite the widespread adoption across many industries, companies should still evaluate the relevancy of a CPQ solution for their business. The two most important dimensions impacting the relevancy of CPQ are 1) the level of product/service complexity and 2) the level of commercial process complexity.
In case the majority of company offers are based on standard pricing and simple product catalog, benefits achieved with CPQ implementation might be limited. Similarly, if company tenders mostly for large and complex engineering projects with long selling cycles, the CPQ solution might not be a perfect fit. The sweet spot often lies somewhere between these extremes where tendering includes special conditions and products, and services need some degree of tailoring to meet customer requirements.
A common theme of troubled projects is the lack of clearly defined business objectives. Without clear goals the risk of scope creep and lack of focus is much higher compared to projects having business objectives set before the project starts. Also, without clear objectives and associated metrics it is impossible to monitor and evaluate the project success during and after the implementation.
Companies should benchmark their existing sales and bidding processes to identify key areas for improvement. This baseline should be documented, and new targets set to establish a clear expectation to be achieved by the CPQ implementation.
Reduce average time to quote from two weeks to one day
Increase average margin for crushers from 25% to 28%
Increase opportunity win-rate from 30% to 35%
Frequently companies rush to start the actual CPQ implementation without first ensuring to have the basic building blocks in place. This is often the most common reason for delays and higher costs in CPQ projects. To avoid these challenges and ensure functional fit companies need to assess and ensure their readiness in advance.
The essential first step is to refine and clean the product and service catalog. In addition, companies need to identify the required structure, characteristics, and configuration parameters together with rules used to bundle different products and services together.
After cleaning the product and service catalog companies need to analyze the actual bidding process. It is important to clarify and define the required pricing rules (e.g., cost+, target, value) and discount methods (e.g., volume, terms), as well as the approval thresholds and workflows. Furthermore, companies need to create a clear list of different document templates needed to offer and finally in contracting (e.g. templates used to send out ROM, quote and contract)
One important area is also to clearly understand the requirements and frequency of the ongoing maintenance tasks. Continuously updating product and service catalog or pricing logic requires special attention in resourcing and impacts greatly the post implementation costs.
Even the most technically advanced CPQ implementations will fail if end users refuse to adopt and use the new solution. Therefore, it is essential to engage and involve the sales team from the beginning in the CPQ solution evaluation and development initiative.
The priority should therefore be to address the most important challenges of both sales reps and sales management. In case there is a conflict of interest, the needs of sales reps should overrule because in the organizations where sales management mandates usage, CPQ projects usually fail.
However, it should be noted that CPQ projects also tend to fail in organizations where sales reps are not forced to use it. This leads to two important implications for the CPQ initiative. Firstly, while CPQ should of course be easy to use, it should be strategically enough positioned to ensure there's no way for sales reps to work successfully without needing to use it. Secondly, CPQ implementation needs to align with company's strategy to ensure executive sponsorship and incentivize sales management to drive its adoption.
With BearingPoint, companies make the most of systematically managing proposals to minimize costs and maximize profits. Exhaustive evaluation of all the possibilities to streamline the quote process has a direct positive impact on time, expenses, and risk – leading to a higher success rate for your offers. Contact BearingPoint today to learn how your business can further accelerate digital commercial excellence initiatives and benefits.
Manager, Digital & Strategy