To avoid this, let’s start with the easy part of unpacking the acronym, and then helping you understand your needs and if CPQ software is the right solution for your sales team.

• C is for “configure”
• P is for “price”
• Q is for “quote.”

Behind each letter is a lot of business details, of course, but the basic idea is this:

“CPQ software accelerates the quoting process by enabling sales teams to quickly configure, price and quote the perfect solution for any customer in minutes.”

In other words, CPQ solutions increase sales productivity while accelerating sales velocity.

Does that matter? You bet it does. Success in the digital economy hinges on a sales experience that is quick, easy and perfectly personalized. That’s what a CPQ solution delivers.

And here’s how it works.

Configuration

In this context, configuration means the configuration of your products. Many companies now create optional combinations for even the simplest products. Fast food restaurants offer apps where customers can tweak their sandwiches down to the pickles and mayo. Why? Because customers want to customize their products and experiences.

We all want to leverage control over our purchases and no one wants to wait to get their fully customized sandwich.

In the B2B context, sales teams selling complex products that require configuration need a way to quickly configure the right product offerings to smartly meet a customer’s needs. Sounds easy enough, but many configurations are so complex it can take years of training before a sales expert can deliver them error-free and on time.

If you can’t quickly pass along the personalized product configurations customers demand, you lose business in a fierce and competitive market. The game rapidly moves on without you.

• Are you losing sales because of a time-consuming process for your sales teams to put together a quote or valid products?
• Are you losing upsell and cross-sell opportunities due to your people either forgetting or not even being aware of possible connections with products they are quoting?
• Are you losing sales because the quotes being sent to customers contain products that are not ideal for the needs of the customer?
• Are you experiencing warranty/replacement costs due to the fact that inappropriate products are being sold and then have to be replaced for free or refunds have to be issued?

If any of these are occurring, a CPQ investment may pay for itself quickly just on the configuration capabilities alone.

CPQ tools optimize and accelerate the configuration process by helping sales people create complex, zero-error configurations in minutes. Yes, no errors. Even junior reps with a single day of experience can sell products like a pro.   

But CPQ doesn’t stop there. Some CPQ solutions infuse AI insights during this process, enabling sales reps to recommend product add-ons that perfectly fit an individual customer’s needs.

When anyone on your sales team can effectively configure any product for any customer, you not only win more deals, but can also lean on AI to bundle the right products or services so each deal is fully maximized.

Additional Tip: The best CPQ solutions go beyond simple configurators to include easy-to-navigate catalogs with guided selling to help sales teams find the right products for customers. World-class CPQ solutions also offer advanced ways to help sales people visualize those catalogs in 2D/3D, or even augmented/virtual reality. That’s a powerful view. And customers notice.

Price

This can refer both to the prices of individual items as well as packages. These prices can also be for services and products, which may be sold together or individually.

If you have complex pricing, you may be losing business or selling at less than optimal margins simply due to ignorance by your team of how to offer optimal prices. You also may be losing deals due to long quote turnaround time resulting from too many hands involved in delivering pricing or special pricing requests.

Additionally, if your company has tier-based pricing for your products and services, your team may not be adjusting pricing correctly or may have difficulty explaining pricing to customers, resulting in lost revenue and sales.

You could once price lemonade at your corner stand for 25 cents because, well, everyone else was doing it, too. Kids from around the block would pay a quarter, and so would the CEO of the Fortune 500 company who stopped to honor your entrepreneurship. And quench her thirst.

That’s the old approach to pricing. Static. One-size-fits-all.

The digital economy works differently. Customers are singular, their industries are unique and their market demands are constantly changing. Sales people now need to deliver pricing that accounts for every nuance.

What does a downturn in oil mean for a plane ticket price? How about a sudden surplus? What could a spate of bad weather or a scarcity of fertilizer mean for produce prices?

Salespeople need to know how to price and discount when the deal demands it. They need to know how to incorporate customer buying patterns and market data that impacts willingness-to-pay. Of course, no one has the luxury of time to research the perfect price, and delays in customer quote requests mean one thing: lost deals.

That’s where AI-based CPQ tools produce even better results than CPQ tools without AI.

A CPQ tool, especially one supported by pricing science, can assure the best pricing is made available for every quote. A properly designed and easy to maintain CPQ system can provide positive ROI based on pricing improvements alone.

CPQ software helps each salesperson price a product or configuration for any customer. Infused with AI-based price optimization technology, CPQ tools become smart quoting engines.

With AI-packed price optimization tracking a million variables, salespeople can deliver perfect product prices for individual customers in real time. Split second personalization means major gains in profit.

Additional Tip: As you look at CPQ software with AI-based pricing optimization, focus on those that provide transparency on how price recommendations are derived. This will help fast-track the adoption of pricing recommendations. 

Quote

Once CPQ software has done all the heavy-lifting of configuring and pricing a product or service, the deal still isn’t sealed. Your sales team must now deliver a professional, personalized quote that perfectly illustrates all the awesome details.

Quoting is probably the most overlooked part of CPQ. However, it can be quite important. When talk about quoting, we mean the quotes you send to customers. Think about this for a minute. Your team delivers a quote to a customer with all the upsell and cross-sell opportunities included.

Then, because you have no control over how the proposal is being built, your prospect sees an unprofessional, poorly organized quote document that is so hard to read it turns them away from your company. Or, if you can’t provide the file format your prospect wants, so you cannot even deliver the proposal to them.

Most B2B customers are now doing their own research and requesting quotes from several vendors. They expect fast responses to their requests and it’s 50 percent more likely that the vendor who responds first wins. You’ve got to get yours right. And get it in now.

But the quoting process can be time-consuming, especially if you’re creating a large quote for a customer with many products and configuration options. CPQ solutions with powerful performance-quote engines make it easy for you to navigate the details and administer changes. You’ll be able to import RFPs directly into your quote and make mass modifications as needed.

Once you’ve completed the quote, your CPQ software automates its delivery in a professional, streamlined way.

Additional Tip: If you have a large catalog of products or configurations, you’ll want to make sure your CPQ solution can handle the creation and management of large quotes. Many CPQ solutions with native architectures (built for only one type of CRM) limit the number of products you can add to a quote. Invest in a hybrid CPQ solution that can handle thousands of line items without performance degradation.

More about the basics of CPQ

In this first video of the ABCs of CPQ series, we help you to understand the basics of CPQ technology. We discuss exactly what CPQ is, who uses CPQ and what the benefits are.

But Does Your Company Really Need CPQ?

• If your sales team is sluggish to a quote or price request and your cross-sell game isn’t fully up to speed, you need CPQ.
• If your product portfolio is bursting at the seams, making it difficult to connect the right items with the right customers, you need CPQ.
• If complex product configurations mean only some of the sales team can accurately create them quickly, (you guessed it) you need CPQ.
• If your otherwise awesome sales team loses profits by over-discounting products, you need CPQ.
• If a single customer is talking to multiple reps and receiving different quotes, you DEFINITELY need CPQ.
• If customer quotes are hidden on the individual laptops of sales reps, please get CPQ as fast as possible. If your quotes aren’t perfectly error-free and still sent in Excel (nothing against Microsoft!), you need CPQ.

Measuring the Impact of CPQ. What’s up with the Metrics?

Once you start making strategic changes to your sales process, begin tracking ROI based on the improvements you’ve made. To effectively measure the overall impact, you’ll need to start considering some of the key metrics to show CPQ deployment value: 

• Response times: How quickly your sales team should respond to customer requests for quotes and how quickly they actually respond.
• Churn rate: Your churn rate helps you monitor how often you lose customers. This metric is important because it can let you know if you are struggling or failing to keep accounts you’ve previously won.
• The number of quotes created by sales: As you leverage CPQ solutions, you should see the number of generated quotes increase by each salesperson.
• Quote-to-win ratio: By using machine learning technologies to help you gain a decisive advantage in sales through improved personalization, your quote-to-win ratio can increase.
• Revenue growth and revenue expansion with customers: Since your existing customers have a lot of growth opportunities to offer your organization, you need to carefully track their sales.
• Profitability impact: Look carefully at how profitable your organization is for deals you are closing. This metric will be a direct reflection of how effectively your sales team adopts price optimization recommendations.
• eCommerce revenue: Your eCommerce revenue can help you evaluate your ROI from investing in your digital experience as an organization.

The value of CPQ for sales teams is clear. Once your organization begins putting it to work, you may be amazed at how much faster your sales process is and how closely aligned your offer recommendations are with what your customers actually want. Invest in an AI-based CPQ solution to help harness the power of machine learning to increase revenue and profitability results for your organization.

Are the Business Benefits of CPQ Truly Worth it? (You Can Probably Guess the Answer)

Even in our ultra-connected digital economy, there are still sizable gaps between your sales team and their goals.

Manual processes speedbump the sales cycle and lose paying customers. The absurd complexity of configuring products for individual needs can stump your most seasoned experts. And no sales rep can read a customer’s mind.

But AI-based CPQ software can read their data, and it can equip each rep to configure, price and quote with granular customer insight and the highest levels of professionalism, all while optimizing each deal on every channel you use to go to market.

While we’ve explored some of the high-level benefits of a CPQ solution in this article, read more about the top 9 reasons to add CPQ to your sales tech stack.

The post What is CPQ? appeared first on PROS.

How Industries Use Revenue Management

Revenue management solutions can be specifically helpful in industries with varying levels of willingness to pay, ensuring a revenue management system can help ensure that sellers capitalize on an increase in demand. For example, things like plane tickets and hotel rooms are often more expensive during holidays and other high travel times of the year so the price for a seat or a room during those windows of time goes up. Conversely, having empty seats or unoccupied rooms always results in losses so, sometimes prices drop during spans of low anticipated traffic or at the last minute if a product isn’t yet sold. Many airlines and hotels have corporate agreements to fill seats and rooms at a lower price to ensure maximum occupancy.

Since many of the corporate agreements created to guarantee all products are sold also come with a lower price point, relying solely on these corporate agreements could result in a full plane, for example, still costing the airline money. Instead, airlines use revenue management systems with formulas and algorithms – which have evolved into PROS Dynamic Pricing Science – to find a price point that customers are comfortable with, therefore minimizing the need for the airline’s corporate safeguards. With more customers willing to pay full price, companies can be more proactive in their revenue management solutions and pricing strategies.

Dynamic Factors in Revenue Management

When it comes to revenue management pricing solutions, there are many dynamic factors at play. However, there are four major variables that consistently influence revenue management: price, inventory, marketing, and channels. Think of each factor as a wedge of a pie chart with constantly changing barriers. The level of influence for each factor varies constantly depending on the scenario.

Revenue Management Pricing

The most obvious factor in revenue management is the price. Identifying the amount a customer is willing to pay for a product is the first step in selling it. By following market conditions, customer demand, competitor prices and a plethora of other factors to determine the right price, investing in data-driven pricing optimization can be very profitable.

Inventory Revenue Management Systems

In terms of inventory, revenue management systems drive how to allocate and price capacity. A strategy may involve providing discounts to increase sales volume with the goal of selling all inventory. This is also what creates the idea of overbooking. Most notably used with airlines in their yield and revenue management strategies, because of the threat of cancellations, they implement a strategy of overbooking to make sure that all seats are filled.

Revenue Marketing Strategies and Opportunities

Discount and promotional opportunities also play into revenue management. Usually activated initially to increase sales volume, in environments that involve long-term subscriptions or commitments, the real strategizing around revenue management comes in determining how to roll customers off of promotions and keep them comfortable paying full price.

Sales Channels and Revenue Pricing

The last major factor to consider in revenue management pricing is the sales channel. Which sales channel is used can indicate certain details about the customer like price sensitivity or willingness to buy a service or product. Some revenue management strategies enforce different prices or promotional opportunities depending on which sales channel is used, all with the hopes of providing pricing options most likely to be attractive to the customer profiles most likely to use said channel.

Understanding how price, inventory, marketing, and sales channels work together to influence revenue management, the next big question is how to actually go about implementing it and determining if your company is equipped to engage. While many of the benefits of revenue management may seem attractive, be aware that they do require some processes and resources to keep it working.

Segmentation and Relevant Data

First off, revenue management is a data-centric idea. Without relevant data and, quite possibly, more importantly, relevant historical data, revenue management solutions won’t function as well as it could. It’s important not only to collect detailed information about the products but also about the customer. Details that can suggest insights into a customer’s behavior or purchasing habits are invaluable to a successful revenue management process, especially segmentation.

Segmentation requires a solid understanding of certain markers that indicate a customer’s likeliness to do one thing over another. Look for factors that influence willingness to buy or price sensitivity. It often requires a few years of analysis to identify what those markers are for your company but, once you know them, use them as dividers in your yield and revenue management strategy.

Revenue Management Forecasts

Having that historical data will make it easier to forecast future behaviors. Forecasting is one of the most critical components of revenue management. Using past info and trends to predict the upcoming is invaluable if done right, but also dependent on the prior parts of the process like data collection and segmentation.

Once forecasting is under control, the next step is to strategize what to do about it. Whether that means offering promotions to certain segments of people or targeting another segment of people differently, revenue management and pricing is powerful on its own but becomes transformational when that power is a trusted part of a company’s strategy.

PROS Revenue Management Technology

PROS is an industry leader in revenue management technology. Not only does PROS’ identify key factors in optimizing revenue, but they also leverage over thirty years of data science, analytics and machine learning in a robust management system that can predict market trends and forecast more accurately without additional data input. By using methods rooted in science, PROS’ revenue management solutions are able to include even more factors like brand loyalty and scheduling behaviors to create consistently profitable revenue models.

The post Revenue Management: Dynamic Factors at Play appeared first on PROS.

Increasing Sales Effectiveness Example

Here’s an illustrative exercise, based on a computer company’s experience. Imagine that you’re running a company with a product catalog that includes 17,000 SKUs. This large portfolio helps you drive sales and cover a larger portion of your addressable market, but the sheer complexity of managing each one of those SKUs takes time and resources. In this case, the cost of managing each SKU amounts to $2,500. When you multiply the SKUs by the management cost, the total cost of managing your product portfolio comes to $42.5 million.

“How do you reduce that cost to maximize value while still meeting customer requirements?”

Determine Which Products Generate the Most Revenue

By analyzing your transaction data, you discover that roughly 80 percent of your revenue is coming from the sales of 200 products. The other 16,800 SKUs in your product portfolio produce 20 percent of revenue.

In other words, you’re spending $500,000 to maintain the products that drive 80 percent of your revenue … and spending $42 million to maintain the products that drive the remaining 20 percent.

Clearly, there’s an opportunity to improve sales revenue by streamlining your product portfolio. Armed with this data, you go back to your product management, product development and supply chain organizations and show them that the complexity of your portfolio is self-inflicted — and extremely costly. Now what?

Develop a Data-Driven Solution

One solution could be to lower the total cost of SKU management by dropping most of the products that drive minimal revenue. But that approach is likely to have a negative impact on your sales effectiveness and, ultimately, your revenue. When your customers need products that are no longer in your portfolio, your sales reps can’t offer a comprehensive solution to the customer’s business problem. You risk undermining your customer experience and either losing their business or becoming a single commodity provider rather than a trusted partner.

Again, the challenge is to lower portfolio management costs while still meeting customer requirements. Here’s a better solution:

“Align your products with customer buying behavior, and use that information to manage your portfolio management.”

Here’s how to break it down:

1) Develop a core portfolio that addresses 80 percent of your customers’ needs

This allows you to focus operations on delivering the most critical products with an exceptional customer experience and consistency around the globe.

Now, when a customer purchases items in your core portfolio, they have confidence that these products are consistently available in a meaningful timeframe in any of the countries you support. This helps your sales organization focus on the most profitable opportunities and provide a customer experience that’s especially attractive to large global organizations.

2) Use streamlined sales forecasting to improve supply chain management

When you’re delivering a core offer instead of 17,000 SKUs, it allows your supply chain to focus on a comparatively small set of products. This improves the supply chain’s ability to predictably deliver your core products, because it’s easier for them to manage forecasts and aggregate their materials purchasing.

Now, you have a product that’s consistent across hundreds of countries, and your supply chain has the confidence to predict a steady demand. The results: a simpler process, lower overhead, faster turnaround times and stronger service-level agreement (SLA) performance around your core offering.

But what about all of those products that aren’t in your core offering?

3) Develop a second management model for the extended portfolio

Rather than investing enormous energy into finding, sourcing and managing 16,800 SKUs that drive only 20 percent of revenue, use a lower-cost management approach for this tier of products. Your customers are still able to buy products in this extended offering, but they should expect to pay more for these specialty items and a longer turnaround time. Instead of 10 days, these purchases might take 30 days. To further reduce overhead, these extended portfolio items should be analyzed for possible elimination or modification.

Improve Sales with a Data-Drive Approach to Streamlining your Portfolio

Following this data-driven approach to streamlining your portfolio changes your organization’s focus and allows you to reduce overhead, driving profitability. For the real company that this example is based upon, this approach helped to improve execution and increase market share alongside vast improvements in the customer experience, particularly in terms of supporting global customers.

Isn’t it time that you took a closer look at how your product portfolio aligns with what your customers are really buying?

Learn more about how streamlining the sales process can improve the customer experience, leading to an increase in satisfaction and lifetime value.

The post How Streamlining Your Portfolio Improves Sales Effectiveness appeared first on PROS.