Six Great KPIs to Measure CPQ Performance
Are you getting maximum value out of your configure, price, quote (CPQ) selling system? Defining and tracking KPIs help you see how your CPQ process is performing. KPIs provide measurable metrics, as opposed to subjective feedback from employees, customers, or even yourself. This type of feedback is important, but to properly assess ROI and performance you need to see performance numbers. You need facts.
In this post, we’ll look at six of the best KPIs for tracking CPQ performance in any industry.
- Percent of Quotes Created via the New Quoting Tool
A tool is only effective when it is used. This KPI is the number of quotes created through the official quoting solution and process (vs. being created manually or by-passing the official process) as a percent of all the quotes sent to customers.
If the CPQ tool is good, all sales people should want to use it for every quote. Ideally you would have a 100% rating here, however you may have some sales people still using a manual process. What you really want is one comprehensive experience through a single CPQ solution that gives you greater adoption, consistency and benefits. This is a core KPI, because get this process right and you should see a knock-on improvement in most of the other KPIs.
We’ve seen customers achieve a 90-100% adoption of a CPQ tool when they found the one that best suited their business.
- Elapsed Time to Respond to Customer
This is the number of business days from when a customer requests a quote to when they receive it.
How fast are you replying to your customers or potential customers? This speed keeps customers happy and is so compelling that they don’t look to your competitors for solutions. The right CPQ solution enables your sales team to quickly create, get approved, and issue accurate quotes for your customers.
Typically, we’ve seen time reduction rates of 60-85% by using the right CPQ. For one of our customers, Cable One, this KPI went from 6.5 days to 1 day.
- Revenue from Existing Customers
This is your total sales revenue per month from existing customers.
How happy are your customers? What’s their customer experience like? The better the experience, the easier to do business with you. This means less churn, more repeat sales, and stronger revenue figures. This is a great indicator of the overall health of your relationship with your customer base.
This area tends to rise by about 2-5% with the right CPQ, but we’ve seen as much as a 20% increase for some PROS customers.
- Price Realization Rate
This is the percentage of planned target increase in selling price that is actually realized. For example, if you planned a 5% increase in selling price, but only achieved 1%, this is a price realization rate of 20%.
The more accurate, targeted, and quick you are with your pricing, the better your price realization rate will be. Hitting your targets, or even better exceeding them, means you have an agile and controlled process that everyone in your organization has signed up for.
We commonly begin working with price realization rates of 20% or lower. With the right CPQ, however, these rates often climb to 35-55%.
- Elapsed Time to Market for Price Changes
This is the number of business days that it takes you to respond to and process an end-to-end price increase. This is the full cycle, starting with the trigger or input change, and ending with a final, updated price in your CPQ and an agreed contract with the customer.
You have to be able to react quickly on your pricing to protect margin and keep customers happy. The best way to do this, in fact the only way to do it and remain competitive, is through automation. You want to accelerate and automate the end-to-end workflow. If you can make your elapsed time to market for price changes decrease, by using a tool that finds and updates all price agreements effected by the change and notifies the sales rep of these changes so they can have final approval, then you’re onto a winner.
Here again, PROS customers have had dramatic results in this area with the elapsed time decreasing by 65-80%.
- Percent of Quotes Issued with Errors
This is your percentage of quotes sent to customers that have an error—it could be outdated information, wrong product, wrong pricing, typos, etc.—vs. the total number of quotes issued.
How do you reduce errors? By using a CPQ that has rules and constraints to ensure the end user selects compatible products to build complex solutions.
Often, a staggering 10-25% of quotes issued have at least one error. PROS customer, Manitou, eliminated configuration and pricing errors with the right CPQ.
And of course, there are more KPIs, but we’ve found that starting with and measuring only 5-6 CPQ metrics give you the best results from your measurement efforts. These are some of the top ones we’ve come across while developing our PROS Smart CPQ.
Want to discuss how to use KPIs to measure the sucess of your CPQ implementation? Contact us here!
About PROS
PROS Holdings, Inc. (NYSE:PRO) is a leading provider of SaaS solutions that optimize shopping and selling experiences. Built on the PROS Platform, these intelligent solutions leverage business AI, intuitive user experiences and process automation to deliver frictionless, personalized purchasing experiences designed to meet the real-time demands of today’s B2B and B2C omnichannel shoppers, regardless of industry. To learn more, visit www.pros.com.