Emilia Dunaj
Emilia Dunaj
Head of Technology Insights
May 2024, 10 min. read

Many companies choose to implement a Configure, Price, Quote (CPQ) system in phases—starting with a product configurator, then adding the pricing engine, and finally, quoting capabilities. These tools evolve to match the complexity of a company’s pricing processes. 

Whether integrated as a single solution or as three interconnected modules, CPQ systems streamline crucial aspects of the sales cycle.

This article will explore the powerful impact of CPQ technology on business operations. You’ll get insights into how each component of a CPQ system works. You’ll also learn this system dramatically shortens lead times, delivers accurate offers within minutes, and helps win customers.  

Implementing CPQ step-by-step

Implementing a CPQ system often happens in phases, matching the complexity and specific needs of a company’s sales operations. Each phase enhances different aspects of the sales process.

Here’s an insight into each stage.

Step 1 | The heart of CPQ: Configuration

At the core of any CPQ system is the product configurator, undeniably the most essential component that sets the foundation for the entire quoting and pricing architecture. The configurator empowers your customers and sales teams to build a product or system that precisely meets specific requirements. From the outset, it ensures that every detail is accounted for.

The configurator serves as the initial touchpoint in the CPQ process. It should provide a user-friendly interface where complex products can be assembled virtually, piece by piece, according to customer specifications. 

This is where the users adjust dimensions, choose materials, or add optional features and the configurator makes this possible in a few clicks. Moreover, advanced product configurators enhance this interactive experience by visualizing the product in 3D and performing dynamic performance calculations.

Automating product configuration significantly reduces the chance of errors when manually configuring complex products. CPQ systems ensure that the product specifications are accurate, compatible, and ready for production. This automation speeds up the process and cuts down on the time sales teams spend on drafting proposals and rectifying mistakes.

Step 2 | Advancing to the real-time pricing engine

Once a product configuration is completed, the next step in the CPQ process is managing pricing. In modern solutions, the transition from configuration to pricing is seamless. The detailed specifications generated by the configurator feed directly into the pricing software. 

Pricing within a CPQ system incorporates dynamic pricing, which adjusts based on a range of factors. These include material costs, labor, manufacturing complexity, stock levels, and market conditions. This integration ensures that the final price is fair and strategically aligned with the business goals and market standards. 

For example, if the cost of raw materials increases, the pricing tool can automatically adjust the product prices to maintain profitability without manual intervention.

A sophisticated real-time pricing engine accommodates variations in market demands and currency fluctuations, which are especially crucial for businesses operating in multiple geographic locations. 

For non-standard, highly customized products, the pricing solution often employs a specialized price list that takes into account the uniqueness of each configuration. 

📢 Read also: Types of CPQ Price Rules To Make Your Configure-Price-Quote Software Effective

Step 3 | Effective quoting mechanisms

After setting prices, the CPQ system transitions into the quoting phase. This module uses detailed pricing data to generate a concise, transparent quote. It outlines terms and conditions and provides a breakdown of costs. This provides customers with a clear understanding of what they are paying for and the value of different features or configurations.

The quoting mechanism is adaptive, offering customization based on customer history and preferences. For example, for a regular customer who often buys in bulk, the system can automatically apply suitable discounts or special terms. This level of personalization enhances customer satisfaction and loyalty by recognizing and valuing their business.

Furthermore, the system enables efficient management of quotes. Sales teams can easily track, modify, and archive quotes to ensure they adapt to any changes in customer demands or market conditions. So, if the customer requires changes, the quoting system can quickly adjust the configurations, update the pricing, and regenerate the quote without starting from scratch. 

It also manages special pricing or discounts to maintain alignment with the company’s pricing strategy. This might include premium charges for special features or discounts for bulk orders, all of which are calculated to reflect the added or reduced value in a transparent and understandable way.

Additionally, the quoting module generates all necessary sales and production documentation directly in the quote. This includes compliance certificates, warranties, Bills-of-Materials (BOMs). In industries requiring strict regulatory compliance, adding this kind of a layer of trust and professionalism to each proposal is essential.

Key benefits of using advanced pricing model systems

A Configure, Price, Quote system focuses on refining three vital aspects of business operations: product price optimization, reducing sales cycle length, and improving product quality. Configurators successfully automate processes, significantly reducing the lead time from weeks to mere hours. These enhancements help your business become more efficient, boost customer satisfaction, and sharpen your competitive edge.

CPQ technology allows for real-time pricing adjustments in response to changes in market conditions or material costs, ensuring prices always align with both financial goals and market dynamics. For example, if the cost of a component rises due to supply chain issues, the CPQ system quickly recalculates the product price to maintain profitability while keeping pricing transparent for the customer.

Moreover, CPQ systems streamline the transition from customer inquiry to quote delivery by automating configurations and pricing. This reduces the need for constant back-and-forth communication and manual adjustments, significantly speeding up the sales process. It also allows sales teams to manage a larger volume of inquiries more efficiently.

Lastly, CPQ ensures that the solutions provided perfectly match customer needs. The system uses detailed rules to help users choose the best features and specifications, ensuring that customers always receive the most effective and cost-efficient solutions available.

📢 Read also: CPQ Benefits for Various Industries

How does CPQ integration support multi-channel sales?

A key benefit of a well-integrated CPQ system is its ability to ensure consistency in pricing and product configurations across multiple sales channels. Customers can place orders through a salesperson, an e-commerce platform, or a distributor, and the CPQ system guarantees that they receive the same information and pricing. Achieving this consistency is crucial for maintaining brand integrity and building customer trust.

what systems should be integrated with CPQ software

CPQ systems excel at price management for complex strategies that consider various factors like volume discounts, promotional offers, and regional pricing variances. Integrating data from other internal digital systems allows CPQ to apply these rules consistently and transparently across all sales channels. 

Now, let’s go through key business solutions that CPQ integrates with and explain why. 

1. Integration with ERP systems

Integrating a CPQ system with Enterprise Resource Planning (ERP) systems can significantly improve its performance. This integration provides CPQ systems with real-time access to essential financial and operational data, crucial for setting accurate prices and managing inventory efficiently. It allows the CPQ’s pricing engine to dynamically adjust prices in response to changes in material costs, labor, and customized discount policies.

2. Integration with CRM systems

Connecting CPQ with Customer Relationship Management (CRM) systems improves the system’s ability to tailor configurations, pricing, and quoting by using historical customer data and past interactions. This feature improves the customer experience by offering personalized solutions. It also helps sales teams use their existing relationships and insights to enhance the sales process. 

For instance, the system can automatically apply discounts for loyal customers, rewarding them for their continued business and potentially increasing customer retention.

3. Integration with PIM systems

Integrating CPQ systems with Product Information Management (PIM) systems ensures that all product information is accurate and consistent across every sales channel. A PIM system stores all product details in one place, simplifying management and distribution. This setup helps keep product descriptions uniform across different platforms, including CPQ systems. 

It also means that any updates to product information are automatically and immediately updated in the CPQ, ensuring that quotes and configurations are always based on the latest data. This seamless integration improves the reliability of the information provided to customers.

4. Integration with e-commerce platforms

Many businesses improve their online shopping experience by integrating CPQ systems with e-commerce platforms. This integration synchronizes product configurations and pricing, allowing customers to configure and price products directly on the website. Any changes they make are instantly updated in the CPQ system, ensuring accuracy and consistency. As a result, customers enjoy a seamless shopping experience, and businesses see fewer discrepancies and greater efficiency in processing orders.

📢 Read also: Embedded CPQ Implementation in eCommerce

5. Integration with accounting software

Integrating CPQ systems with accounting software enhances financial accuracy and streamlines billing processes. This connection ensures that once a quote is approved, the details are automatically transferred to the accounting system. The link allows for immediate invoicing with the correct prices and terms. It also helps maintain consistency in financial records, as all transactions recorded in the CPQ are directly mirrored in the accounting software. 

Cloud-based vs. on-premises CPQ

The choice between cloud-based and on-premises pricing management software can impact how effectively these systems integrate with other business software. CPQ solutions that use cloud services offer scalability, ease of integration, and real-time updates, which are essential for businesses that need flexibility and up-to-date data access. Apparently, 94% of all companies worldwide claim to use some kind of cloud computing service that helps them run their operations. 

On-premises solutions, while sometimes offering more control over security and customization, can be limited by longer update cycles and more challenging integration with other cloud business systems. 

Each type has its strengths, and the choice will depend on a company’s specific needs, including security, control, and scalability requirements.

The future of pricing technologies

As businesses continue to seek efficiencies in their sales processes and strive to meet increasingly sophisticated customer demands, modern digital technology is rapidly evolving. 

Future CPQ systems will focus more on improving the user experience (UX), making them even more intuitive and interactive. They will feature more refined user interface (UI) elements that simplify the configuration of complex products. This ensures that both customers and sales reps can easily use the CPQ software.

For instance, visual configuration tools, such as 3D modeling and augmented reality (AR), are becoming more common, allowing users to see their customizations in real time and in a more realistic format, which reduces errors and enhances satisfaction.

Artificial intelligence (AI) is set to play a major role in the evolution of CPQ systems. AI-powered software can achieve more optimal pricing, improve recommendation engines, and streamline the configuration process. AI bots can analyze historical data to identify pricing trends and suggest optimal discount levels. It also manages cross-sell and upsell opportunities and automates routine tasks, freeing up sales personnel to focus on more strategic activities.

Leveraging big data and predictive analytics, CPQ systems will increasingly help businesses forecast future trends and customer behaviors. This can inform product development, pricing strategies, and inventory management. Predictive analytics can also help to anticipate customer needs and preferences, allowing your company to tailor your offerings more strategically.

Conclusion: The time to adopt CPQ is now

Implementing a Configure Price Quote system can revolutionize your business operations by making them more agile and precise. This technology streamlines the configuration and quoting processes and incorporates a sophisticated pricing engine that directly addresses the complexities of modern sales environments.

Businesses that deploy CPQ tools benefit from faster response times to customer inquiries, more accurate pricing, and efficient sales cycles. These improvements directly impact the bottom line and elevate customer satisfaction by delivering tailor-made solutions swiftly and effectively.

At Right Information, we specialize in crafting custom-made CPQ solutions that simplify configuring, pricing, and quoting of complex product ranges. Our strength lies in developing systems that create non-standard pricing behaviors, ensuring that price lists are customizable yet straightforward and logical. 

We support our clients in defining complex pricing rules and wrapping them in software that maintains flexibility and scalability. We’ve helped many top companies from various sectors to quickly adjust to new market trends and meet changing customer needs, making them more competitive in the B2B space. 

Explore our successful case studies to see how this tailored approach has propelled other businesses to success.