Emilia Dunaj
Emilia Dunaj
Head of Technology Insights
May 2024, 12 min. read

Selling configurable products is incredibly challenging. Efficiently managing complex product options, price lists, and sales processes can greatly impact the production line. CPQ for manufacturing simplifies the complex. This technology automates the configuration, pricing, and quoting processes, ensuring manufacturers can quickly and accurately respond to customer needs. 

Keep reading to learn how CPQ software can help you optimize your production operations and boost manufacturing efficiency, leaving your competitors behind. 

What is CPQ for manufacturing?

CPQ means Configure, Price, Quote software. It’s a system designed to help manufacturers accurately define the price of goods across a vast and constantly changing spectrum of variables and send accurate quotes quickly. In cases where products have numerous customizable features or are made to order, CPQ helps manage complexities efficiently.

Core components of CPQ systems:

  • ⚙️ Configuration: The product configurator module allows manufacturers to define and manage the numerous possible configurations of their products. For example, a car manufacturer can use CPQ software to easily handle options across different car models, such as engine types, exterior colors, and additional features like GPS systems or safety packages.
  • 🧮 Pricing: The pricing component of CPQ automatically calculates the cost of each configuration in real-time. This means that if a customer chooses a specific set of features, the system immediately applies the right pricing rules to reflect the correct price adjustments. 
  • 📑 Quoting: Once the product configuration and pricing are determined, CPQ software generates a detailed and accurate quote for the customer. At this stage, it considers any discounts, promotions, or custom pricing agreements. This quote can then be automatically converted into a sales order, reducing the manual work typically required.

In manufacturing, where product options and versions proliferate, CPQ software ensures that all possible combinations are presented, priced, and quoted correctly.

As we’re explaining in our Excel vs CPQ Quoting Software. How To Close Deals Faster if You Sell Complex Products? article, using a configurator cuts down the time needed to make a quote by approximately a colossal 85%.

How CPQ helps manufacturers increase margins and efficiency

The integration of CPQ software into manufacturing processes significantly boosts margins and overall business efficiency. This is achieved through several key improvements. To illustrate, let’s take a closer look at an example of a manufacturer of industrial equipment that produces a wide range of custom machinery. 

Before implementing manufacturing CPQ software, their sales team often encountered challenges with manual quoting. The complex configurations made it easy to misquote, leading to costly revisions and delays in the sales cycle. With CPQ, they now automate the quoting process, reducing errors and speeding up sales by delivering accurate quotes the first time.

The same manufacturer previously struggled with pricing strategies, often missing opportunities to adjust pricing based on volume or customer value. Using CPQ, they can now implement dynamic pricing strategies. For instance, they offer discounts to repeat customers and adjust prices in response to changes in raw material costs. This strategy allows them to maintain healthy margins while staying competitive.

Administrative overhead was another challenge. CPQ’s automation minimized paperwork, giving sales teams more time to engage customers. This led to more closed deals and a noticeable increase in productivity and sales volume.

CPQ supports digital and hybrid sales teams, which are among the fastest-growing in the industry. A McKinsey study showed digital channels allow sales reps to reach four times as many accounts in the same amount of time, while hybrid sales can drive up to 50% more revenue​.

10 Benefits of implementing CPQ for manufacturing

Using a CPQ solution in the manufacturing environment brings multiple benefits. Let’s explore some of the key advantages in more detail.

how manufacturers can benefit from cpq system

1. CPQ can work with any variance

Custom-developed CPQ software enables manufacturers to manage extensive product configurations with precision. When building custom software, the developers work closely with the sales engineers to ensure that all critical industry and business knowledge is captured within the program. No matter how complicated your product or process is, a tailor-developed CPQ can accommodate it. This solution allows you to work with any level of complexity without compromising accuracy or efficiency.

2. Your manufacturing company becomes truly customer-centric

Modern CPQ systems help manufacturing companies focus on what customers want and deliver it efficiently. Moreover, the system enables personalized interactions and quick responses to customer needs, even on-the-go. This means that your engineering team can operate directly from customer sites, providing immediate responses to configuration requests and adjustments. The software helps build stronger customer relationships and fosters brand loyalty. 

3. CPQ sets new standard workflows

Through CPQ solutions, manufacturers can ensure that sales processes are uniform and efficient, regardless of product complexity or the involvement of multiple departments. This standardization helps prevent errors and delays, making the overall sales cycle smoother and more predictable. Your CPQ will introduce a step-by-step configuration process, ensuring that nothing is missed and no conflicting choices are made, providing a clear path from inquiry to completed order.

4. Software rules ensure transparent pricing

With CPQ software, manufacturers and distributors can automate and clearly articulate pricing and discount structures. This transparency helps prevent discrepancies and builds trust with B2B customers, as they understand exactly what they are being charged for and why.

5. Users can configure complex products visually 

Product builders with 2D and 3D visualization capabilities allow customers to see accurate representations of their configured products before making a purchase decision. These features improve customer experience and reduce the likelihood of misunderstandings and returns caused by unmet expectations.

6. Your sales team can close deals faster

CPQ systems streamline the sales cycle, significantly speeding up the time it takes to close deals. Since the software automatically populates quotes with accurate pricing and product configurations, the risk of errors is reduced. This accuracy speeds up the approval process since customized quotes no longer require multiple rounds of revisions. Additionally, CPQs can send quotes for approval to the relevant stakeholders with just one click, eliminating delays caused by manual approval processes. 

7. Manufacturing CPQ streamlines engineer-to-order processes

For custom orders, CPQ provides dynamic performance calculations. These calculations ensure that components and systems fit their intended purposes. Plus, users can see how small changes in configuration affect performance. Additionally, the software automates critical aspects of the engineering process, such as generating detailed CAD drawings and specs, reducing the time from design to production. 

8. Guided selling feature lowers training costs

Guided selling features in the CPQ tool help train new sales reps faster by offering them interactive configuration scenarios that mimic real-life situations. This educational function shortens the learning curve but also ensures consistency in the sales process across the team.

📢Read more: Configure Price Quote with Confidence Using CPQ Guided Selling

9. You gain insights through analytics

Manufacturers can use the detailed analytics provided by CPQs to gain insights into customer behavior and preferences, helping to tailor marketing and production strategies more effectively. Consequently, such a data-driven approach allows for better alignment with market demands and operational optimization.

10. CPQ automates documentation generation

CPQ software automatically generates all necessary sales and production documents, like Bills of Materials (BOM) and sales orders, ensuring consistency across all transactions. This automation reduces the administrative burden and ensures compliance with industry standards and customer requirements. It also facilitates smoother coordination with your supply chain, as accurate documentation helps keep production and logistics in sync. As a result, your staff gains more time for higher-value tasks. 

KPIs impacted by the CPQ manufacturing software

Manufacturers use KPIs (Key Performance Indicators) to track performance, identify areas for improvement, and ensure that production goals are being met. CPQ has a major impact on some of these metrics. 

Here are some of the key KPIs that are positively influenced by CPQ implementation:

Increase in quote accuracy

With the right CPQ solution, manufacturers can achieve near-perfect accuracy in their quotes, minimizing costly errors that can occur when configuring complex products manually. This precision directly impacts the company’s bottom line by reducing the need for rework and ensuring that pricing reflects the true cost and value of customized products.

Reduction in quote-to-cash time

CPQ software streamlines the sales process by automating tasks and improving efficiency, leading to a faster quote-to-cash cycle. The system automates product customization, pricing calculations, and document generation, dramatically reducing the time it takes to create accurate quotes. Additionally, streamlined workflows and guided selling ensure sales reps capture all necessary information upfront. This eliminates delays caused by missing details or back-and-forth communication.

Improvement in sales cycle efficiency

CPQ tools help manufacturers shorten their sales cycles by enabling sales teams to generate proposals and close deals more quickly. As a result, Your team becomes more productive at handling a higher volume of transactions without additional resources, effectively increasing their market reach.

More satisfied customers

CPQ contributes to your customer satisfaction. With features like 3D visualizations, customers can see their product configurations, reducing misunderstandings and creating a more engaging product experience. Also, self-service elements and interactive calculations let customers adjust features and see real-time pricing changes, giving them more control over their orders. 

In the end, satisfied customers are more likely to become repeat buyers and recommend your company to others.  

Growth in sales revenue

Implementing CPQ software for manufacturing often leads to an increase in sales revenue. This growth comes from the ability to upsell and cross-sell more effectively during the configuration process. Your enhanced service offerings can attract more customers as well. In fact, with automated, one-click upselling, the average order size can increase by over 360% which makes it an incredibly worthy feature. 

Reduction in operational costs

CPQ for manufacturers automates many aspects of the sales and production processes, significantly reducing labor costs and operational overhead. This cost efficiency is particularly noticeable in the reduction of errors and the amount of time sales staff spend on each transaction. With the right software tool, they can focus on more value-added activities.

What to look for in CPQ solutions for manufacturing

When selecting a CPQ solution, you need to consider whether an off-the-shelf product or a tailor-made system better suits your specific needs. Off-the-shelf CPQ software typically offers a fixed set of features and lower initial cost. These commercial tools can be an attractive option for businesses with standard product lines and simpler configuration needs. 

However, these apps might lack the flexibility to handle highly specialized products or complex pricing models that are common in many manufacturing sectors.

If you have unique requirements or are looking to integrate deeply with your existing IT infrastructure, a building custom CPQ solution may be a better choice. Tailor-made systems are designed to fit the specific processes and needs of the business, providing greater control over configuration, pricing, and quoting functionalities. Additionally, you have full control over your data, allowing you to manage it autonomously as needed without relying on external support.

In addition, custom CPQ solutions often come with comprehensive setup and support from the software development company. This means that experts handle the installation, integration, and initial training, typically included in the software’s cost. 

Although it requires a bigger upfront investment, the long-term benefits make it worthwhile. Therefore, choosing the right CPQ solution depends heavily on your current and future needs, industry-specific challenges, and the complexity of your products.

📢Further reading: Bespoke vs. Off-the-Shelf CPQ? Comparing Quoting Software for Manufacturing

4 Example types of manufacturing industries that require CPQ software

Most industries benefit from introducing CPQ software. In industries with complex or highly customized products, advanced CPQ plays a critical role in managing configurations, pricing, and quoting with precision. 

Let’s explore a few examples of industries where CPQ has a significant impact.

1. Automotive Manufacturing

When selling cars, Configure Price Quote software is essential for managing the complex configurations required by customers. From engine types and wheel sizes to interior finishes and exterior colors, CPQ allows car brands to offer a wide range of customization options while ensuring accuracy in pricing and specifications. 

For dealers, CPQ software speeds up the quoting process, helping to provide quick and accurate responses to customer inquiries. This efficiency can lead to more closed deals and increased sales volume. Additionally, CPQ helps dealers manage inventory more effectively by aligning it with customer demand based on popular configurations.

CPQ eliminates production errors by ensuring accurate specifications. It also allows manufacturers to gather data on customer preferences and use those insights in product development and marketing strategies. 

📢 See our car configurator case study: Advanced Car Configurator by Right Information  

2. HVAC Manufacturing

In the HVAC industry, Configure, Price, Quote software is invaluable for managing a wide variety of product configurations. Manufacturers of heating, ventilation, and air conditioning systems often deal with complex customization options, such as varying ductwork layouts, energy-efficient components, and climate control features. CPQ streamlines this complexity by automating the configuration process, reducing errors, and ensuring accurate pricing.

CPQ also helps HVAC manufacturers quickly respond to customer requests, enabling sales teams to generate accurate quotes based on specific building requirements. This agility leads to faster sales cycles and higher customer satisfaction, as clients can see real-time adjustments to their configurations. 

📢 Read our case study: Custom Platform with CPQ and PDM Capabilities

3. Industrial components and machinery manufacturing

Thanks to CPQ, manufacturers of industrial components and machinery can offer more complex products and services that are often tailored to the specific needs of different industries. CPQ simplifies the quote-to-production process, especially when dealing with products that require detailed specifications, such as weight, power requirements, and environmental conditions.

Read our case study showing how our Custom-Built Product Selection Tool also helped to improve the manufacturing sales process.

4. Medical devices manufacturing

The medical device industry requires stringent adherence to regulatory standards and often involves complex configurations for products like imaging machines and diagnostic devices. CPQ software ensures that all configurations comply with industry regulations while allowing for the necessary customization demanded by healthcare providers.

Final thoughts – How Right Information helps manufacturers

A Configure, Price, & Quote solution can solve many problems, especially for manufacturers that deal with complex and customizable products. Thanks to automating the critical aspects of the configuring, pricing and quoting processes, this technology can simplify your sales cycle. It also improves accuracy and efficiency across the board. 

If you’re in the manufacturing business, you know how modern digital solutions can revolutionize the way your company works. If you decide to adopt a CPQ solution, you can expect significant improvements in operational performance, customer satisfaction, and profitability. 

Right Information knows how to make complex manufacturing simpler, helping you to meet the evolving needs of your business and customers. Therefore, If you’re looking to implement bespoke digital systems like a product selector, CPQ, or ERP, reach out to our tech experts today to discuss your needs.