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

The main job of product configurator software is to increase sales. A tailor-made product configurator adapts to any business environment, optimizing processes for heightened efficiency and customization–two key drivers of success. However, the crucial question that lingers in the minds of many decision-makers is: does the Return on Investment (ROI) justify the cost of implementing such a sophisticated tool? And how do you know which type of tool will drive the best results for your company? Let’s explore product configurator benefits and its ROI.

Understanding the full scope of product configurator benefits and ROI could be the turning point for your business’s growth and customer engagement.

This article explores the indirect savings and revenue opportunities, as well as the hidden costs, of adopting a product configurator. We’ll break down its ROI to help you make an informed decision. 

What is ROI? 

ROI, or Return on Investment, measures the profitability of your investment. It answers a simple yet vital question: for every euro spent, what financial return can you expect? Understanding project ROI is essential, especially when evaluating technology investments like product configurators.

The ROI Formula

The basic formula for ROI is straightforward:

roi formula

Let’s break it down:

Net Return/Profit: This is the revenue generated from the investment minus the cost of the investment.

Investment (expense): This includes all expenses related to implementing the product configurator–from acquisition or development costs to training and maintenance.

Let’s have a look at a simple ROI calculation example. If your company spends €100,000 on a product configurator and generates an additional €300,000 in revenue, the net profit is €200,000. The ROI would be 

(200,000 / 100,000) × 100 = 200%

This means that for every euro invested, your company gets two euros back.

Knowing the ROI helps you make the best choice for your company. It can help you in weighing the options between various off-the-shelf configurators and opting for one tailor-made by a software development company. Either way, understanding ROI ensures how quickly your investment pays off and if it matches your business needs.

However, the product configurator ROI is more than just crunching numbers. It involves understanding the value and impact of your investments. This comprehension is crucial for smart, strategic decision-making in your business’s technology journey.

How to calculate ROI for your project?

Calculating the ROI for a product configurator project involves a thorough understanding the of benefits as well as the costs of the investment. Box-model and custom-developed solutions have different factors to take into consideration. Here’s a guide to help you navigate through this process:

1. Identify all costs

Start with summing up all the expenses related to the new system. Depending on the type of product configurator, this includes:

Investment costCommercial solutionTailor-made solution
Service costsThe level of support depends on your planOngoing maintenance, technical support, and updates, as specified in SLA
Software costs– License cost depends on your plan (limited to users, admins, configurations, support type, etc.)  
– Extra features
– Customization & Implementation costs (usually an unknown number of work hours)
One cost full cycle development (production, configuration, roll-outs, and deployment)
Operating expensesUser and server limitation costs– Infrastructure maintenance costs
– Data administration cost
– Programming language & paid module licenses

An SLA, short for a Service-Level Agreement, in tailor-made solutions typically includes ongoing maintenance, application development, and technical support within the agreed costs. The agreement usually specifies a set number of hours for these services, tailored to your specific needs, ensuring a development roadmap aligned with your business goals.

Moreover, It’s an investment in a partnership that offers continuous development and support. One key advantage is the lack of limitations on users and servers, ensuring scalability and reliability for everyone using the system. 

2. Quantify the product configurator benefits

Measuring the financial gains from the configurator software might be tricky. 

For internal-use configurators, ROI can be more straightforward to calculate by comparing the time saved by sales staff. Let’s assume your salesperson can create three times more offers with the help of a configurator than manually. The benefit here can be estimated by evaluating the employee’s monthly salary against the time saved. 

On the other hand, with configurators designed for customer interaction, measuring exact benefits like increased sales or operational efficiency is more complex. Additionally, intangible gains such as customer satisfaction are even harder to quantify.

Apart from the direct benefits of introducing product configurator software, there are indirect ones that span various departments within your company. We’ll discuss these hidden benefits in detail further down in this article. 

3. Apply the ROI formula

Now, let’s calculate the ROI. To understand how quickly your configurator investment will start to pay off, consider the efficiency gains. Calculate the time your team saves by using the configurator and compare this to the software’s cost. This approach will give you an estimate of the time frame for seeing a return on your investment, whether it’s within 4, 6, or 12 months.

4. Long-term perspective

ROI isn’t only about immediate returns. Consider how the configurator will impact your business in the coming years. A longer perspective often justifies the initial high costs.

Direct benefits of product configuration tools for calculating ROI

When assessing the return on investment of the product customization tool, numerous direct configurator benefits come into play:

  • Quicker offer creation process: Your salespeople can create offers more efficiently. For example, where a salesperson might make only one offer calculation a day, with the configurator, they can produce three. The time to configure and generate offers is significantly reduced, leading to more opportunities created in less time.
  • Fewer mistakes: The configurator minimizes costly human errors. Mistakes in manual processes, especially in sales, can be expensive. The configurator ensures consistency and accuracy in every offer. 
  • Ready for growth: If you’re ready to make the next step and expand your sales, implementing a configurator gives you the power to do this. It makes onboarding and training of new sales team members easier, too. 
  • Full automation for B2C: In a consumer-facing setting, customers prefer handling their configurations, leading to a fully automated process. This autonomy enhances customer experience and efficiency.
  • Relieves salespeople from simple calculations: In industries where a human touch is essential, the tool often doesn’t fully automate but significantly speeds up the process. It can automate straightforward calculations, allowing sales staff to focus on more complex, knowledge-intensive aspects of customer service.
  • Helps distributors: The configurator eases the work with distributors, encouraging partnerships. The tool can be branded for each distributor’s use, enhancing sales and profits for both the producer and the distributor. The onboarding process for distributors is also simplified.
  • Saves time spent on paperwork: The configurator reduces the number of documents needed to create and process offers. This leads to significant resource savings for the company, aligning with a zero-waste approach.

A study found that using product configuration tools led to several improvements. These include higher sales, more accurate orders, and less need to redo work. They also sped up the time it takes to process orders and deliver sales. Notably, about 47% of users saw their sales volume go up by 30-50%, and 50% reported cutting their order processing time by more than half.

Indirect product configurator software benefits for your business

Product configurators bring hidden profits that are often hard to quantify but crucial for long-term business success. Here’s a closer look at these benefits:

  • Back-office optimization: If integrated with systems like ERP and CRM, the configurator eliminates the need to enter data multiple times in different places. This data transfer automation saves time and reduces errors.
  • Marketing advantages: If you place your configurator online, it’s an evergreen tool for generating leads. The configurator also provides deep insights into customer preferences and enables more cross-sell and upsell opportunities.
  • Workflow structure: A configurator introduces a well-defined structure in your workflow. It ensures consistency and accuracy, reducing mistakes in the sales and production processes.
  • Consistent quality of offers: Every offer generated through the configurator is consistent and of high quality, originating from the same template. Plus, even if a human error occurs, the system provides checks and highlights any discrepancies or errors for correction.
  • Dynamic 3D visualizations: A 3D product configurator can create 3D models of products on the fly. This makes it easier for customers to see and understand the products, improving their shopping experience.
  • Responsive applications: The configurator’s responsive design allows customers and your specialists to make configurations anytime, anywhere, on any device. The software doesn’t limit users to office hours or equipment type.
  • Easy updates for scalability: When developed with scalability in mind, updating the configurator is straightforward. This saves time and reduces development costs when changes are needed–whether due to product updates, industry trends, or new regulations.

You need to consider these hidden profits to grasp the full scope of a product configurator’s value beyond immediate ROI calculations. This ensures a more informed decision when choosing the right solution for your business.

Explore the comparison between the offer creation process with and without a product configurator:

product configurator benefits analysis

How much does a product configurator cost?

The cost of software development, like a product configurator, depends on many factors. Generally, it can vary significantly depending on whether you opt for a simple 2D configurator or an advanced AR (Augmented Reality) configurator for a more immersive experience.

A basic type of configurator, typically used in eCommerce, may cost less but offer limited customization options. More advanced systems, like those incorporating 3D visualization and AR, provide a more engaging user experience but come at a higher price. 

If the configurator needs to integrate with existing eCommerce platforms or CPQ (Configure, Price, Quote) systems, this could also influence the overall cost. Seamless integration that ensures a smooth workflow between the configurator and these systems is essential but may require additional investment in development.

A fully customizable configurator, tailored to your specific product range and customer needs, typically costs more than off-the-shelf solutions. However, the investment can be justified by the potential increase in sales and customer satisfaction.

In summary, the cost of a product configurator can range from a few thousand euros for basic solutions to much higher amounts for advanced, fully customized systems with AR capabilities and complex integrations. 

7 Hidden costs of product configurators

Introducing new solutions often comes with unobvious costs. It’s important to consider these when you calculate your investment cost to ensure your decision is based on a comprehensive understanding of both the obvious and less visible costs: 

  • Software licensing: Often, the licensing of ready-made tools is based on the number of users, or configurations per month. This can add up, especially as your team grows. 
  • Ensuring technological match: A ready-made configurator might require additional investments if its technology doesn’t align with your existing systems. This mismatch can lead to extra costs for integration or additional software to ensure compatibility. 
  • Infrastructure expenses: For cloud-hosted configurators, hosting fees are a common expense. These costs can vary depending on the scale of use and the cloud services chosen.
  • Cost of customization and implementation: While off-the-shelf configurators might seem cost-effective at first, customizing them can be tricky. It’s often hard to estimate the number of working hours a specialist will need for customization and implementation. These can significantly add to the investment costs.
  • Maintenance and upgrades: When changes are needed, whether due to complex product updates or industry shifts, modifying a standard configurator can incur high costs. Some changes might even be impossible or disproportionately costly to implement. In comparison, tailor-made solutions, where updates and modifications are included in your SLA, may offer more predictable budgeting.
  • Additional software licenses: If the configurator uses paid modules or specific programming languages (like Java), relatively small license fees for these components should be added to the overall cost.
  • Training and adoption: The introduction of a configurator may require extensive training for staff. Additionally, there’s a period of adoption where productivity might temporarily decrease as employees adjust to the new system.

Understanding these hidden costs helps in making a more informed decision about investing in a product configurator. While purchasing a box solution plan may seem like a smaller initial investment, tailor-developed software can bring bigger ROI in the long term.

Convincing the decision-makers

70% of companies outsource software development projects to save money. When it comes to investing in a product configurator, convincing the decision-makers is a crucial step. Here are 5 key points to effectively present the case of investing in a product configurator:

✔️ Highlight tangible benefits: Showcase how the configurator boosts your company’s performance by automating sales processes, saving time, and reducing human error. For your customers, focus on the enhanced buying experience and satisfaction they’ll enjoy from personalized and faster service.

✔️ Demonstrate ROI: Calculate ROI and present a clear picture of the financial returns. Include both short-term gains and long-term benefits to illustrate the full value of the investment.

✔️ Address hidden costs and profits: Be transparent about the hidden costs, but also highlight the indirect benefits like additional revenue opportunities, marketing advantages, integrations, and scalability. This comprehensive approach shows thorough planning and understanding of the investment.

✔️ Share success stories: Provide examples of other businesses, preferably within the same industry, that have successfully implemented product configurators. Success stories can serve as powerful testimonials to the configurator’s potential.

✔️ Discuss risk mitigation: Acknowledge potential risks and share strategies for mitigating them. This could include phased implementation, ongoing support plans, or customization options.

Investing in a product configurator is a major decision that can hugely benefit your business. When presenting this investment to decision-makers, focus on how it aligns with and supports your overall company goals. Your pitch should clearly demonstrate the configurator’s alignment with long-term business objectives to help in making a compelling case for this investment.

Conclusion

A thoughtfully implemented product configurator software quickly proves its worth, swiftly paying for itself. This investment drives fantastic returns and positions your business as high in the market.

Boxed configurators may seem like a cost-effective solution but can come with significant hidden costs. They might not align perfectly with your specific needs, leading to further customization expenses or compromises in functionality. 

The value of a custom-made product configurator often generates a higher ROI. The cost is more transparent, and you get a scalable solution that looks great, functions efficiently, and grows with your business. 

Additionally, the value of a product configurator extends beyond mere numbers. It represents a commitment to innovation, customer satisfaction, and operational excellence. 

And, let’s face it–going digital is the only right way to go. 

So, is a product configurator worth the investment? If you’re aiming for growth, efficiency, and a competitive edge, the answer is a resounding yes.

Recommended reading: How to Choose the Right Product Configurator Software?