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Expert Guide to Configure Price Quote When it comes to complex quoting processes based on large catalogs, complex price lists, configurable products, or rule-based discounts, Customer Relationship Management Management (CRM) isn’t always the right tool for the job. Configure Price Quote (CPQ) helps you bridge the gap between your front and back-end systems, elevate the accuracy of your quotes, and keep approving, bundling and discounting up-to-date.
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CPQ Overview “With CPQ, your reps and If you’re familiar with customer relationship management (CRM) tools, such as salesforce.com, you know that CRM effectively tracks the activities that move a lead to an opportunity to a cl osed deal. It’s also great for managing the customer relationship once the deal is
partners are more efficient, more
and
have
the tools they need to move the
closed.
effective,
deal
along,
get
the
quote approved, and get to However, when it comes to complex quoting processe s, CRM often
a signed contract.”
comes up short. Many companies that have invested a lot of time and money bringing a sales team onto a CRM platform find quoting still needs to be done outside the CRM, especially if tools like Excel and Word are used to get parts of the process done. And when quoting i s done manually, without the safeguards CRM provides, errors, unnecessary risk, lost deals, and angry customers are right around the corner. For organizations facing these challenges, configure price quote (CPQ) can be a lifesaver. CPQ picks up where CRM leaves off by making all of the complex product, pricing, and business rules centralized, automatic and available in real-time, so sales has everything they need at their fingertips when trying to configure and quote a deal. CPQ puts guardrails in place that ensure your sales teams only sell to the latest approved pricing and discounting rules, and that approvals—when necessary—can move quickly along without holding up your deals.
LEAD
ACCOUNT MANAGEMENT
OPPORTUNITY
CONFIGURE
PRICE
QUOTE
CPQ Drives the Modern Multi-Channel Strategy CPQ isn’t just for making your internal reps effective and efficient, it also is an essential part of a successful global, multi-channel selling strategy. CPQ provides real-time, up-to-date product catalog visibility to every approved user, whether inside or partnering with your company, so all your channels are on the same page. CPQ grants you full control over which partners, groups, or channels can access certain pricing or product information, with role-based access, di scount locks, and portals, so you can manage revenue share, exclusive discounts, or pricing and shipping fees. It also allows you to manage different strategies for different channels or different geographies by giving you full visibility into sales trends and channel effectiveness, so executives
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can course-correct when needed. Finally, CPQ enables channel consistency so customers can find the same product everywhere you offer it, and for a pri ce you control, so you get maximum value out of al l of your channels.
How Configure Price Quote Defines the Sales Cycle CPQ is an integrated business process that starts with guided selling, and ends with quote creation and approval workflows. CPQ presents enormous opportuniti es for added efficiency, at every step of the sal es process.
Connecting Goods to Customers with Sales Configuration Configuration, the foundation of CPQ, is the engi ne that ensures your business rules are accurately and automatically represented in your quotes and contracts, and that your reps are selling the best mix of products at the best price. Configuration Makes Your Reps More Efficient
How Do Your Reps Spend Their Time? 1. Wading through outdated product catalogs
Leading analysts estimate that the average sal es rep only spends 10% of their time selling. Imagine what would happen if everyone in your company was only doing their job 10% of the time. That’s an exorbitant
2. Waiting for approvals
amount of wasted time! You probably would n’t be in business for long. While there will always be some things that take Sales away from managing deals, CPQ is the best weapon against unnecessary
3. Scheduling customer calls and appointments
administrative steps in the sales process that eat your reps’ time. CPQ can eliminate a manual quoting process, make things like product training and onboarding more efficient, and put more hours back into the day.
4. Learning sales scripts
When Sales isn’t bogged down by junk, they can get back to what they do best—being in front of the customer —which makes them more effective, and shortens the sales cycle too.
5. Complex Excel spreadsheets
6. Fixing mistakes
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Configuration Reduces Rep Mistakes For those who aren’t in sales, you may not appreciate how difficult it is to memorize a dense catalog and sell a complex set of products and features, especially when your products include things like:
Multiple Delivery Options
Warranties And Manuals
Service Packages
Compliance Issues
Third-Party Components
Status-Specific Pricing
Discounting Offers
Product Dependencies
And across a range of industries, like manufacturing, life sciences, communications, technology, and many others, there are even more factors that can add to the complexity. Trying to manage your product rules i n an excel spreadsheet can, and usually does, drive Sales, Sales Operations, Product Management and
The Cost of Inaccurate
even Engineering crazy. As you can imagine, when reps are trying to
Quotes:
manage a million SKUs, and hundreds of different product lines that all change seasonally, there are some real pain points around configuration.
Sales quotes products that can’t be built
When you're managing your product, pricing, bundling, and channel rules with real configuration, you don’t have to worry about the
invoices, and orders
complexity of your business, or how often it changes, because it’s very easy to make sure your business rules are automatically reflected in
Slower sales cycles
Bundles are
compliance for your sales team, not only do you reduce errors, but you
quoted/shipped with
reduce the time spent in approvals because your team’s quotes will be
missing elements
close to perfect when they're submitted. If you add a business rule into
the system, your reps will have to follow i t if they want to get their
Added costs from refunds/returns
every proposal or quote. By making your business rules automatic, and enabling 100%
Errors in contracts,
It takes too long to monetize new products
quote approved. So with CPQ, it’s even easier to encourage Sales to do what gets them paid. Automated configuration will allow you to manage advanced pricing strategies and maintain uniformed pricing rules across all deals and product channels.
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Capturing Maximum Value with Intelligent Pricing In terms of product configuration, one of the most complicated aspects that you need to define in your business rules is pricing.
Pricing is the MOST immediate way you can impact revenue and margins. If you are selling without a pricing strategy, you are undoubtedly leaving money on the table. In the CPQ world, pricing refers to the set of rules that tells sales how they can price a deal, offer creative incentives, and what approvals should kick in when they go outside the preferred price parameters. The perfect price for a product is influenced by market demand, competitive pressures, your business strategy, your position in the sales cycle, and your necessary margins. But pricing is also influenced by a whole set of variables that are constantly in-flux, so even if you come up wi th the perfect price today, if you don’t have the flexibility to make frequent— but controlled—changes to your pricing if needed, your pricing strategy will fall short. Typically, if you see a drop in margins, it is usually tied to pricing. Whether it’s rogue discounting, or inconsistent pricing across channels, little mistakes can amount to big costs. Pricing as a Strategic Advantage When pricing is a strategic initiative, and you’re looking at things like market conditions, prospect and buyer demographics, close rates, geography-based factors, and pricing history, you can get some incredible insights that enable you to offer smarter discounts and price points based on what works, and avoid making mistakes that cut into your margins. The first rule is, one-size-fits-all pricing rarely works, especially if your business is spread across geographies, or leverages a variety of channels. At its core, pricing strategy is about making informed, data-driven decisions to effectively manage behavior, whether it’ s the market, the customers, or your own sales reps. For example, if you notice that smaller customers spend more when they perceive a lower per-unit cost, while enterprise organizations spend more on hardware if the services are discounted, you might decide to target smaller customers with volume pricing and offer discounted services to the enterprise.
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Maybe you have excellent renewal rates, so you offer a subscription with a c heaper first year fee. In both those scenarios, you’re encouraging your buyers to do the things that make sense for your business .
How to Influence Buyer Behavior with Smart Pricing Promotions Promotions are probably the easiest way you can influence customer behavior. We’ve all been enticed at one point or another by a “Buy one, get one free” offer. In fact, promotions are what most companies turn to when they try to use price to control a deal. But promotions shouldn’t ever be haphazardly offered. They should always be created
Things You Must Consider:
Real Cost
Customer Demand
Competitive Prices
Business Strategy
Business Cycle
Market Demographics
with a clear idea of whose behavior you want to modify.
Is it buy one get one free because you need to move more inventory?
Is it an extra 3% discount for paying under 30 days because you need cash in the bank?
Is it 25% discount on service with 50 seats because you want Other Pricing Techniques:
to encourage larger deals? Figure out what you want then customer to do fi rst, and then build
Subscription Pricing
your promotion around that.
Contract-Based Pricing
Usage-Based Pricing
Ramp Pricing
Flat Fee
Channel Pricing
Volume Discounts Volume pricing is another way you can i nfluence behavior, and this is an extremely compelling lever to pull for high volume manufacturing, where the cost of selling one additi onal unit is very low. Or say you’re selling a license key for a piece of software or another virtual gift—it doesn’t cost you a thing to get someone to buy more. Not only are you getting the customer to buy more, but you're actually more profitable! Geography-Based Pricing
And then of course there's geography-based pricing. You might do this to mitigate exchange rates, or you might do this because you know the market in one area will bear a much higher price. For instance, the cost of living in Fresno or Sacramento is drastically different than the cost of living in New York City or San Francisco. If you want to take advantage of the ability to price for a specific geography, you’ll need a flexible mechanism for pricing.
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Bundling Bundles are another way you can make a significant impact on revenue and margins with fairly little effort. They enable you to increase your sales and still give your customer a great deal. For instance, you can sell a laptop for $1,500. But if you sell it as a part of a bundle (the laptop + an external hard dri ve, mouse and key board) for $1,800 you might see an uptick i n sales for your ancillary items and i ncreased revenues. Let’s say it actually cost the customer $2,000 to buy all the items separately. Your customer perceives they saved $200. But you don’t take a $200 hit; you actually just got $300 more than what you would have if you hadn’t offered this bundle. The rule of thumb with bundles is this: As long as your bundle covers your product costs and gives you a margin, you’ll increase your revenue. It’s a lot easier for a consumer to buy just what they want, but entic e them with “savings” and you’ll see how much more they will spend wi th you.
How to Make Quoting Easy with CPQ
The Value of Effective Quoting
If you have centralized up-to-date product and pricing information, and enforceable discounting rules, the quote should be the easiest
Make a positive first impression!
Get the first mover advantage
Set the starting point for negotiation
Get the customer to commit
part of the CPQ equation. The quote is really the first chance you have to make a good impression on the customer. If a customer as ks you for a quote, and you can deliver an accurate and professional document within their time frame, you’ve just indicated that you are easy to do business with. Another point to consider is that often, the company that fi rst delivers the quote has the advantage in the negotiation. By the time the competition has responded, you’re already moving down the negotiation path and it’s hard to catch up. Like pricing, there's a lot of opportunity in quotes, but there's also a lot of risk. Quotes are often a subject of pain, frustration, and conflict. For example, one high-tech manufacturing firm took weeks to respond to a quote, because manufacturing, services, engineering, and delivery partners all had to get involved. Because
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there was no standard process around quoting, everything had to be manually approved by 7 di fferent stakeholders spread across the globe. In a scenario like this, while you are going around in circles trying to collect approvals, your competitors will be closing the deal. Quoting is a Battle of Speed and Accuracy When quoting becomes a problem, it’s usually because the quotes aren't getting to the customer fast enough, or the quotes are full of errors. When it comes to speed, your goals should be, t o deliver within
“Quoting errors are like
the timeline expectations of the customer, and to beat your
resume errors – if you’ve
opponent. Slow quotes are caused by a number of factors,
got them, don’t be surprised
starting with poor product knowledge on the sales side. When
when you don’t get the job!”
reps have difficulty finding the product and pricing information they need, quotes stall. Another problem is caused by access ibility. Do reps need to be in front of their computer or in the office to put together a quote? If there are about to get on a plane, or are driving down highway 101, or on a networking retreat on a tropical i sland with no signal can they get the information they need to create quotes on the fly, and then sync the quote when they’re back online? If so, that’s huge efficiency gains.
Poor Product Knowledge + Accessibility Challenges + Unorganized Approvals = SLOW QUOTES On the flip side, it doesn’t help to be fast if the quote is wrong or incomplete. Plus, if you don’t make it easy for prospects to see what they're paying for, or if you don’t send a formal proposal and just bounce product and pricing info through emails, this can cause problems too. When the space is extremely competitive, and all the players have strong products, sometimes it comes down to little mistakes that are the difference between winning and losing. Even if errors aren’t a deal breaker and the customer still buys, errors in your quotes lead to a whole string of problems you don’t have the time to deal with —problems like incorrect products being ordered, returns, and lots of unhappy customers.
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Why Quotes and Contracts Need to Connect Finally, one of the biggest hiccups in quoting is that quotes are detached from the contract – or in some cases, from the order management system. What’s the val ue of having an accurate, speedy quote, if you just run into bottlenecks when it’ s time to make it official? Or if you have to copy all of the quote information manually into a new system, you re-expose yoursel f to errors, and lose all of the accuracy provided by your CPQ solution. If it takes weeks to negotiate terms and conditions and get a signed contract, you ’ve nullified many of the advantages of a CPQ solution. Instead you need to have a qu ote flow seamlessly into a contract, so you can close deals and get them on the books as fast as possible. Don’t let the contracting process bottleneck your quotes. Implem ent your CPQ capabilities within a full Quoteto-Cash solution that will link all of your critical business processes end-to-end. Here are some of the real business values of an automated CPQ sui te.
The ROI of Configure Price Quote
105% larger deal size
49% higher proposal volume
28% shorter sales cycle
26% more reps achieving quota
17% higher lead to conversion rate
Data acquired from Aberdeen Group’s “Breaking the Laws of Physics: Shortening the Last Mile through Workflow Automation” by Peter Ostrow (April 2013)
What Apttus customers have experienced:
30% deal size increase for new deals
20% increase in renewal contract value
25% reduction in rogue discounting
80% faster time to quote
80% faster contract process
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Apttus CPQ Case Study: Full article: http://customerthink.com/cpq_advance_pipelines_with_apttus/ In the past few years, however, a number of software application vendors that specialize in automating configure, price and quote (CPQ) processes have emerged. One such vendor is Apttus, whose product is built on a modern, cloud-based platform that makes an excellent choice for businesses that want to tap CPQ capabilities. […] In short, using manual processes to handle configuration, pricing and quoting is wasteful and expensive, and that’s what tools such as Apttus are focused on addressing. Using CPQ also helps businesses tame product or bundle proliferation, in part by letting salespeople create unique combinations of products or services for any given customer. From Customer Think, “CPQ: Advance Pipelines With Apttus” by Adam Honig
Summary CPQ helps you bridge the gap between your front and back-end systems, elevates the a ccuracy of your quotes, and keeps approving, bundling, and discounting up-to-date. CPQ picks up where CRM leaves off by making all of the complex product, pricing, and business rules that captured in your CRM t ool centralized, automatic and available in real-time. With CPQ, your reps and partners are more efficient, more effective, and have the tools they need to move the deal along, get the quote approved, and get to a signed contract. CPQ allows you to manage multi-channel strategy, capture maximum value with intelligent pricing, guide selling, eliminate rogue discounting, connect goods to cu stomers with advanced sales configurati on, and accelerate your quoting process without sacrificing accuracy. Configure Price Quote is a key component of the Quote-to-Cash process.
About Quote-to-Cash Quote-to-Cash is the vital business process that connects a customer’s interest in a purchase to the realization of revenue. It includes creating a quote, responding to RFXs, submitting a proposal, negotiating and managing a contract, fulfilling orders, recognizing revenue, ensuring compliance and tracking payments – all within visible and controlled workflow. Quote-to-Cash solutions include Configure-Price-Quote (CPQ), Contract Lifecycle Management (CLM), and Revenue Management applications.
Quote-to-Cash is the single link between top-line results, bottom-line results and customer satisfaction. No other process is as critical for maximizing the value of capturing revenue in a profitable way as well as meeting the needs of customer sales requests. This process relies on the coll ective intelligence of the enterprise. The impact of accurate quotes, proposals, contracts and orders make the flow of all data and processes within an enterprise work smoothly, thus creating value for enterprises and their customers.
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