In our last insight from Iain Logan, our UK MD, we explored the importance of cost to serve(CTS) and the value this information can bring to a service provider. There was a really important point he made that we wanted to build on in this quote:
“You are continually making one-time and ongoing decisions across your investments/products and customer lifecycles to ensure you are getting the right returns.”
In this insight, we wanted to extend from cost and further into the commercial lifecycle – Configure, Price and Quote (CPQ). We believe including cost is an absolute must, as CPQ on its own does not provide a complete picture to the salesperson or the business.
What does CPQ do?
Firstly, let’s remind ourselves of what CPQ does at its core:
Guides the user to make the correct configuration recommendations to the customer
Ensures only configurations that can be delivered and supported are proposed
Manages the pricing of the services to simplify the process for the sales person
Support activities like discounting through the sales process, perhaps automated with a workflow
Generates a quote or proposal to help secure the business (Hopefully this is detailed, personalised and consistent)
Obviously, CPQ is great to get a configured, personalised quote out to the customer; however, without cost we are driving without all our senses (or perhaps a petrol gauge).
Without cost information sales, management and leadership don’t have the complete picture to make effective decisions on margin, cost recovery, cashflow and risk.
Now, this may be okay if you are selling a widget or private virtual server, but what about a data suite or complex infrastructure solution. The business could be massively exposed, but no one knows about it….
With the Complete Picture - What’s possible?
Imagine, with this cost information how much broader your decision making process would be:
Solution-level price, cost and margin visibility – Management now has a choice on how to structure a commercial offering
Flexibility to discount offering with largest margin to increase likelihood of win
Clearly understand where your direct and indirect cost liabilities sit
Understand the impact on outgoing costs to support revenue acquisition – cashflow
The screenshot below is an example of the most basic information we think is important for making effective commercial decisions:
In summary, in the MSP industry, we never seem to have enough time or enough data to make effective decisions to increase our win rate. We do think that combining cost information into your commercial lifecycle will have a massive impact on your deal flow, your bottom line and success in our increasingly competitive market.
CPQ is great, but don’t forget about C-CPQ.