Over the past several years, we’ve written various blogs and articles that give an extensive/comprehensive account of the relevance of Configure Price Quote technology. Systems in all industries come and go “out of style” but some just continue to get better with age. Last year we stated that “some 75 years ago, the need for automation was realized; but that was for engines and motors – today, all industries ranging from welding to medical, to electronic manufacturing, are wanting to automate most, if not all, organizational procedures” and nothing in that statement has changed.

The previous data and insights highlighted some interesting trends.

2016 – 2017 CPQ Impact Data

Aberdeen

A research report published by Aberdeen in 2016 titled “Powering a Profitable Sales Organization: How CPQ Cuts Costs” revealed some profound insights. Aberdeen Group looked at a segment of CPQ users achieving Best-in-Class levels of sales performance. Aberdeen defined Best-in-Class as follows:

“Best-in-Class CPQ users average 5 times greater growth in year-over-year revenue compared to All Others (15.7% vs 2.6%). In concert with this revenue growth, Best-in-Class CPQ users also see on average, 4.8 times greater annual increase in profit margins compared to All Others (12.7% vs 2.2%).” Additionally, they also categorized Best-in-Class and further refined this definition; Best-in-Class = top 20%, Industry Average = middle 50%, Laggards = bottom 30%.

The research revealed the following:

• Best-in-Class CPQ Users average 5 times greater annual growth in revenue and increase profits at a 4.8-fold greater rate year-over-year compared to their peers; Industry Average = 15.7% and Laggards = 2.6%. CPQ delivers value by simplifying complicated sales processes into systematic, scalable processes.
• Aberdeen’s projections show that a company starting with a baseline annual revenue of $102 million and a net profit of $6.6 million can double its revenue and multiply net profits by 4 times over a 5-year span.
• In defining Best-in-Class CPQ Users, Aberdeen also included Customer Retention Rate as an important measure; Best-in-Class CPQ Users demonstrated a customer retention rate of 13% higher than Industry Average and Laggards – that had a customer retention rate of 75% and 34% respectively.
• Best-in-Class CPQ Users were also seen to enjoy a higher Average Deal Size increase year over year; 4.3% vs 3.1% and 0.4% increases for Industry Average and Laggard respondents.

“CPQ can serve as a backbone for precise, clear, and actionable visibility into all relevant sales activities. Insight eliminates ambiguity and mitigates risk: ensuring swift sales action through CPQ”.

• Aberdeen also created a model based on Best-in-Class CPQ user performance data, that predicted that over a five-year span, Best-in-Class CPQ usage would foreseeably double a $102.7 million company’s original annual revenue to become a $212.9 million company. This example company would also multiply its net profit almost fourfold, from $6.6 million to $24.8 million.
• Aberdeen research also showed that Best-in-Class sales organizations were 32% more likely than All Others to attribute the ability for sales workflows to be managed by sales admins and leaders (no-code/low-code approach) as a “strong” or “very strong” organizational success factor, compared to All Others. CPQ helps make such direct sales operational effectiveness possible.

In a report titled “Visibility, Insight, Impact: Simplifying Complex Sales Processes with CPQ” that Aberdeen published in May 2016, Aberdeen also shared some more interesting findings. CPQ users as compared to non-users, they wrote, enjoyed:

• 8.2x Wider margins in improving lead conversion rates year-over-year
• 7.5x Higher year-over-year increases in customers renewal rates
• 1.6x Greater year-over-year reduction in contract/proposal generation errors
• 60% Higher effectiveness at speaking intelligently about competitors and differentiators
• 45% Greater proficiency at rapidly responding to RFPs
• 21% Higher effectiveness at generating complex quotes in a timely manner.

Forbes

Forbes had also published an article titled “Five Ways Cloud-Based CPQ Increases Sales Effectiveness And Drives Up CRM Adoption” in April 2016 that gave an overview of the business impact of a streamlined CPQ process.

Forbes revealed that organizations enjoyed significant benefits from streamlined CPQ processes, including but not limited to:

• As found in 2015 Sales Performance Optimization Study, Forbes revealed that investing in CPQ-based selling strategies contributes for improving sales team performance delivers up to a 10% lift in company revenues.
• Increase in customer face time and subsequent likely customer retention up to 50%.

It can be seen that revenue growth, customer retention, responsiveness, and accuracy of quotes have been the top priorities of all businesses – and as the numbers above have demonstrated, Configure Price Quote tools have massively helped organizations in achieving desired results.

What is the current trend?

2018-2022 CPQ Impact Data

“The best CPQ offerings on the market help you deliver better quotes faster” Hazel Wheldon, Manager, Accenture stated in a writeup she shared in July 2021.

Since most organizations are now adopting the remote working model, collaboration/coordination has become an even more pressing concern. CPQ enables collaboration, while also offering a single view across contributors, reviewers, and approvers.

“With CPQ, all products are shown in one simple quote. A sales rep and other teams, such as finance, can review all elements of the deal, and a customer can quickly see the impact of decisions and changes.” Hazel Wheldon, Manager, Accenture.

Along with this, quite a few other trends were seen in reports published by Accenture.

Accenture

Accenture, in a few articles that they published in the years 2019 and 2020, shared a few outcomes of CPQ implementation business success that included but were not limited to:

• Upto 10% increased deal size
• 5–15% increase in win rates with efficiency gains in double digits
• 13% higher EBIT
• 25-200 Basis Point Margin Increase
• 2-10% improvement in renewal rate
• 5-15% improvement in average order fulfillment lead time
• 5-10% operational savings

TSIA

“Constellation Research estimates that companies adopting CPQ see a 300% increase in quoting speed.”

Technology Services Industry Association (TSIA) is a research and advisory organization that provides deep data insight and an executive peer community to help you improve the strategic, financial, and operational performance of your business.

According to TSIA’s 2021 Professional Services Tech Stack Survey, as shared here by John Ragsdale, B2B tech companies saw a significant increase in adoption of two technologies by professional services organizations over the last year: professional services automation (PSA), and configure price quote (CPQ). Adoption of PSA rose from 75% in 2020, to 83% in 2021, and adoption of CPQ rose from 44% in 2020 to 54% in 2021. In addition, both technologies have high planned spending for 2021-2022, with 54% of PS groups planning an additional investment in PSA, and 41% planning additional investment in CPQ”

You may ask why are we not getting these results? We have a CPQ solution. There are still some cases of organizations struggling with failed CPQ implementation or broken CPQ. Getting the right CPQ is still imperative to drive maximum benefits from this cutting-edge technology. Some CPQs are designed for discreet manufacturing and others are focused on Managed Service Providers (MSPs) – it is vital that organizations understand and choose the CPQ system that best suits their needs and serves the intended purpose and results. A CPQ initiative also requires care and feeding, it is not a “fire and forget” system, it needs to be tuned and supported. Click here to learn about the signs it’s time you upgrade from your current CPQ system.

Done right, CPQ software can empower sales reps to close deals more efficiently and keep their customers happy. CPQ technology allows organizations to expand their sales capacities, and make good revenue faster by creating good deals. If not implemented accurately, however, CPQ, like any other badly implemented tool/technique can expose organizations to risks.

McKinsey shared a story of an organization whose migration to a subscription-based model blew to bits due to CPQ implementation failure. “Failure to carefully consider every design decision in the QTC process can be costly. Take the case of one fintech company that decided to move into the subscription business without making deliberate choices in the end-to-end journey. Six months into the launch, the feedback from sales was that the process was plagued by bottlenecks, requiring some 200 emails to move a quote to an invoice. The sales team had to generate quotes manually. The ordering team did not know how to process orders. The entitlements system was not ready to store subscription information. And all invoicing was performed manually. With no clear direction on enterprise-wide choices, each salesperson was left to shepherd their deal through multiple functional teams. Though customers were excited to embrace the new subscription model, the inability of scaling it put growth plans on hold. The organization ultimately had to send a cross-functional team back to the drawing board to identify explicit enterprise-wide design choices for each step in the QTC process.”

McKinsey also stated in the same article that “While it is difficult to establish a causal link between QTC practices and growth, B2B subscription businesses that optimize their QTC processes have greater success in adding new accounts, growing existing accounts, and reducing customer churn. As a result, these high-performing companies grow their annual recurring revenue (ARR) at four times the rate of others.”

Some more interesting stats from other reliable resources:

• Response Time: Hubspot stated that 50% of buyers prefer the vendor that responds first – Since CPQ solution enables you to quote faster, reaching the customer first becomes easy.
• Accuracy: According to Forbes, sellers who are the first to produce an accurate, complete quote win the deal at least 60% of the time or more – Since CPQ enables sales teams to quote faster and with guaranteed accuracy, business can close more deals.
• Personalization: Deloitte stated that 1 in 5 buyers are willing to pay a 20% premium for personalized (read: configured) products – By providing excellent configuration capabilities, CPQ solutions like servicePath CPQ+ help businesses delight their customers.
• Increased Proposals: According to Superoffice Companies that use CPQ solution can experience 49% higher proposal volume.
• Faster Quoting: Sales reps can produce a quote or proposal in 27% less time to compared to non-CPQ user reps, according to softclouds.
• Customer Renewal: According to Aberdeen, CPQ users enjoy 8.2 times higher margins and 7.5 times increased customer renewal.

Some other findings:

• Wizards of Ops wrote in a blog titled “CPQ: A Superhero For Revenue Growth”, “Configure, Price & Quote is the first step in a quote-to-cash roadmap and it’s all about automating the process of creating proposals and transforming them into contracts. Done right, CPQ is a hero of epic proportions for organizations looking to scale profitably”. CPQ can empower teams struggling to maximize revenue by enabling reps to quote complex products and services fast and accurately. Sales reps will ultimately close bigger deals at a higher win rate which will directly impact the companies’ revenue growth rates.
• As demonstrated earlier, companies often find it extremely challenging to expand their product offerings/configurations. The G2 team created an article in November 2020, “The overall purpose of implementing a CPQ system is to make your sales cycle more efficient,  productive, and successful. By accelerating the product configuration and proposal process and reducing the risk of producing inaccurate quotes, sales reps have a better chance at establishing a more positive relationship with the customer and offering a positive buying experience.” So if you are currently, or aiming to expand your product offerings/configurations, investing in a Configure, Price, Quote tool will help you a lot. CPQ also helps companies deal with or provide complex/configured products and services. Click here to see how servicePath compares with other CPQ vendors.
• Companies that struggle to keep their salespeople happy can also benefit from CPQ. Salespeople often complain about not being able to spend enough time doing what they’re hired to do – i.e. selling. Did you know, according to Forbes, salespeople only spend about 35% of their time selling? “The average field sales rep is paid $105,482 a year. If 64.8% of the time is spent on non-revenue generating activities, the typical company spends $68,352 per rep per year to pay him or her for tasks they were not hired to do.” This leads to frustration and lack of motivation in them and as you’ve just seen, enormous losses. With a comprehensive CPQ solution handy, they can spend more of their time and energy selling and reaching their quotas.

Summary

Analysts have been following CPQ for over 15 years and have been tracking the impact and improvements it can have on an organization. The data is consistent year over year and validates that CPQ can have a significant impact on driving revenues, improving and streamlining processes, reducing financial risk, and improving corporate governance. Moreover, change continues to accelerate and the ability of CPQ solutions to construct new solutions and offerings allowing organizations to quickly and easily launch new services and solutions that are increasingly complex. Implementing a flexible CPQ solution within your sales team means by and large flexibility and automation within your sales process. What this does is it arms your salespeople with the ability to spend more time and energy in getting to know your customer’s needs and delivering an excellent customer experience.

At servicePath, we believe in empowering the end-user with a CPQ and revenue lifecycle platform that is no-code/low-code that enables non-technical users with the flexibility to modify the system easily, and to keep up with changes in market conditions. While at the same time, servicePath’s powerful rules engine and governance platform to enable businesses to drive good revenue faster. Good revenue is profitable revenue that does not haunt you.

“Giving customers what they want, when they want it, and at a price that’s good for both buyer and seller, is the mission of “configure-price-quote” (CPQ) software. It involves far more than just plugging in a piece of software or a simple “lift and shift” of existing pricing tools and processes into an online platform. In reality, it’s actually a transformational opportunity: resource and time efficiencies, improved accuracy, and access to real-time business performance data to inform decision-making. It’s the optimal time to standardize and refine products and services, commercial constructs and supporting processes.” Hazel Wheldon, Manager, Accenture

“CPQ comes with a big payoff, too. According to Aberdeen Group Reports , organizations that use CPQ software see a 28% reduction in the length of their sales cycles and a 49% higher proposal volume per representative per month. The study also found that companies that use a CPQ solution have an average deal size 105% greater than companies that do not.”

The right CPQ makes more sense than ever.

Click here to learn more about servicePath.

Click here to learn more about CPQ.