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As in biology[i], evolution is naturally embedded in the development of IT systems. Dead ends do occur, but they most often result from marketing mistakes[ii], not flaws in technology or the underlying concepts. ERP solutions follow a well-established evolutionary path and now cover virtually every aspect of enterprise operations. One of the newer, less common and therefore more interesting systems is CPQ—Configure, Price, Quote. It is a remarkable tool that primarily makes life easier for salespeople in companies manufacturing highly configurable products with complex, intricate pricing. Let us take a closer look at CPQ.
What is CPQ?
CPQ systems are usually components of larger CRM (Customer Relationship Management) solutions, which in turn form part of ERP systems (Enterprise Resource Planning). As its name suggests, a CPQ—Configure-Price-Quote—system can configure even the most complex product without errors, price it accurately, and prepare and send a finished quotation to the customer. Consider a relatively simple product: an entrance door for a detached house. How many characteristics affect its final price? Manufacturer, type, model, width, type and size of sidelights, material, color, hardware, accessories, frame dimensions, and many others. The customer usually wants several variants because they have not made a final decision. Preparing such a quotation manually is time-consuming and creates a high risk of configuration and pricing errors. Some accessories are unavailable for certain models; a particular handle requires a compatible lock, and so on. If a company sells products from more than a dozen manufacturers, each with dozens of models, mistakes are unavoidable and training a salesperson becomes lengthy and expensive. The automotive industry is no different: almost everyone has used a new-car configurator[iii]. Equipment options, engine versions, safety packages, and other features create a dense network of dependencies in which one choice may exclude another. Reliable quotation preparation would be impossible without CPQ. A CPQ database stores information and prices for every product, assembly, part, and component that may form the finished product. It also supports flexible product-configuration rules and discount systems for virtually every customer and product. Automated pricing and efficient configurators radically shorten quotation preparation. This reduces sales-department costs and increases customer satisfaction and loyalty through individualized, well-targeted offers suited to each customer’s needs and means.How profitable is a CPQ investment?
There is only one correct answer: it depends. The final implementation outcome is affected by the system vendor, historical-data condition, IT infrastructure, implementation-team knowledge and experience, company characteristics, business-process maturity, and many other circumstances and decisions. Fortunately, numerical data helps estimate CPQ return on investment. One vendor reports[iv]:- a tenfold reduction in quotation-preparation time,
- a 95% reduction in the time required to approve customer discount levels,
- a 30% reduction in the time needed to train a fully productive salesperson.
What does CPQ implementation involve?
Because of its multidimensional complexity, CPQ implementation is not easy, although it is less challenging than a full ERP implementation. The first obstacle is selecting an application that meets users’ business requirements and can be deployed without excessive infrastructure changes. Success depends on carefully preparing product recipes and a discount system defining the conditions, amount, and customer for each discount. Discounts may depend on purchase volume, payment timeliness, region, or even season, so expressing those relationships algorithmically requires time. Product recipes define the composition of the final product. The difficulty lies in relationships among components: selecting one option may require or exclude another. The implementation team must understand production, customer-service, and financial processes thoroughly. Only after a reliable plan has been prepared should system parameterization begin. Databases and rules are completed and then tested in detail. There is no room for shortcuts: under commercial law, except for obvious mistakes, a quotation is binding on the offeror. Fortunately, sufficiently long testing can be planned. CPQ adds value to ERP but is not so operationally critical that testing must stop company operations.What are the main advantages of CPQ?
CPQ’s greatest advantage is the simplification and acceleration of final-product configuration and quotation preparation. Automation means a smaller sales team can serve the same number of customers, producing direct financial savings. It also improves quotation quality, consistency, completeness, and alignment with customer needs. Sales can increase through available pricing scenarios and bundled-selling, package-selling, cross-selling, and up-selling strategies. The organization also benefits from a substantial reduction in human errors during quotation creation. Such errors can extend the sales cycle, make deals harder to close, reduce sales-potential utilization, and cause financial loss. Users value fast, complete access to the quotation archive, which can provide strong arguments during negotiations. CPQ integration with CRM records useful information about customers and interactions. Sales representatives can plan better and tailor their arguments, maximizing performance. If a customer loves French bulldogs, nobody will conduct the sales process better than another admirer of the breed. This is basic sales knowledge, and CPQ is its most advanced working tool. Cloud storage gives every authorized user complete access to the application and data regardless of time, location, or device. Following implementation, organizations can expect higher sales volumes, greater salesperson efficiency through best practices, lower training costs, and therefore higher profits.How does Epicor CPQ work?
Epicor CPQ offers distinctive functions valued by users:- Visual configurator—every product component can be viewed in 2D, 3D, or AR (Augmented Reality), with options and prices changed in real time to match customer needs. Visual presentation accelerates quotation creation and, when performed with the customer, often accelerates closing.
- Dynamic pricing as product options change, delivering an immediate, accurate valuation. Appropriate rules require configuration, but the result is highly valuable.
- Omnichannel operation, providing full automated quotation creation, supporting documents, product lists, and high-quality illustrations in every sales channel.
- Production automation—dynamic CAD-file creation enables workflows that generate BOM (Bill of Material) lists and production documentation.
- Integration with corporate websites and business systems through REST APIs. Predefined configurations facilitate ERP integration, including through the universal MuleSoft connectivity layer.
- Easy rule creation, through an advanced rule engine that lets users create clear logical instructions simply and ergonomically.
- Advanced analytics, providing invaluable information about every quotation and customer.
- Cloud operation, radically simplifying configuration, consistent rule definition, and solution administration.
