CPQ process and platforms

The right configure, price, and quote solution is key to transitioning to a flexible consumption model

In our previous reports, we’ve talked about the capabilities and technology platforms needed to support a flexible consumption model (FCM) in the as-a-service economy. Now, we’re here to discuss one key aspect of the go-to-market capability, which is the CPQ processes of the lead-to-cash cycle. It’s essential to align the CPQ processes with the flexible consumption strategy. This enables direct sales, channel partners, and customers to easily configure, price, and quote as-a-service solutions.

CPQ processes in flexible consumption business models provide capabilities to support a diverse set of products portfolios, complex offerings with multiple features, and complex pricing structures. With expanding customer channels and partners, and the increasing complexity of product structures and pricing strategies in consumption-based models, the CPQ approach needs to be transformed for efficient sales operations.

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Potential benefits of CPQ

CPQ offers a range of potential benefits for companies transitioning to flexible consumption models.

Supports diverse products with complex pricing: With FCMs, customers pay only for the products or features they use. This means organizations need to develop and offer their products and services in a modular fashion (standard and nonstandard bundled offerings). Pricing is defined for each feature, and there’s flexibility to set discounts and margins at various levels, such as bundle, deal, and line item.

Shortens sales cycle: A well-designed CPQ process integrates organizations with their channel partners in the sales cycle. Organizations can define the steps to auto-validate and auto-book a segment of incoming legal quotes to orders, reducing the overall time within the sales cycle. The time required by sales reps to interact with other teams to gather information and seek approvals and responses can be reduced by clearly outlining rules for approval management and streamlining the processing of all requests.

Sales reps can also quickly analyze the effectiveness of each deal by determining potential cost, margins, profitability, and other key performance indicators (KPIs) to ensure that the deal is aligned with business objectives. Some of the key metrics that are relevant for managing CPQ process include: Quote accuracy rate, quote turnaround time, standard-to-nonstandard deal ratio, quote conversion rate, and self-service quote ratio.

Helps reduce inadvertent quoting errors: Manual configuration of quotes often leads to errors, which in turn can lead to revenue loss and erosion of customer confidence. Developing optimal quotes is a challenge in the case of complex products and large orders. CPQ helps ensure error-free sales quotes and proposals that align with customer requirements. Through business rules, discounts are capped, and quotes don’t fall below a defined margin value. At the same time, automated quote generation increases quoting accuracy and sale closure rate, while decreasing fallout rate.

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Let’s talk

Every organization should differentiate itself through exclusive product offers and pricing structures, making it imperative to get the most out of CPQ capabilities. A streamlined CPQ process that integrates all relevant teams is difficult to design, yet is essential for the successful transition to flexible consumption-based models.

At Deloitte, we understand the complexity of this challenge. We’ve worked with numerous companies to develop capabilities across the entire lead-to-cash cycle that support flexible consumption—from defining a roadmap and establishing an architecture to reskilling their workforce. Let’s talk about what this change could mean for you.