Will CPQ provide a return on investment?

basic information

However, how should we assess the "Return on Investment" (ROI) that can actually be achieved with CPQ solutions? ... This is because participating in sales meetings and learning about all the benefits these solutions are said to provide is entirely different from measuring the results that customers have actually seen in their own companies and understanding whether the outcomes are worth the investment. Through the explanations in this article, I hope to provide you with hints to determine whether you can gain more benefits from CPQ solutions than the amount invested. Please consider for yourself whether CPQ is worth the investment for your company or not. (Please note that this article does not distinguish between excellent/good/satisfactory investments.)

Price information

2 General Benefits of CPQ First, let's look at the general benefits of CPQ. - Shortening the Sales Cycle It allows for the automation of at least part of the sales process. For example, the automatic creation of various proposal documents, automatic pricing for each customer, and determining alternative products can all be done with just "the push of a button." In other words, instead of spending hours or even days on these tasks, they can be completed in just a few minutes.

Delivery Time

Applications/Examples of results

- Reduction of Errors CPQ solutions provide options to input rules for product configuration, pricing, quoting, and workflows. These rules run in the background to prevent users from entering invalid information. For example, it is not possible to set up products that cannot be built or to issue quotes with unauthorized discounts. - Expansion of Deal Size CPQ solutions offer cross-sell and upsell capabilities. By displaying or suggesting these options to users, CPQ solutions can increase the average deal size. - Increase in Margins Many CPQ solutions combine pricing guidance and pricing capabilities with workflow features, ensuring that users obtain the necessary approvals before granting discounts.

Detailed information

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  - Reduction or elimination of sales training The emergence of cloud-based CPQ solutions has led many CPQ vendors to make their solutions more user-friendly by increasing the information accessible to users within the application. One example of this is context-sensitive "help" or "training" videos that show users how to address specific issues. While this does not eliminate the need for training, it can reduce the time required. There is still considerable room for growth in this area. - Multi-channel support In addition to traditional sales teams and channel partners' market entry routes, the importance of e-commerce routes has been increasing. This trend has been present for some time but has been significantly strengthened due to the impact of the COVID-19 pandemic. - Improvement of customer satisfaction Regardless of the market route in which CPQ solutions are used, there is always the potential to enhance customer satisfaction. This can be reinforced by use cases and functionalities can be added as needed (e.g., product visualization).

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  - Simple Maintenance Managing all product configurations and pricing rules in a single system, rather than dispersing them across many different documents, systems, and people, makes it simpler. The issues of knowledge gaps between departments and the lack of thorough documentation and sharing of business processes are challenges that many customers still struggle with. While these benefits may not include a reduction in customer personnel, please note that in some areas, it may instead lead to an increase in customer personnel. It is not possible to make general statements without looking at customer-specific information.

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  Three Tasks to Achieve the Benefits of CPQ In Chapter 2, we discussed the general benefits of CPQ with a qualitative approach to ROI. In this chapter, we will consider a quantitative approach to CPQ's ROI. To achieve the benefits of CPQ mentioned in Chapter 2, customers need to ensure that the following three tasks are executed: 1. Select the Optimal CPQ Solution: There are many CPQ solutions available, each specialized for various use cases and industries. Customers need to choose the CPQ solution that best fits their business case. Depending on the complexity of the use case, there may be a reliance on external support, such as consulting firms, or not. In any case, if customers choose the wrong solution, the ROI they can achieve will be significantly limited.

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  2. Selecting the Optimal CPQ System Integrator: It is not enough to simply choose the best CPQ software; it is also critically important to select a system integrator who can implement the CPQ solution and achieve the desired business outcomes. The selected system integrator must build a good collaborative relationship with the CPQ vendor to jointly achieve desirable business outcomes for the customer. Customers should consider selecting a system integrator through a thorough process, just as they would with a CPQ vendor. 3. A Solid Project Foundation: This may sound like common sense, but it is not always the case. Generally, to establish a strong foundation for a CPQ project, four different pillars are needed.

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  - Existence of project and change management skills Most CPQ projects require agile project management skills, or a mix of agile and waterfall project management skills, also known as "hybrid project skills." Customers who do not want to rely entirely on CPQ vendors or system integrators need to have these skills in-house. - Project plans have achievable timelines It is essential to set achievable stretch goals. If schedules continue to be disrupted, there is a high likelihood of losing support and interest from the team and management. - Project goals are achievable While it is common to set aggressive project goals, setting unattainable goals can be counterproductive. This can negatively impact team morale and commitment.

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  Future CPQ users are prepared and motivated to use CPQ solutions. Only the CPQ solutions that are actually used can deliver the expected return on investment. Otherwise, the team is likely to look for ways to avoid the CPQ solution. Before customers begin calculating (estimating) and measuring the ROI of the CPQ solution, they need to identify their business goals and determine how detailed the ROI calculation needs to be. In other words, it is necessary to closely examine the customer's current business processes. To look at this in more detail, let's provide an example:

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  4 Business Case Examples Manufacturing company ABC analyzed its sales process and found that it takes an average of 8 business days to issue a quotation. They learned that the average time for competitors to issue a quotation is 5 days, based on feedback from customers and prospects. To shorten the 8 business day quotation lead time (with the overarching business goal of "reducing the sales cycle"), they delve deeper into business process steps such as "product configuration," "product pricing," and "obtaining approval for requested discounts." They determine that the sales team is requesting discounts of more than 30% on 60% of all quotations. It typically takes 5 days to get approval for all necessary discounts. In this simple scenario, it is clear that the business goal is to provide more discount guidance to prevent the sales team from offering such high discounts. This example also illustrates that collecting all the necessary business data for high-quality ROI calculations is not always easy.

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  To start calculating ROI, customers or advisors working with customers typically begin business process analysis with the following questions: - Which market entry route is causing the most problems? Sales revenue Channel sales E-commerce - In which areas (configuration, pricing, quoting) are there the most issues? Products in quotes cannot be assembled → Product configuration Products that were discounted too much → Pricing Quotes are difficult to understand → Quoting - What type of customers are experiencing the most problems? B2B customers B2C customers Public sector customers

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  Depending on the expected quality of the ROI calculation, it may be necessary to gather more business data. This additional data can be collected in various ways, such as having the sales team seek feedback from customers or sending out surveys. Now that we understand what benefits CPQ customers can expect and what prerequisites are needed to increase the likelihood of success for a CPQ project, let's calculate the ROI of CPQ using a simple example.