July 07, 2016
Selecting the right CPQ solution for your business
By: Brice Rey-Herme

Selecting the right cpq solution for your business

The Configure, Price, Quote (CPQ) vendor landscape is crowded—there were 45+ CPQ tools & apps the last time we checked. And as the market continues to become more and more crowded, selecting the right solution becomes increasingly difficult. So how do you go about finding the right CPQ tool for your business? The bad news is that there isn’t a simple answer. The good news is, there is a simple, four step approach:

  1. Involve the right stakeholders

  2. Understand your goals & value drivers

  3. Define your evaluation criteria

  4. See before you believe

The 4 Step Approach to Selecting a CPQ Solution

Here’s what this four step approach looks like in action:

  1. Involve the right stakeholders

    First and foremost, it’s essential to ensure you have a cross-functional group with a mix of both business & IT stakeholders involved from the very beginning. Key stakeholders to include in this group are those whose departments play a critical role in CPQ programs, including sales, finance, product management, pricing teams, operations and marketing.

    In addition to involving the right stakeholders, you need to make sure this group is aligned, as having one stakeholder outweigh the others usually leads to missing key criteria and not selecting the most appropriate tool as a result. This alignment also plays a key role in ensuring proper communication and governance throughout the entire process.

  2. Understand your goals & value drivers

    Most CPQ vendor selections fail because organizations are too quick to jump straight to the vendors instead of first taking the time understand what they really need out of the solution. The key to success, however, is to understand your goals and value drivers BEFORE speaking with vendors.

    First understanding your current and future landscape is vital because it helps to assess your desired capability maturity, which you will ultimately need to compare against market-leading practices and vendor offerings. To achieve this understanding of your current and future landscape, you should ask:

    • What pain points exist today?

    • Where do you want to take your CPQ strategy?

    • Do you have a configuration problem, a pricing problem or both?

    • What do your average quotes that cover ~80% of your requirements look like?

    • What do your complex quotes look like?

    • How does CPQ fit into your overall lead to cash landscape?

    You also need to identify and prioritize your value drivers. Doing so should help answer questions like: Are you trying to increase average deal size or improve margins? And which of those goals takes priority? These identifications and prioritizations will impact both your vendor selection process and your overall program roadmap. To make these determinations, I recommend creating a value tree that looks something like this:

    Business Outcomes  Key Value Driver  Capabilities
    Increase Revenue Improve Cross-sell Services Attach/Up-Sell Increase Avg. Deal Size
    Improve Customer Experience Increase Quote Velocity Self-Service Quoting Increase Quote TAT
    Grow Operating Margin Improve Deal Pricing Price Guidance/Empowerment X% improved deal margin

    Based on the above analysis, you should have a clear definition of:

    • The functionality and use cases that matter to you most

    • Your business case and key value drivers

    • The priority and relative business value of each capability or value driver

    Finally, as you make these considerations, remember that this undertaking is not just about tool enablement or system transformation -- it will also involve process transformation.

  3. Define your evaluation criteria

    Next, you need to determine the critical points you will include in your evaluation of vendors and their technologies. I recommend focusing on the following factors:

    • Configuration capabilities – How complex are your quotes and pricing logic? How “big” (how many line items) are your quotes? Does the tool meet your needs for the most complex of these cases?

    • Pricing capabilities – How important is pricing to you? Do you care about pricing analytics/instant pricing? Organizations often overlook pricing capabilities in CPQ vendor assessments, but doing so is a mistake, as faster and more accurate pricing with systematic approvals and governance is one of the key benefits of CPQ.

    • User collaboration – How well does the tool fit into your existing technology ecosystem to enable easy hand-offs and collaboration among users? CPQ needs to be where the front office meets the back office and should simplify collaboration for users working on the same quote.

    • User experience – Does the tool meet your UI requirements? Do you need multiple experiences? How much do you need to be able to change the UI? Is mobility a factor?

    • Scalability and technology – Can the CPQ solution scale to meet your business needs? How much does the platform on which the solution is built (e.g. matter to you? In some cases, looking for a solution that is 100% native to a specific platform can be very limiting in the CPQ space.

    • Industry alignment – Does the vendor have functionality catered to your industry? Certain CPQ solutions are tailored for specific industries. Others are not, but their capabilities are better suited for certain industries.

    You also want to make sure that your evaluation criteria align with your value drivers. Therefore, you should weight the importance of criteria based on their ability to support your target business outcomes (e.g. if your priority is pricing and margin improvement, don’t focus only on the configurator).

  4. See before you believe

    Finally, it’s time to reach out to vendors. As you compare vendor capabilities to your goals, drivers and evaluation criteria, force the vendors to show you how their solutions work and to demonstrate their abilities to meet your requirements – don’t just settle for them telling you.

    For example, if you need a CPQ tool to support 1,000+ line items on a quote, make sure the vendor shows you a live demo of a quote with a 1,000 line items. Don’t settle for “yeah we can do that” while the vendor shows you a quote with 10 line items.

    As someone who’s evaluated my fair share of CPQ solutions, I also have two pro tips:

    • Asking a vendor whether functionality is provided out-of-the-box or requires customization usually isn’t effective. Most vendors will tell you almost everything can be done out-of-the-box. Instead, ask the vendors to explain how their solution can enable your business outcomes and where have they enabled similar outcomes before. Be sure to ask for a customer reference and to share clear use cases for them to demonstrate and discuss.

    • During the demo, go off script. Anyone can do a seamless demo when they are following a script. Ask the vendors to modify the configuration, add products, create a new approval or add a new configuration rule in real-time. This off-the-cuff change is a great indicator of how flexible the CPQ tool can be, which is incredibly important.

Don’t Overlook the Importance of the CPQ Selection Process
When it comes to CPQ, or any technology for that matter, taking the time to approach the selection process properly makes all the difference. That’s because skipping any of the steps listed here can result in costly mistakes, such as:
  • Increased time and costs for implementation and maintenance: If you need to make heavy customizations to have the solution meet your needs, you will need to increase your project budget and future upgrades and enhancements will become more difficult. Similarly, applications with scalability issues can lead to expensive architecture workarounds. 

  • Missed benefits to your sales organization and customers: Having a clunky user experience and application features that don’t fit your program goals can actually decrease efficiency and adoption.

Ultimately, if the solution doesn’t meet your needs, you might even need to go through the entire process again and re-deploy a new solution. As a result, it pays to take the time at the start to clearly identify your goals and value drivers and to map evaluation criteria to those goals and drivers in order to select the best possible solution for your needs.

Discover what it takes to transform your sales effectiveness with CPQ. This opens a new window.

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