A Guide to Smarter, Faster Pricing in Configure Price Quote

Configure Price Quote software, commonly referred to as CPQ software, has grown in popularity as companies look to streamline quoting processes and improve pricing capabilities. However, when companies rely only on a CPQ system, they inadvertently solve only half of their pricing challenge. They miss out on effectively setting and optimizing prices to ensure sales reps make the best possible pricing decisions every time they quote. Before diving into why price optimization and price management software is needed alongside CPQ software, let's start with a refresher on these solutions.

What is Configure Price Quote?

The Configure Price and Quote (CPQ) software market has exploded in the past five years as B2B companies invest in better deal execution and customer-centric sales. Salesforce.com defines CPQ as, “a sales tool for companies to generate quotes quickly and accurately for orders. CPQ applications often work in tandem with CRM platforms, ERP programs, and other business technology, which helps ensure integrated data as well as accuracy.” Simply put, CPQ is a critical tool for B2B companies to close deals faster by streamlining the quote-to-cash process.

What is Price Optimization?

Modern business moves at lightning speed through many sales channels. Order history, customer behavior, competitive concerns, available inventory, demand swings and geographical market specifics all influence prices from one selling scenario to the next. For companies that have large customer and product counts, using spreadsheets and other manual tools to set prices at a granular enough level to reflect this commercial complexity, is difficult, if not infeasible. Without a market-aligned price at hand for each unique circumstance, companies lose margin or revenue. Price optimization software uses artificial intelligence and machine learning to calculate the profit and revenue maximizing prices for every microsegment of a business, enabling companies to provide tailored pricing guidance to salespeople that meets P&L goals.

Read more: Price Optimization - A Guide to Maximizing Profit

Price optimization is proven to be the most effective profit lever available to B2B companies, whether they are using a CPQ in tandem or not. Integrating optimized prices certainly increases the value and return on investment of CPQ, but price optimization is a powerful tool in it is own right, delivering tremendous value regardless of the commercial system that ultimately serves up optimized prices.

What is Price Management?

Price management is the function of creating and updating prices within a business. It includes setting and managing prices across a variety of price types such as list, matrix, negotiation, or customer-specific. For mid- to large-size B2B companies, manual price management is increasingly impractical. Leading B2B companies are utilizing more robust price management software to help the pricing team tackle price management and administration challenges, streamlining previously burdensome tasks with price management software.

Read more: An Introduction to Price Management

Is There a Lack of “P” in Your CPQ System?

CPQ software is no doubt the most effective way to deliver price guidance to sales reps as well as streamline and provide guardrails in the quoting process. Given the name, it suggests that pricing is a core capability of CPQ software. However, the only pricing functionality offered in a CPQ is simply the ability to load basic pricing logic or price books into the software to populate a quote. This misses a critical component of generating an effective quote: getting the price right. In other words, how do companies make sure that the prices provided to sales reps are aligned with the market, granular enough to reflect the selling circumstance and up to date as companies face increasingly volatile market dynamics?

Read more: Zilliant + Salesforce The Importance of Faster, Smarter Pricing in CPQ

To generate and manage prices, B2B companies need to complement CPQ with price optimization and management software, which enables pricing teams to:

• Make strategic pricing decisions
• Update price lists
• Execute cost pass-through strategies
• View pricing analytics to assess price performance
• Generate negotiation guidance for sales reps

When solely reliant on CPQ, B2B companies lack these critical pricing capabilities and are forced to use more rudimentary methods that likely result in revenue or margin loss.

It's true that CPQ is one of several critical execution systems that B2B companies need to function in the digital economy and provide a quality customer experience. However, much like ERP, CRM and eCommerce, CPQ systems need an infusion of pricing intelligence to realize their full potential.

Why Should You Consider Price Optimization & Management Before Writing RFPs for CPQ?

Many companies begin their journey to better pricing and quoting with an RFP, or request for proposal, for CPQ. But as they build their requirements, the focus often quickly turns to or includes pricing functionality that can only be supported using purpose-built pricing software. As a rapidly maturing but still under-utilized capability, price optimization and price management solutions often get left out of consideration for these transformative projects. The conventional wisdom is often, “After all, CPQ has “Price” in its name, shouldn't it handle all my pricing needs?” As discussed above, what the company really should explore in addition to CPQ is price optimization and management software to derive the most value out of whichever CPQ solution they choose. Many companies still need CPQ, but CPQ alone cannot provide the ability to deploy robust pricing strategies in the same manner that price optimization and management software can. CPQ can deliver the right price but cannot generate it.

Read more: Get Your Business Ready for CPQ + Price Optimization

Can Configure Price Quote Software Handle Deal & Agreement Management?

Deal management encompasses every aspect of the customer price agreement lifecycle - from negotiation to creation to updates to renewals. Customer price agreements exist in most B2B companies, and in many cases make up a significant portion of a company's revenue. Yet they are often undermanaged. These agreements are sometimes handled within CPQ software or managed directly in an ERP, yet agreement management functionality is not a key focus or mature capability within the CPQ software category.

Increasingly, B2B manufacturers, distributors and services companies conclude that status quo deal management processes are no longer feasible and seek a better approach. Best-in-class deal management solutions can centralize all agreements, ensure new agreements are created at prices that reflect the customer relationship and margin goals, provide a mechanism for mass updating agreement lines, and facilitate seamless communication between pricing, sales and end customers.

Read more: What is Deal Management?

How Do You Enable Smarter, Faster Pricing in CPQ?

Zilliant provides price management and price optimization software that is specifically created for pricing professionals, enabling them to ensure the prices that salespeople see in CPQ are market-aligned and contextually relevant to each selling circumstance.

The Zilliant pricing solutions can be integrated with CPQ software via the Zilliant Real-Time Pricing Engine™ or through batch processes. While our end-to-end pricing solutions add tremendous value within CPQ software, many companies utilize them as a stand-alone solution, or integrate the pricing back into CRM, ERP, eCommerce, order entry systems, or other commercial applications.

Zilliant Price Manager™ gives pricing teams greater control and visibility over price and rebate management, as well as the ability to update pricing as market conditions change. This includes a wide variety of pricing capabilities, including:

• Managing, setting and updating prices for all price types: list, matrix, negotiation and customer-specific price setting and management
• Defining, publishing and managing rebate programs, including simulating forward-looking program effectiveness, running accruals and tracking rebate payments, and analyzing backward-looking waterfalls
• Configuring dynamic KPI cards to view the impact of pricing strategies as changes are made

Read more: Zilliant Price Management Datasheet

Zilliant Price IQ® is the leading AI-based price optimization application. It accounts for all statistically significant factors that drive price response, rationally aligns price/customer/order/product relationships and measures price elasticity with win-only data to set profit-maximizing or revenue-maximizing prices. It uses constraint-based optimization to simultaneously enforce business rules, runs predictive what-if scenarios, and produces optimized price guidance for all the different ways price is expressed in a business.

When pricing guidance is market-aligned and delivered within CPQ, companies are better able to:

• Improve the speed and effectiveness of pricing decisions within the quoting process
• Ensure price guidance in CPQ reflects up-to-date pricing strategies and market and cost changes Increase sales confidence by providing contextual analytics, including historical prices paid by other customers in the same pricing segment, and scoring price quality 
• Simplify a complex quoting process by dynamically optimizing line-item pricing with order-level targets 
• Accelerate quote turnaround time with real-time approval guidance

Read More: Price IQ | B2B Price Optimization Software

Conclusion

A common mistake that B2B companies make when they seek out a CPQ solution is to assume it will meet all critical pricing needs. While CPQ is often a necessary step toward modernizing the sales process, it must be infused with intelligent pricing capabilities to meet its full potential. Thus, B2B companies would be better served to investigate price optimization and management software in tandem with, or even before their CPQ research. Additionally, companies should consider their deal and agreement management needs during this research.

Companies that invest in price optimization and management software typically realize an incremental 100 to 300 basis points of gross margin improvement.

Want to enable smarter and faster pricing? Contact Zilliant today.