Mapping a Successful CPQ Journey, Part II

AllCloud Blog:
Cloud Insights and Innovation

A successful CPQ program can make an enormous, positive difference for your business by helping increase efficiencies in the sales process to close deals — and therefore generate more revenue — faster.

But getting to that point of success takes work. All too often, organizations are lured into a false sense of simplicity when it comes to introducing a CPQ program. In fact, the most successful CPQ programs are actually quite complex underneath the surface. As a result, there are several considerations that must go into a CPQ program.

In the first part of this post, we discussed what it takes to get started on your CPQ journey, including taking an inventory of what’s needed, mapping your route, assembling your crew, finding a guide and getting on the road. However, that’s not where your journey ends. Once you’re on the road, there are several important stops to make to get to your destination. Those stops include:

Stop 1: Define Your Products and Bundles

First up: Defining your products and bundles, including all of the different configuration scenarios for how someone can buy anything you sell on its own or in groups. During this stop, you need to take a deep dive into all aspects of your products, such as how they can and can’t get grouped together for sales and how products and bundles differ based on regions, verticals, customer types and sales channels (e.g. partner sales vs. direct sales vs. distributor sales).  As you think through all the logic of what can and should go together, you might ask questions like: Do we offer different types of support tiers with various products? Are there dependencies that require some products to go with others or prevent some products from getting grouped together? You need to clearly define all possible product configurations before moving on.

Stop 2: Align Your Products and Bundles with Pricing

Once you’ve defined all of your products and the potential bundles, you need to align those purchase packages with pricing. After all, what you sell is one thing, how you price those items is another. Once again, you need to consider all possible scenarios on top of standard list price, such as distributor discounts, partner discounts, promotional discounts, subscription-based pricing and volume pricing. Some companies may also need to take into account cost plus markup, percent of total pricing or how prices change from one year to the next. Lastly, be sure to think through how your sales reps can add manual discounts to your products to help close the deal.

Stop 3: Determine Approval Requirements

Next, it’s time to factor in approvals. This stop involves determining when quotes require approvals, the amount of approvals required in each case and the path for approval. Many organizations require approvals for quotes that include a discount, quotes that exceed a certain threshold (which may differ by product or bundle) and quotes for a custom product configuration (since you may need to verify your team can actually build the solution). Once you determine approval requirements, you also need to identify who can give those approvals. Typical paths for approvals include legal for terms and conditions, finance for unique or non-standard billing, sales for pricing and discount levels and product or engineering for custom solutions.

Stop 4: Build Your Quote Template

Building your quote template is a major stop on your CPQ journey, as this template will be the output of all your work on the backend. During this stop, you will finalize how quotes get generated and put into a document for review and signature. It’s important to consider how many templates you need, as you might need one for proposals, one for quotes and another for sales agreements. You also have to think about what these documents should look like. For example, how long should they be, what images should they include, what branding requirements must they satisfy and how will they display different products? Yet another element that can complicate quote templates is the need for dynamic outputs, such as terms and conditions, renewal language and fields that should display only when certain products are included. At this stop, many companies take a detour on their CPQ journey to integrate an e-signature solution, such as DocuSign, to speed up the signature process.

Stop 5: Consider the Need for Amendments and Renewals

The final stop on your CPQ journey is an optional one. If you have subscription-based products that have a term length, then you need to account for amendments and renewals. Specifically, you need to decide whether term lengths, products and quantities can be amended mid-contract and, if so, how that should work. On the renewals side, you need to determine if renewals will be automatic or manual, if the price will increase at renewal and what happens if there is an upsell as part of the renewal process. It’s important to keep in mind that reducing the time spent on renewals is often a big way for companies to scale without having to add as many people.

Detour: Plan for Potential Side Paths

The five stops outlined here are the absolute minimum for a successful CPQ journey. It’s also important to plan for potential side paths based on your unique business needs. These side paths typically cover integrations with existing business systems, such as your ERP or accounting programs.

Are You Ready to Embark on Your CPQ Journey?

Once you do the pre-work to map your journey (as outlined in Part I of this post) and plan for key stops and side paths along the way, you will have everything you need to embark on a successful CPQ journey. As you get started, remember that the journey will have its twists and turns, but that’s nothing an experienced partner shouldn’t be able to guide you through. Most importantly, the end results of a well-mapped CPQ program will make the journey well worth the effort.

Nathan Spiwak

Read more posts by Nathan Spiwak