What is complex Configure Price Quote (CPQ) software?

This is a key question because as new strategies and tactics are adopted, product and process complexity tends to rise, enterprises need to better understand how complexity can be better handled, scaled and effectively wielded as a competitive advantage.

Traditionally complex CPQ referred to specific manufacturing styles, namely engineer-to-order (ETO) and highly componentized configure-to-order (CTO) products. However, businesses are increasingly interested in marketing and sale services.

At a high level, complex CPQ encompasses the business practices for varying how sophisticated products and services are marketed and sold. These practices entail configuring intricate, unique combinations of offerings, applying the right pricing, generating compelling sales documents (quotes and proposals) and producing accurate contracts and orders for fulfillment (including generating bills of materials and routings).

With complex CPQ, enterprises can accommodate changes at all levels of a product hierarchy on a regular basis. Typically, variation is managed for highly componentized offerings with large sets of configurable items and nested arrangements (components within components). Similarly, support for process variation is important when targeting different channels and customer segments, such as managing both direct sales and partner sales of machinery to business customers.
CPQ Graphic

There are eight rules of thumb that, in combination, indicate if product lines and supporting processes make an enterprise’s CPQ requirements complex:

  1. Many variations of and changes to components, subassemblies, and options, at a granular level within a product hierarchy
  2. Very large numbers of items required in an offering, since quantity has a complexity all of its own
  3. High-value products and services (like financial services) being marketed
  4. Products involving advanced technology, craftsmanship and/or intricate terms and conditions
  5. Outright customization performed with products
  6. Sophisticated pricing methodologies, e.g., attribute and component based pricing involving many variables, value-based pricing and/or dynamic pricing
  7. Many non-standard terms
  8. Many non-standard deals or transactions, requiring extensive approval processes

Complex Configure Price QuoteThese conditions provide rules of thumb to help decision-makers refine the scope of CPQ initiatives and better anticipate the level of complexity that a project may involve. Project planning is then significantly strengthened, leading to much better defined technical and implementation requirements.

 
To learn more about the benefits of implementing complex CPQ practices, download the whitepaper Mastering Complex CPQ for Dynamic Businesses.

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