September 4 by Tom Banton
To quote Richard Buckminster, I’m not a genius. I’m just a tremendous bundle of experience.” Specifically, one of my areas of expertise is Configure Price Quote (CPQ), pricing solutions, and configurable bundle structures.
Some systems call it a ‘Model BOM (Bill of Materials)’ others call it an ‘Option List’ but whether building configurations for sales or manufacturing (or both), the C in CPQ all starts with a potential bundle of products and services.
Most companies implementing CPQ solutions struggle with just what is the perfect structure of components and services. If you throw everything plus the kitchen sink into a bundle and build them wide then the art of configuring becomes lengthy and sales adoption becomes low. If you build your structures close to a one-off per quote and too narrow then maintenance of all those bundles becomes a nightmare.
Try to remember these key concepts when thinking about your ‘Bundles of Joy’ in your pricing solution:
How you sell is NOT how you fulfill
Ask someone in sales how you sell a product and ask someone in manufacturing or engineering how you build a product and you will get completely different answers. Bundles built for Sales should be relatively flat and straight forward where as BOMs built for manufacturing might resemble an Italian family tree – absolutely loaded! Many ERP configurators are great at getting a configured product to the floor but have low to no sales adoption on the front end. For sales configurations consider the minimum required questions to get a price to the customer. Get creative in your modeling exercise and have questions for sales to answer (to get a price) and use rules for fulfillment AFTER the sale to finalize the configuration. Don’t make sales jump through manufacturing hoops just to get a price to the customer.
If it Quacks like a Duck
Then it is a duck. Now that you’ve simplified your structures for sales, they will be the first to ask for more complexity. Many will want their own models and their own rules by channel, by industry, by region, etc. But the simple fact is, if the components are mostly the same, then the bundle should be the same. Use attribute-based rules to build configurations based on non-option questions. Use default rules based on customer and/or the rep to help simplify their configuration process. Use pricing rules to price according to options and attributes (Attribute based pricing blog to follow!) Do NOT create bundles for different use cases for similar products.
Maintain, Don’t Gain
Just because there is a clone or copy function in your BOM or bundle program doesn’t mean you should use it! Strive for continuous model improvements and usage.
For more information on CPQ best practices, download the Ultimate Guide to CPQ.