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What Is CPQ? A Manufacturer’s Best Friend!

Time is one of your most valuable resources, yet many manufacturers still waste time taking orders manually without the assistance of CPQ software. Take this example of a typical quoting process:

You manage a small, independently owned manufacturer of specialty delivery vehicles. A sales rep receives a call from a company looking to order ten trucks for their fleet. Your rep goes through all available options with the customer, explaining your capabilities.

Then, the rep contacts the manufacturing floor and talks to the engineers and machinists to assemble a bill of materials (BOM). Only at this stage can your team determine if they can meet the customer’s requested specifications.

Of course, as this process takes place, someone has to record all information, determine what customizations are required, and apply those pricing rules to the quote. After all this, it could take days to generate a quote.

It’s tough to wait for a major order that can make or break your company’s bottom line — and each day that passes is another day your potential customer could switch to a competitor. Even after you deliver the quote, the customer could return to update their specifications or alter the product mix, forcing you to start the quoting process again.

There has to be a better way.

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What Does CPQ Software Do?

Manufacturing companies use CPQ software to produce quotes and process orders for configurable products. This quoting solution automates repetitive parts of the ordering process, giving you time to focus on your customers. It also connects your internal systems, providing you with the visibility to make decisions on order requests at a moment’s notice.

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Let’s break it down, piece by piece:

Configure

The first process CPQ software takes over is configuring new, highly customized products. Customers increasingly want products tailored to their specific needs — and they want them now. 

The manufacturing industry is trending toward mass customization. The most forward-thinking manufacturers can make tailored products quickly and efficiently. This is really only possible with an advanced CPQ solution.

 

With a CPQ configurator, customers can decide what their product should look like and plug those details in. The CPQ system can automatically tell them if this is possible with their current capabilities and generate a quote. You and your customers no longer have to wait days to see if the order request is viable.

Price

If you offer your products in standard configurations with little variability, pricing might be relatively straightforward. But, if customers are coming to you with their specifications, you still need to be able to arrive at an accurate price as quickly as you can — even if you’ve never completed an order with that configuration before.

 

Pricing is where the automation capabilities of a CPQ solution really shine. Pricing can be based on BOM characteristics, production costs, optional features, or any combination of those elements. This can be done accurately because CPQ software uses a pre-generated rule set that automatically determines an order’s price. Each pricing rule can apply without manual intervention, removing human errors from the process.

 

What’s more, you can add approval workflows, discount structures, preferred customer pricing, and variable price books to maximize revenue and continue personalizing the buying journey.

Quote

All of this adds up to providing a quote for your customer. The objective is to generate an accurate quote as early as possible, putting yourself in the driver’s seat to make the deal. Nailing this last stage can also help you avoid redoing work and dealing with customer returns.

CPQ software helps you create a formal document to deliver to your customer. The right CPQ solution will also ensure your quoting documents are clear, easy to read, and accessible for all your clients.

The best CPQ software includes 2D and 3D visualization capabilities, allowing your customers to see their products before they hit the production line. Visualization helps the customer better understand what you’re offering so they can make changes before production starts. 

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CPQ to the Rescue!

Let’s revisit the scenario at the beginning of this article in an environment where CPQ software is already at work:

You receive a call from a company looking to order 10 trucks for their fleet. With CPQ software, you walk your customer through the options available with accurate, up-to-date information. Since you have all product variations and customization choices, you might even be able to upsell to configurations they didn’t know they wanted.

Your CPQ software knows all the rules for configuring your trucks, eliminating guesswork. As they select options, the price is updated in real-time while an interactive 3D model of the product reflects changes, showing the customer how their selections will look to ensure it meets their requirements.

Once configuration is completed, you generate a quote at the push of a button and email it to the customer. Discounting rules allow sales reps to offer discounts within boundaries established by management, or reps can send more aggressive pricing terms to managers for approval. You can do all of this in hours or even minutes.

Once the order is won, the order details, including detailed BOMs, can be sent automatically from your CPQ to integrated manufacturing applications, like ERPs and CRMs, without any data re-entry or manual intervention. Time saved is time gained.

The Perks of Using CPQ Software

Now that you know how it works, let’s boil down the benefits of integrating CPQ software for your business. Here’s what you can expect when you invest in automated quoting solutions:

Faster and more reliable product configuration: CPQ software simplifies even the most complex products and eliminates errors from incompatible options. When you use a configurator, you can be sure every order you quote is feasible.

Streamlined sales process: Instead of taking days or weeks, an order can be finalized and moved into production in a matter of minutes.

Standardized pricing: Sales teams don’t need to worry about complicated pricing structures when they’re built into the software. This also reduces the overhead for new employees and speeds up training. They can get right to work negotiating and serving their customers, not memorizing complex mathematical rules.

Improved customer satisfaction: CPQ software lets customers see 2D and 3D mock-ups ahead of time, so they know exactly what they are getting. This can give your customers the confidence they need to seal the deal.
 

Who Benefits from cPQ software?

The answer is everyone.  Both the customer and your business are better off when you use an automated quoting solution.

Customer benefits

Customers get a more satisfying and engaging experience when buying from a company that uses CPQ software. Since CPQ software makes the process faster and easier, customers don’t have to wait around for a quote. They will feel more confident and positive about the buying process, so they can commit to their order right away and get it into production quickly.

CPQ software can also be a problem-solving tool for your clients. Since each customization option is there to explore already, they may find another, more apt solution to their needs that they weren’t aware of before.

Using 3D and 2D visualizations lets you show the customer what their finished product will look like. Some manufacturers use CAD automation to provide fully configured drawings and 3D renderings of products. When customers can see their desires reflected through visualizations throughout quoting, they’re more likely to buy and more likely to order from you in the future.

Your Benefits

After implementing CPQ software, you’ll see a new level of speed and efficiency throughout the quoting process. Your reps can quickly close sales and move on to the next order, improving productivity. You can also bring new sales team members on board faster without extensive training.

Along with an increase in sales volume, you will see larger orders come through more regularly.With a full understanding of costs and margins for each component, CPQ software helps your sales team upgrade and upsell orders. The whole experience is more streamlined, leading to fewer errors and a better outcome for the customer.

Consolidating all product information into a single source of knowledge helps you better organize and store data. By formalizing the rules for configuration with CPQ software, you can enable your dealers and distributors to more freely quote products, knowing their configurations and prices will be accurate. You can even give your customers direct access by allowing them to configure products and make purchases without needing to go through a salesperson.
 

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The Modern quoting solution

CPQ software is a vital upgrade for manufacturers that have been doing things manually for too long. With quoting software, you can quickly generate accurate prices and quotes, without spending days getting feedback from different departments. You can eliminate mistakes that might have cost you a sale in the past.

But the biggest reason you should consider an automated CPQ solution is that it will allow you to grow your business by making the sales process quicker, easier, and more efficient. Contact a representative today and schedule a demo to see how CPQ can work for you.

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