What is Configure, Price, Quote (CPQ)?

Posted by Philip Huthwaite on November 5, 2015
Philip Huthwaite
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What does CPQ mean?

Configure, Price and Quote (CPQ) brings together three critical elements of a sales cycle. It can be applicable in business-to-consumer (B2C) sale interactions, but is more commonly adopted in business-to-business (B2B) situations. 

The Configure, or configuration element, essentially refers to “what products or services do I want?” Where you are selling complex items or bundles of items, it guides the user to ensure items are selected that are compatible, or supports in upselling/cross-selling opportunities to recommend e.g. “customers who bought this product, also bought…”.  



Let’s first take an example from a B2B environment. A lighting manufacturer has been asked to quote for a job that involves providing light fixtures for a university corridor. The corridor is 30 metres long, and the customer would like to have the lights suspended from the ceiling with no exposed cabling. To quote for the job, the sales person uses a configurator to select a design of light fixture, and enters the parameters requested. Because of the configuration rule set setup in the system behind the scenes, the system first tells the sales person that they can have a 28-metre fitting (because the chosen design comes in standard 4 metre lengths). It works out all the associated suspension kits needed, caps required to hide the cabling, and connection kits to join the individual components together to make up the complete 28-metre fitting. It may even suggest certain upselling opportunities such as maintenance packages available on some of the items selected. Where you have thousands of products, even the best sales person in the world will not remember all the right combinations.

Let’s take an example from a B2C environment. You’re looking to purchase a new computer, so you visit a reputable online retailer. You select the laptop brand you would like, and start the checkout process. Step 1, you are asked what size you would like the screen to be. Step 2, you are asked how much memory. Step 3, you are asked what graphics card you would like, and so on. This guided selling approach again ensures you are presented with the correct combination of components.

The Price element takes over once you have selected your components. It is the pricing engine that sits behind the scenes, and ensures the correct price is displayed for that combination of items selected. You may have setup certain bundle rules, or discount structures based on the combination of parts selected. The pricing solution takes the stress away, to minimize any pricing errors.

The Quote element is the final piece of the jigsaw. It takes the selected items, and the assigned prices, and presents them in a professional formatted manner either shown to the consumer on the summary page of a website before they enter their credit card details, or in a company branded pdf, excel, or word document, ready to be sent out directly from the system, or downloaded.

In earlier articles we have covered topics such as the reasons why excel based pricing could be hurting you business and the ROI of Price & Quote Management. This article about CPQ is a system that can replace your excel processes and also deliver real return on investment. Read further to see the benefits.


What are the benefits?


At various stages in the configure cycle it can present opportunities to upsell or cross-sell. Therefore it gives you the opportunity to increase your average deal size, which is good for your bottom line and business growth.



No one wants to manufacturer the wrong item, ship the wrong component, or not send all the required items to a customer. CPQ takes the worry away and automatically does all the checks to ensure the correct combination of items are quoted.



By eliminating errors, this will support a reduction in costs caused from re-work: such as having to manufacturer the correct components again, or having to send out an engineer on site a second time because the incorrect items were shipped originally. Also less time will be needed on training new employees on complicated product sets, as the logic is handled automatically.



When your marketing team wishes to introduce new products and customized offers, the CPQ tool-kit can be used to quickly setup the combination of items in the admin side of the system, so they are then instantly available to the salesforce.



No need for Ping-Pong email trails and calls between your office team and salesforce, to double check what products can be sold together and what the price should be. The CPQ streamlines the process and allows a quicker turnaround time of complex quotes. Not only will this increase your chances of winning an order as you can reply to the customer quickly, but also frees up the time of your salesforce to do more selling, which will again support business growth.



Where you are able to make the complex seem simple, your customers will be satisfied and impressed that you are knowledgeable about your product or service set.


When should you consider CPQ?

  • You would like to implement new offers in a short time,
  • You can see an opportunity from attracting customers with precisely tailored offers,
  • You suffer from a high or growing salesforce or customer churn rate
  • It takes a long time to create quotes
  • You have difficulties in pricing
  • Your salesforce is not completely office based, they are spread geographically
  • You are spending too long manually administering the process

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