The manufacturing industry is experiencing a new wave of digital growth. Evolving consumer preferences, cutting-edge technology, the rise of B2B e-commerce, and the need for resilience are key drivers shaping this phenomenon.
Today, manufacturers understand that doing business effectively and satisfying customers in a digital-first environment involves a higher degree of digital maturity. And to reach an optimal level of digital maturity, enterprises are increasing their investments in transformative sales technology, like configure, price, quote (CPQ) software.
What is CPQ software?
CPQ software is quote-to-cash technology that enables companies to execute a smooth transition from a traditional consumption model to more flexible consumption business models, also known as everything-as-a-service (XaaS). CPQ can help manufacturers streamline the quoting process by quickly generating accurate price quotes for their B2B prospects.
For growing companies that have to manage an increasing portfolio of products and services and a larger customer base, CPQ is an ideal solution for calculating prices quickly. The software enables sales reps to prepare personalized price recommendations for potential customers in a time-efficient manner by automatically pulling together relevant data and generating quotes based on discounts, customizations, compatibility, and more.
With instant gratification and speed being among the top preferences of today’s modern consumers, businesses that don’t come close to delivering on this expectation risk losing revenue and profit. The longer it takes to close a deal, the less likely it is to secure the prospect. CPQ software automates and expedites the quoting process, making it much likelier to close a deal fast.
How CPQ enhances your sales tech stack and returns
To enable sales professionals to achieve the highest possible return, an enterprise’s tech stack should provide access to the right software tools and technologies for optimal performance. By deploying CPQ solutions that work in tandem with CRM, ERP, and other business technology programs, manufacturers can ensure integrated data and accuracy. And this is only the beginning of a compelling list of perks for CPQ users.
1. Enhanced sales efficiency and faster selling cycle
According to research, 66% of a sales rep’s day is consumed by exhaustive sales processes. And for non-CPQ users, producing a typical quote or price proposal takes 73% more time. CPQ software relieves sales reps from manually calculating price quotes for each prospect, thus improving sales efficiency and minimizing time and productivity losses.
Additionally, more research shows that some CPQ users have been able to reduce the sales cycle by 28%, experience a larger average deal size, and a 49% higher proposal volume. A shorter selling cycle is becoming critical, especially in increasingly fast-paced environments like the manufacturing industry. B2B prospects tend to choose the vendor that delivers the correct price proposal as quickly as possible.
2. Optimized pricing and error-free quoting process
Best-in-class CPQ solutions offer advanced price optimization features that can help manufacturers maximize their margins or net revenue. Most manufacturers with meaningful variable costs can leverage CPQ to capture both costs and margins and manage both net revenue and margin percentages to predict discount percentages.
Likewise, advanced CPQ solutions enable them to leverage machine learning in order to predict and generate optimization results that sales reps can access. AI-based pricing recommendations eliminate the guesswork and risk of miscalculation, making the price configuration process much more reliable and enabling sales reps to communicate the right price for their prospects’ needs.
3. Overall increased profitability and revenue
To increase profitability, sales teams need to eliminate manual and unnecessary work in order to focus on closing bigger deals with higher margins and respond faster to the needs of their prospects and customers. CPQ software enables them to achieve that by automating pricing optimization and configuration while also speeding up the sales cycles.
To top it off, manufacturers can use CPQ software to cap discounts, thus ensuring that their sales reps don’t recommend the wrong price. This doesn’t only help align quotes and proposals with customer requirements, but it also ensures that they don’t fall below a defined margin value and cut into profits.
CPQ introduces new capabilities for efficient sales operations
Especially for growing businesses that have also embarked on their digital transformation journey, CPQ can provide capabilities that will help them support a more diverse products or services portfolio as well as complex offerings and pricing structures. According to Deloitte’s capability map, CPQ software should enable a transformed sales process through the following capabilities:
- Guided selling
- Product and service configuration
- Price adjustment
- Standard and non-standard deal management
- Workflow and approvals
- Quote generation and amendments
- Quote to order conversion
- Asset-based ordering
As more and more manufacturers are creating value-added offerings and selling solutions as-a-service, a CPQ capable of supporting these new business models is paramount in ensuring sales teams are aligned with the new offerings and able to properly communicate them to their prospects.
Moving forward, investments in CPQ software will continue to increase, as manufacturers expand their offerings and grow their consumer base. By 2026, the global CPQ market size is forecasted to value $3.9 billion, with North America and Western Europe leading the pack due to their swift adoption of technology.
The rise of B2B digital commerce is a major factor driving the need for CPQ solutions among manufacturers. As e-commerce becomes the new way of doing business in the industry, CPQ software is becoming a powerful tool for companies with highly customizable products that are faced with more complex sales processes than ever before.
Due to the rise of e-commerce in manufacturing, our research found that 36% of manufacturers will invest in CPQ systems in 2022 to transform their online sales process into a data-driven instrument for profit.
Those who have already invested in CPQ software have reported that their quote generation process is now 10 times faster, their approval time has been reduced by 95%, they are moving two times faster from quote to cash, and they have a 30% quicker ramp for new reps.
Such positive and profitable outcomes, as well as CPQ’s ability to streamline sales and drive excellent ROI, makes it one of the major technology investments for many manufacturing companies in 2022.