SF Learners Hub


Understanding CPQ: Streamlining Sales Quoting and Pricing Processes

Share This Post

In today’s fast-paced business environment, companies are constantly seeking ways to optimize their sales processes and generate accurate quotes efficiently. This is where CPQ (Configure, Price, Quote) comes into play. CPQ is a powerful sales tool that enables companies to quickly and accurately generate quotes for orders, saving time and ensuring pricing accuracy. In this blog post, we will delve into the key components and features of CPQ and explore how it can benefit businesses.

What is CPQ?

CPQ stands for Configure, Price, Quote. It is a software solution designed to streamline the quoting and pricing processes for companies. The three components of CPQ represent the fundamental steps involved in generating accurate and customized quotes for customers.

  1. Configure: The configuration aspect of CPQ allows sales teams to customize product offerings according to customer requirements. It enables the selection of specific product features, options, and configurations to meet the customer’s needs.
  2. Price: Pricing is a crucial element of the quoting process. CPQ integrates with price books that contain the list of products and their corresponding prices per unit. It ensures accurate and consistent pricing calculations, considering factors such as discounts, promotions, and any applicable pricing rules.
  3. Quote: Once the configuration and pricing are finalized, CPQ generates a comprehensive quote that includes all the selected products, pricing details, and any additional terms or conditions. The quote serves as a formal proposal to the customer, providing a clear overview of the products and services being offered.

Product Types: CPQ supports various product types to accommodate different business models and offerings. Some common product types include:

  1. Subscription: Products or services offered on a recurring basis, typically with a specified duration.
  2. Usage-Based: Products or services charged based on usage metrics, such as data volume, API calls, or user licenses.
  3. MDQ (Multi-Dimensional Quotes): Complex products that require configuration across multiple dimensions, such as size, color, or capacity.
  4. Bundles: Collections of products packaged together, either as pre-defined bundles or customizable options.

Key Components of CPQ

  1. Price Book: The Price Book contains the catalog of products and their respective prices per unit. It serves as a central repository for pricing information used during the quoting process.
  2. Product: A product refers to a specific service or item that a company sells to its customers. It can include tangible goods, software licenses, or professional services.
  3. PricebookEntry: The PricebookEntry acts as a junction object between products and the Price Book. It establishes the connection between a specific product and its corresponding price in the Price Book.
  4. OpportunityLineItem: The OpportunityLineItem serves as the junction object between Opportunities and PricebookEntries. It captures the relationship between the products selected within an opportunity and their associated price book entries.
  5. Pricing Methods: CPQ supports various pricing methods, such as List Price (retrieved from the price book entry), Cost Price (child object of the product), Block Price, Percentage of Total Price (calculated based on other quote line items), and Price Rules (injecting static values, field values, or summary variables).

How to Configure a Quote?

Configuring a quote involves customizing the product selection based on customer requirements. With CPQ, sales teams can use an intuitive interface to choose the appropriate product features, options, and configurations. This ensures that the quote accurately reflects the customer’s needs and aligns with the company’s offerings.

How to Configure Price Book Entry and Price Book?

The configuration of Price Book Entries and Price Books in CPQ enables sales teams to establish consistent and accurate pricing for products. Price Book Entries define the specific product-pricing relationships, while Price Books organize and store these entries for easy reference and use during the quoting process.

CPQ Managed Package: CPQ often comes in the form of a managed package within Salesforce, offering extensive capabilities and customization options. The managed package allows users to manage CPQ settings related to quotes, pricing, subscriptions, orders, and the Line Editor. Additionally, it provides configuration options for document-related settings.

Bundle: Simplifying Product Offerings A bundle refers to a collection of products that can be pre-packaged or configured based on customer preferences. Bundles enable companies to streamline the sales process by offering predefined combinations of products or allowing customers to customize their selections within specified limits.

Pricing Methods: CPQ supports different pricing methods to determine the cost of products within quotes:

  1. List Price: The list price is retrieved from the Price Book Entry and serves as the baseline price for a product.
  2. Cost Price: The cost price represents the actual cost incurred by the company to procure or produce a product.
  3. Block Price: Block pricing allows for discounted rates based on volume or quantity thresholds.
  4. Percentage of Total Price: This pricing method calculates the price based on a percentage of the total price of other quote line items.

Product Rules: Ensuring Accurate Configurations Product rules play a vital role in CPQ by enforcing business logic during the configuration and selection of products. They help sales reps assemble the right products and bundles consistently. Product rules are categorized into validation rules, selection rules, filter rules, and alert rules.

Advanced Approvals: CPQ provides advanced approval features, including Smart Approvals, Requiring Approvals, Delegated Approvers, and Replacing Approvers. These features enhance the approval process, improve visibility for sales reps, and streamline the overall workflow. Streamlining Quote Approvals CPQ offers advanced approval features to streamline the approval process for quotes.

Key features include:

  1. Smart Approvals: CPQ remembers the approval sequence, so if a quote is rejected at a higher tier, the same approver or group doesn’t need to reapprove it when resubmitted.
  2. Requiring Approvals: Sales reps have visibility into the approvals required as they work on quotes, eliminating surprises during the submission process.
  3. Delegated Approvers: Approvers can be assigned to take over approvals when individuals are unavailable.
  4. Replacing Approvers: Approvers who are no longer required can be easily replaced, eliminating the need to manually update every approval process they were part of.

Advanced Order Management: With CPQ’s advanced order management capabilities, sales reps can fulfill orders faster by seamlessly generating orders from quotes. The system supports split orders, future-dated orders, and modifications with point-and-click simplicity. It also provides a 360-degree view of the customer and enables integration with back-office systems for order fulfillment. Streamlining Order Fulfillment CPQ’s advanced order management capabilities help companies fulfill orders more efficiently.

Key features include:

  1. Faster Order Fulfillment: Seamlessly generate orders from quotes to ensure quick delivery of products and services to customers.
  2. Flexibility for Evolving Needs: Split quotes into multiple orders, manage future-dated orders, and modify orders using a point-and-click interface.
  3. 360-Degree View of the Customer: Generate contracts with comprehensive details, including contract terms, pricing, assets, and subscription information, providing a holistic view of the customer’s engagement.
  4. Connect to Back Office: Synchronize order details with the company’s ERP system for streamlined order fulfillment.

Dynamic Bundles: CPQ allows the creation of dynamic bundles, empowering sales reps to choose their own options within a bundle. Filter rules are utilized to control the available options, ensuring a smooth and guided selling experience.

Amendment Process: The amendment process in CPQ handles changes to a contract after it has been signed. If a customer wants to modify quantities, add or remove products, or make other adjustments, the amendment process allows for efficient updates to the contract.

Price Waterfall: CPQ’s price waterfall illustrates the breakdown of prices throughout the quote process. It includes original price, list price, special price, regular price, customer price, partner price, and net price. Understanding the price waterfall helps sales reps and customers comprehend the various pricing components.

CPQ serves as a powerful sales tool that enables companies to streamline their quoting and pricing processes, resulting in faster sales cycles, accurate quotes, and improved customer satisfaction. By leveraging the key features and components of CPQ, businesses can optimize their sales operations and drive growth. Embracing CPQ can be a game-changer in today’s competitive business landscape, enabling companies to enhance their sales effectiveness and deliver exceptional customer experiences.

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe To Our Newsletter

Get updates and learn from the best

More To Explore

The Power of Salesforce Integration

What You’ll Learn What Is Salesforce Integration? Salesforce integration involves combining the data and features of Salesforce with another application, creating a cohesive experience for