What is CPQ?

The definition
CPQ is a term commonly used for the process leading up to generating a sales proposal for companies offering complex products and/or services.

The goal with CPQ software is to help companies with the CPQ process, i.e. configure complicated product offerings, price them in correct way, and finally create fast and accurate quotes based on that information. CPQ software can ideally bridge the gap between lead to order.

The acronym
What does each letter in CPQ stand for?

Configure: The process of discovering, selecting, and combining product and service options to create a configured product while taking into consideration all rules and constraints. Examples may be manufacturing or packaging restrictions, marketing decisions or functional limitations.
Price: Deciding the amount required for payment while taking into consideration the configuration and additional conditions. Examples of additional conditions may be economic benefits, manufacturing costs and competition’s pricing.
Quote: Providing a document that describes the requested products and services, and the price of these.

Other names for CPQ
The term CPQ sometimes gets used interchangeably with other terms. Here are a few examples of common CPQ terms and how they may be different:

Sales configuration: Can be used interchangeably with CPQ even though the term does not explicitly state that a price and quote is included.
Product configuration: Basically the same thing as a sales configurator, but with more focus on combining correct options in a product. Doesn’t necessarily include pricing and quoting, and may be used internally within engineering instead.
Guided selling: The process of dynamically leading salespeople through a series of questions to feasible combinations of complex products and services to create optimal deals for customers. Check out our article about Guided Selling for more information.
Quoting system: A system that produces and distributes sales quotes to customers. The surrounding system around the sales or product configurator may sometimes be defined as a quoting system. But without a configurator is cannot be used unless the quoted product is non-configurable.

Issues CPQ may solve

  • Slow quote process
  • Long time spent on proposal generation and alteration
  • Low accuracy in quotes leading to incorrect orders
  • Missed opportunities of upselling and cross-selling
  • Low visibility of pricing changes

Read more about key functionality in a CPQ software or look at the key vendors in the market.