Quantify the Impact of a CPQ Solution
In this article, we’ll take a quantitative approach to CPQ ROI and show how businesses can measure the financial benefits of a Configure Price Quote (CPQ) solution.
To achieve the CPQ benefits discussed previously, it’s essential that the following three tasks are completed:
1. Select the Best CPQ Solution
There are many CPQ solutions available, each tailored to different industries and use cases. Choosing the right solution for your business is critical, as the wrong solution can limit the potential CPQ return on investment. Depending on the complexity of your requirements, this selection may involve internal expertise or external advisors.
2. Select the Best CPQ System Integrator
Even with the best CPQ software, achieving the desired results depends on a skilled system integrator. The integrator should collaborate closely with the CPQ vendor to deliver business outcomes that align with your objectives. Consider evaluating system integrators with the same rigor you used to select your CPQ software.
3. Ensure a Solid Project Foundation
A successful CPQ project relies on a strong foundation, typically built on four pillars:
- Availability of project and change management skills: Most CPQ implementations require agile or hybrid project management capabilities. If these skills are not available internally, the customer must ensure the vendor or integrator can provide them.
- Achievable project timelines: Setting realistic goals is key. Overambitious timelines risk losing team and management support.
- Achievable project objectives: Aggressive objectives are common, but goals must be realistic to maintain excitement and commitment.
- Future CPQ users will be ready and willing to adopt the solution: Only a CPQ system that is actively used can deliver a measurable CPQ ROI. Plan adoption strategies from the start to prevent workarounds.
Before calculating Configure Price Quote ROI, you must define business goals and determine the depth of your ROI calculation. This often begins with analyzing your current processes.
Business Case Example
Manufacturing Company ABC analyzed its sales process and found that, on average, it takes eight business days to issue a quote, while competitors take five days.
To shorten the sales cycle, ABC examined steps such as:
- Product configuration
- Pricing accuracy
- Discount approvals
They discovered that 60% of quotes request a 30% or higher discount, causing approvals to take five days. The solution: provide more discount guidance to the sales team.
This example highlights the challenge of gathering accurate business data for a high-quality CPQ ROI calculation.
Getting Your Money’s Worth from Your Configure-Price-Quote Solution: Calculating CPQ ROI
Download the report for insights on successful CPQ implementation and real results.
Key Questions for Business Process Analysis
To estimate CPQ cost reduction accurately, start with:
- Which route-to-market causes the most issues? (Sales, Channel, E-commerce)
- Which area (configure, price, quote) causes the most errors? (Configuration, Pricing, Quote presentation)
- Which customer type experiences the most issues? (B2B, B2C, Public sector)
Additional data may be collected through sales team feedback, customer surveys, or questionnaires to improve the accuracy of your CPQ savings calculation.
How Our Calculator Works
Now, let’s walk through a simple CPQ ROI example:
- Customer ABC issues: 1,200 quotes/year
- Average quote value: $5,000
- With CPQ: 1,800 quotes/year, average value $5,100
Current order value: 1,200 × $5,000 × 70% quote-to-order conversion = $4,200,000
Projected order value with CPQ: 1,800 × $5,100 × 70% = $6,426,000
Increase in revenue: $2,226,000
Related Fees:
- Software license: $250,000
- Implementation: $650,000
- Training and other costs: $75,000
Total fees: $975,000
ROI: $2,226,000 – $975,000 = $1,251,000 in the first year
This example illustrates how CPQ ROI can be quickly calculated, though real-world estimates may require more detailed data. Focus on high-impact processes and solid, accurate data.
Rule of Thumb for CPQ ROI:
- Measure ROI as soon as project benefits start to appear.
- Ensure expected benefits exceed costs.
- Prioritize projects with the highest ROI potential.
Curious how much a CPQ solution can save you? Find out with our ROI calculator.
Why CPQ Is a Smart Investment
A well-implemented CPQ solution can:
- Reduce quote turnaround time
- Increase quote-to-order conversion rates
- Improve pricing accuracy and margins
- Enhance sales productivity and customer satisfaction
Disclaimer: Cincom has a vested interest in promoting CPQ solutions. ROI will vary depending on your business processes and adoption. Potential challenges may include adoption resistance, data integration complexity, and underestimated implementation effort.
Conclusion
Investing in a CPQ solution isn’t just about software; it’s about transforming your sales process and maximizing business outcomes. Calculating CPQ ROI helps you understand the tangible benefits, from faster quote turnaround times to higher conversion rates and improved profitability.
By selecting the right CPQ solution, partnering with a skilled integrator, and establishing a solid project foundation, organizations can achieve a measurable Configure Price Quote ROI that drives growth.
Ready to see the potential savings for your organization? Explore Cincom’s ROI calculator and discover how CPQ can revolutionize your quoting process today.
Novus CPQ is the leading CPQ Analyst and publishes a regular podcast of all things related to Configure-Price-Quote. Check out Frank Sohn and his company’s socials and podcasts:
LinkedIn: www.linkedin.com/in/franksohn
Twitter: @NovusCPQ
CPQ Podcast on iTunes
FAQs
1- What is a CPQ ROI calculator?
A CPQ ROI calculator estimates the potential savings and revenue improvements from implementing a CPQ solution.
2- How is CPQ ROI calculated?
ROI is calculated by comparing projected benefits (higher order value, faster quote turnaround, reduced errors) against total costs (software, implementation, training).
3- What data do I need to calculate ROI?
You need historical quote data, average quote values, conversion rates, current process durations, and estimated CPQ costs.
4- How are the ROI figures calculated?
ROI figures are derived by applying expected process improvements and cost reductions to historical data and projected sales.
5- Is this calculator specific to Cincom’s CPQ solution?
Yes. The calculator reflects Cincom CPQ capabilities and industry-specific implementation scenarios.
6- What are the main business benefits of a positive CPQ ROI?
Benefits include faster sales cycles, higher revenue, reduced quoting errors, increased sales productivity, and improved customer satisfaction.
