A configure-price-quote (CPQ) tool makes buying and selling configurable services easier.
Service providers, just like any business, must be able to adapt to changing market conditions. With discrete products, market agility is enhanced by using sophisticated CPQ tools.
CPQ can achieve the same results when selling services; however, the case for supporting the selling of services with CPQ is compelling for all kinds of reasons beyond market dynamics.
Complex, discrete products often require the delivery of additional services to ensure that the customer will fully enjoy the benefits associated with acquiring and using the product.
For pure, standalone services such as financial products or insurance, CPQ can provide great benefit to the selling organization, as well as the buyer. Not only does CPQ ensure that accurate pricing information is delivered to the prospect, it also ensures that the proposed service will also be beneficial to the buyer.
Early in my career, I ran a service organization that was responsible for the implementation of various business systems. These fixed-price, on-site, turnkey projects were labor-intensive and subject to completion deadlines.
As a result, they were frequently scheduled for afterhours and weekend shifts. They also involved lots of travel and lodging expenses. My bosses used to laugh and refer to my organization as the place where profits went to die.
We did have a prodigious run rate once onsite, and a poor decision or wrong turn could put a project in the hole very quickly. However, in reality, we were very profitable and successful. The reason we were successful was that we stayed within the scope of our own knowledge and expertise. This was critical to our success. The ability to avoid changes in scope, timeline or resources required kept us within our operational budget and kept us from having to deal with changing customer expectations due to performance issues.
Unfortunately, service-oriented projects can quickly and easily hemorrhage vast amounts of money. In most cases, the reason has to do with projects that have moved beyond their functional scope as well as the expertise of those providing the service.
Pick up any trade journal and you are sure to find a news item relating to some “mismanaged” service project that is bleeding dollars and ruining careers.
Why Are Services Unique, and How Can CPQ Help?
Services are unique because there is a high potential for misalignment between seller and buyer relating to capabilities, expectations and goals. Let’s examine each.
Selling Configurable Services and Capabilities
Services are difficult to portray visually, and they rely on descriptive language to convey their strengths, features and benefits. Words are subject to interpretation and relative definition.
A service capability may be described or specified as Fleet Maintenance for Delivery Vehicles. What does maintenance include? Changing the oil? Checking the air pressure on tires? Does it include washing and waxing vehicles on a periodic basis? What about brake jobs, safety checks or engine overhauls?
Using CPQ to configure complex services eliminates this confusion by maintaining a very specific listing of what services are available. Individual deliverables are clearly identified and described.
Configured service packages bundled together may be selected for inclusion in a specific service contract or quoted à la carte.
Just as parts combine to make sub-assemblies and sub-assemblies make up assemblies that in turn are combined into deliverable products, services are hierarchically listed in the same manner as physical parts that are listed on a bill of materials.
This protects the buyer from making an assumption about what is included in a service package, and it also protects the seller from sales reps who overpromise on deliverables.
Buyer and Seller Expectations
Consider the term Payment Is Due upon Completion of the Project. The word “completion” must be defined in exquisite detail. The seller may see completion as a point when specific deliverables have been fulfilled. The buyer may only see completion as a point when every question has been answered, every hiccup has been addressed and proven benefits are being accrued and documented.
Similarly, CPQ for providers of services mitigates this by defining the specifics associated with any descriptive term. The proposal generation facility will produce an automated proposal and statement of work (SOW) that clearly states what each party’s expectations are.
Instead of stating that the “seller will train your users,” CPQ will identify specific types of users to be trained with competency-level descriptions. The resulting contract and SOW will provide specifics and details such as: “four database administrators, three shift supervisors, 20 finance personnel, 15 shipping clerks, four sales managers and 40 sales reps will receive role-specific training in the use of the product.”
Instead of simply stating that the workers supplied for the project will include “x” number of contractors trained appropriately, the specifications will list required certifications and other needed credentials associated with workers who are qualified to deliver the services and training under the contract.
No one expects sales reps or buyers to be legal experts, so CPQ must incorporate legal, expert knowledge into the descriptive elements of specific services and the terms and conditions that govern the contract itself.
Project Goals and Success
What does a successful project conclusion look like? Some buyers will not be able or willing to share exactly what underlying issues are driving the project.
For instance, a buyer may solicit services for designing and upgrading a new building security system. The buyer may articulate a vision of a safe and secure building and work environment as the goal of the project. He or she may not disclose that the project is motivated by suspicion of employee theft or industrial espionage.
The buyer may see what appears to be a direct cause-and-effect linkage, but it might not actually exist. Losses may not be due to neither theft nor espionage. It may be that a dishonest supplier is shorting them on deliveries, an incompetent warehouse receiving agent is careless in documenting receipt of supplies, or it may be some other external factor that is completely unknown.
The services contractor cannot adequately address the needs of the buyer if the causal agents are not fully identified and understood.
CPQ facilitates a full and total understanding of the buyer’s pain points and situation through the scripted interviewing process. This guided-selling technique utilizes a hierarchy of questions and responses to guide the seller/buyer conversation throughout the buying process.
The buyer answers specific questions, and those responses in turn result in additional, more-focused questions. Ultimately, the responses begin to reveal a clear and accurate picture of what the actual situation is.
Finally, these buyer responses are used to generate solution recommendations and specifics regarding how the seller will help the buyer. The buyer supplies the inputs that drive the process of configuring complicated services to be offered.
CPQ for configurable services makes great sense for both seller and buyer. CPQ facilitates the intelligent selection of configurable options and add-ons, and it will configure pricing for services—even applying accurate discounts to ensure the buyer and seller that the price quoted is the correct price.
The vagaries of poorly understood service agreements have resulted in many unhappy business transactions that are almost never the result of intentional misrepresentation by either party.
The issue is almost always poor assumptions or forgotten or misunderstood requirements that result in substandard performance or abandonment of the project altogether. Remedies are almost always very expensive.
CPQ for service-focused operations will take the mystery out of selling and acquiring configurable services.