A CPQ tool (short for “Configure, Price, Quote”) can help your sales organization operate more efficiently, minimize errors, and reduce costs.
When implemented correctly, CPQ can have a transformational impact on how individuals sell and can dramatically change how sales teams or channel partners interact with customers and internal sales support teams. Given the profound impact a CPQ tool can have on a sales organization, you can start seeing ROI weeks or months—not years—after implementation.
Sounds easy, right? Well, implementations in the enterprise B2B commerce space are difficult. This has far less to do with the CPQ tool itself and much more to do with the inherent challenges of selling complex products. B2B products can be difficult to sell for the following reasons:
- They can have multi-part pricing, which adds complexity to the process.
- They often have long sales cycles.
- They may require collaboration from different subject matter experts.
- They can require customers to sign extensive contracts.
The larger the sales organization, the more each of these challenges is magnified. A solid set of baseline metrics is essential to track an implementation’s progress and to justify the time and resources needed to achieve success.
How to measure performance with a CPQ tool
As with any project, success can be determined based on improvements to a set of operating metrics, or Key Performance Indicators (KPIs). Standard Six Sigma techniques recommend choosing KPIs carefully early in the project and measuring each of them before implementation begins to establish a starting value. As the project progresses, measuring these KPIs again will allow you to quantify impact, whether it be positive or negative.
Customers using Oracle CPQ rely on five key CPQ KPIs to measure success.
1. Headcount to support the quoting process
The headcount to support the quoting process is the number of sales, support, or order entry team members your organization needs to generate quotes and order products. When the configuration, price, and quote process is manual, this number can be quite high. However, a CPQ tool automates key parts of the process to increase your team’s capacity and decrease the total headcount needed—along with any associated costs.
2. Resource time to produce a finished quote
Resource time to produce a finished quote describes the time it takes sales and sales support teams to research a product, create a quote, approve a price, generate supporting paperwork, and send it to the customer. This time also includes any updates or revisions needed before the final paperwork is sent. A CPQ tool is designed to guide and streamline these processes, so a reduction in resource time is a direct indicator of success.
3. Order failure rate
Order failure rate is the percentage of orders which are entered incorrectly the first time and require re-work, updates, or clarification before they can be successfully entered into your ERP or accounting system. By simplifying the order process, a CPQ tool reduces opportunities for errors to ensure orders are accurate.
4. Quote conversion rate
Quote conversion rate is the number of quotes won divided by the total number of quotes produced, revealing the rate at which your quotes result in sales. If your quote conversion rate increases after you implement a CPQ tool, it’s a sign that customers are responding well to your optimized process and buying more as a result.
5. Quote cycle time
Quote cycle time measures the time it takes for a CPQ tool to generate a quote that accurately estimates when a configured product will be delivered to a buyer and paid for. Also referred to as “quote-to-order-to-cash,” quote cycle time is important because it measures the length of your entire end-to-end sales cycle—and, whether your CPQ tool is creating efficiencies that shorten it.
Together, these five CPQ KPIs can help you understand whether your CPQ tool is delivering the value it promised, improving order accuracy, shortening sales cycles, and reducing operational costs.
Learn why Oracle Configure, Price, Quote was named a leader for five years running in the 2021 Gartner® Magic Quadrant™ for Configure, Price, and Quote Application Suites.
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