Home Virto Commerce blog Adoption of CPQ Software in B2B eCommerce

Adoption of CPQ Software in B2B eCommerce

Feb 3, 2021 • 5 min

Few of us remember what life was like before the 1980s. I am not even talking of the gigantic computers cramped up within the four walls of the MIT labs or nerdy scientists with classic mullet on their heads posing in front of the monstrous machines. No, think of a prosaic life of a typical sales representative. From flipping the rotating file device with business cards and making hundreds of calls to memorizing all the equipment parts and drafting possible machinery configurations that the customer would most likely buy – a daily routine that was hardly enviable! The 1980s were an extraordinary time and not only because of the emergence of Guns N’ Roses but also because of the invasion of affordable and futuristic devices that allowed millions of people to discover computers. The 1980s also irreversibly changed the life of a salesperson. It was the time when CPQ technology was born. Initially, it was a simple configurator that functioned as a rules/logic-based system that ensured the buyer specification didn’t conflict with the company’s resource planning. The configurator application, originally catered toward engineering teams, later shifted toward CRM and became more of a sales tool. Forty years would pass before the concept of CPQ was popularized when Gartner published a report finally defining the technology:

Configure Price Quote (CPQ) application suites provide an integrated set of software applications supporting the configuration, pricing and quote generation activities that accompany solution and negotiated selling.

CPQ was clearly born out of necessity. The complexity of machinery, service contracts, and other business processes and products were exponentially growing and there was no way for the sales representatives to remember all of it. There’s just not enough brain space. The increasing need for scalable and structured sales processes, including the sale of the right product combos, applying and controlling discounts, and automating approvals, was precisely why CPQ technology was born. Over the years, it has helped countless sales reps close deals faster, and companies accurately quote, track, analyze, and forecast sales of products and services. 

As the digital world evolved, so did CPQ technology, which gradually seeped through the web’s cracks and found its way into digital commerce. CPQ has become instrumental in making buyer-interaction more autonomic and personal: customers now self-serve and configure their products independently online contacting a salesperson only when their support is required.

In this piece, we’ll explore the CPQ technology within B2B ecommerce solution and try to figure out how to make it work for your ecommerce store.

By the end of the article, you’ll know

  • Definition of CPQ in B2B ecommerce
  • Advantages and disadvantages of using the CPQ technology
  • Things to consider while choosing CPQ software
  • Implementation approaches 
  • Strategies of making CPQ technology work for your customers in your B2B ecommerce marketplace solution

What is CPQ in B2B ecommerce?

CPQ, or Configure Price Quote, software refers to a type of software system that helps sellers quote complex and configure(able) products.

Let’s look at the truck industry as an example. A typical truck consists of many configurable parts, sometimes up to 500+, with each part having a possible alternative, sometimes up to 20+. The theoretical configurations of any given truck can therefore be almost limitless.

The CPQ software allows the customers to configure the whole product family while the configurator helps them find the necessary or optimal parts based on predefined models or determined by the customers’ initial choice. 

As you may have guessed, the “C” or configure part is the most complex component from the CPQ formula, primarily because it deals with combinatorial explosion, that is – the rapid growth of the complexity of the problem. There are three main approaches or systems that try to deal with ever-growing complexity:

  • Rule-based truth-maintenance systems, which represent the first generation of configuration engines dating back as far as the 1970s;
  • Constraint satisfaction engines, which can handle the full set of configuration rules but can be difficult to maintain because of all the rules that have to be written to accommodate its intended use;
  • Compile-based configurators, built on top of constraint satisfaction engines and further research in the binary decision diagrams, can handle all the combinations while ignoring how the rules are written. Because of such agnosticism, these configurators can handle inputs from the legacy systems and manage increasingly complicated rules and constraints associated with the customizable products.

Artificial intelligence (AI) has been an important component of CPQ solutions for many years, but recently it has gotten smarter and more versatile. AI and ML tools in CPQ can improve deal guidance, quote efficiency, subscription metrics, optimize margins, and suggest dynamic pricing, rebates, and incentives. For example, while your customer is configuring a product, AI can provide recommendations specifically tailored to that customer; or at the checkout-page, AI calculates the final price considering previous price agreements, existing subscriptions, and applicable discounts without a single look into the deal by the salesperson.

Another important technological component of the typical CPQ software is 2-D, 3-D, and AR visualizations. Digital assets, especially during quarantine, are the only way for customers to visualize a company’s products and interact with them. In fact, visual representations have become so sophisticated that they don’t only represent and describe a digital model of a physical counterpart (product, system, process) with all its attributes and behaviors, but are also able to dynamically collect and combine data from the adjacent fields during its life-cycle stages. The data from operations, service, engineering, and so forth continuously flows into the model allowing new ways of analysis, simulation, and optimization. The resulting model enables the end-user to evaluate the product by looking at its shape form and compare its features and options with the products’ description. Some representations allow consumers to fine-tune and interact with the models, be it turning them around, clicking on buttons, changing colors or textures.

Advantages of CPQ software

In times of social distancing and isolation, CPQ is more of a necessity than a luxury. Customers need to be able to serve themselves: browse the digital catalog, assemble the necessary parts, and receive the prices for configured products. However, even in better times, which are deemed to come when the pandemic steps back and allows for a breather, CPQ offers significant advantages for digitally mature businesses.

  1. CPQ increases the speed of the selling process: it shortens the sales cycle by providing a centralized location for all product and pricing information, suggesting personalized pricing recommendations, allowing customers to tinker with configurations and manage product complexity before contacting a real person. If preparation of quotations and proposal documentation still takes a huge amount of your time, perhaps it’s time to automate that process, so your sales team spends more time selling and less time fiddling with paperwork. Moreover, sales teams gain more autonomy in the selling process because they don’t have to rely on the engineering and product teams in producing visual configurations since they are already there. The elimination of back-and-forth communication between the sales and engineering teams can actually strengthen collaboration and improve rapport during the sales process. While the sales team is doing its actual job, which is selling, engineering and product teams spend more time innovating and working on improving the CPQ solution.
  2. CPQ eliminates errors: CPQ solutions ensure automatic compliance with the product, pricing, and business rules and root out the possibilities of human error. A good and accurate quote delivers a compelling proposal that can urge your customer to arrive at a decision faster. 
  3. CPQ maximizes the deal size: guided selling that’s stitched into CPQ solutions highlights up-sell and cross-sell opportunities that not only help customers configure their products but also have the potential of increasing the deal size. 
  4. CPQ allows businesses to stay ahead of the competition. Being able to adapt to the ever-changing circumstances is a tremendous competitive advantage. CPQ solutions with their automatic quoting and pricing can account for changes in different areas of your business and deliver up-to-date knowledge to your sales team and your consumers by accurately pricing products against multiple rules and constraints and suggesting configuration parts that are currently available.
  5. CPQ helps overcome typical buyer objections and drive customer satisfaction: the visual representations ensure customers know exactly what they are getting without any surprises which ultimately results in happy and repeat customers. 

Shortcomings of CPQ software

Chances are you’ve probably heard one of those horror stories of failed CPQ implementations that left the trailblazers in tears and with empty pockets. Truth be told, CPQ is a complicated technology that requires a team of professionals, heavy customization, and maintenance, which, in combination, is perhaps the very reason CPQ has low adoption rates.

These are a few typical reservations associated with CPQ adoption:

  • High upfront and maintenance costs with a continuous need to nurture and feed the system;
  • Inability or difficulty to scale to channels and partners;
  • Reluctance for use by sales reps and lack of trust from customers, who still prefer working with engineers to figure out their own optimal solutions;
  • System performance issues: since CPQ software with its sophisticated visualization tools needs to work on all possible customers’ devices, including mobile phones and tablets, system performance is critical. Even though there have been huge improvements in consumer hardware, software, and ecommerce platform capabilities, there’s still a disconnected technology landscape that prevents businesses from investing more money in CPQ software lest it doesn’t work properly on a customer’s device.

These reservations can be tackled on several fronts: 

  1. The CPQ software can be used in combination with an AI-based advisor, who can support customers in their configurations and choice of products by providing intelligent advice on solutions.
  2. Careful budgeting and working closely with the development, engineering, and sales teams before, after, and during implementation can eliminate many, if not all, problems mentioned above.  
  3. Standardizing, organizing, and formatting data consistently across the company and providing access to the same CPQ data points and tools to all involved decision-makers, will transform the CPQ software into a virtual warehouse of high-quality data. This will allow people to leverage its power to draw inferences from the same starting points and make informed, objective decisions.
  4. System performance issues are usually addressed by designing CPQ software in such a way so as it works on the lowest common denominator. Optimizing the creation of visual assets, such as determining the individual weight of a model, the number of different objects in the scene, and object materials, can help with performance issues and determine the golden mean that will satisfy both engineers and sales teams.

Things to consider while choosing a CPQ solution for B2B ecommerce

Sparing you the trouble of mentioning the obvious criteria, such as the cost of the solution, the availability of the technical support, and relative ease and straightforwardness of its use, we’ll concentrate on more subtle aspects of choosing the optimal CPQ solution. The selection criteria listed here are far from exhaustive. However, it shall give you an idea of what to consider while shopping around for CPQ software.

  1. Look for the solution that can seamlessly integrate with your existing systems, including ERP, CRM, and accounting software. You need a solution that can connect to the system’s architecture and retrieve data from multiple locations. The optimal choice is CPQ software capable of cloud deployment. 
  2. Besides integration with your company’s systems, CPQ software must be able to exchange data with third-party services. Depending on your industry, your vendors need to have an opportunity to communicate with your quoting solution and exchange real-time information like pricing and products’ availability.
  3. Ensure CPQ works on a mobile device. The portability is no longer a game-changer but a necessary prerequisite. Your CPQ solution should provide a responsive experience both on the web and mobile and render the right information to the right customer.  
  4. Your CPQ solutions should be customizable and flexible enough to align with your existing processes and systems. You should be able to have complete and comprehensive control over the looks and interior of your software.
  5. Look for additional features that your business processes could benefit from: reporting, automated ordering, subscriptions, contract lifecycle management, and so forth.

Implementation of CPQ software

Before rolling out any new technology, you need to formulate measurable goals that you wish to achieve with its implementation.

For CPQ, those metrics can be 

  • Accuracy of generated quotes
  • Decrease in quotation turnaround time
  • Reduction in time selling
  • Average increase in order value
  • Increase in renewals and subscriptions rates.

Then, based on your business needs, requirements, and expectations, you need to design an efficient CPQ workflow and document the quote generation and approval processes. Work closely with engineering, product, and sales teams to determine what data would form the core of your CPQ solution: the number of SKUs, value-added services, terms and conditions, pricing, and so forth. The subject matter experts will help you determine the product bundle configurations and cross-reference them with customer antics. The result of your teamwork will serve as a foundation of your CPQ solution, which will most likely be fine-tuned for a while until you reach the golden mean that will satisfy all involved parties.

Most of the CPQ solutions on the market are extremely complex and offer an overwhelming number of features, some of which you won’t need. Hence, it’s important to prioritize the features you want and implement those first. You may start with a solution “out of the box” and gradually add more features until the software meets your requirements.

The focus on data management and system integration is also critical. CPQ needs to source data from multiple sources across many systems in your organization, think CRM and ERP. Identify where data can and should be sourced from, check it for accuracy and quality, identify its owners, and finally, assign responsibilities for maintaining the data error-free and up-to-date. Make sure your CPQ solution seamlessly integrates with other critical business software, test it, and iron out the bugs.

Everyone on the team should be comfortable with CPQ software. Many projects fail because people don’t find software user-friendly or even necessary. To eliminate common user objections, you need to ensure your people are aware of software benefits, its functionality, and potential. Supervised training and information-rich user guides can help people get comfortable with software quickly and ensure that everyone on the team knows what they are doing.

How to make CPQ software work for your customers

The birth of the CPQ technology, as mentioned earlier, was mainly conditioned by the complexity of the B2B sales processes. At first, CPQ made it easier for sales reps to find the ultimate configuration of their buyers’ products and services and quote them accurately. As the CPQ technology shifted towards the self-service paradigm of digital commerce, it became imperative for sales reps and engineers to simplify and adapt it in such a way that it is comprehensible, useful, and serviceable for customers. By investing thousands of dollars into a complex technology, you don’t want to end up with something that customers don’t use or have no idea how to work with. So, the question is, how to make CPQ work for your customers so that they actually end up using it and derive the maximum possible value from it.

If your buyers were accustomed to filling out the forms or spending countless hours on the phone with a sales rep, they might have a hard time transitioning to a new system, leading to mistakes and overall resistance to using the software. By rolling out CPQ technology in a big swoop, you might only turn your customers away or negatively impact its long-term adoption.

First of all, consider using the Crawl-Walk-Run approach to roll out your CPQ solution gradually, for example, across multiple releases, deploying its functionality in pieces. Start with relatively easy functionality that will certainly benefit most buyers. Introducing these easy-to-use features will help spread positive feedback and increase customer awareness of the potential benefits yet to be reaped.

Customers who are used to having an in-person communication and collaborative, consultative experience may feel threatened they won’t have this opportunity to ask for clarification. To solve this problem, encourage your sales team to follow up when customers place their orders to ensure that you receive accurate information and customers are happy with their final proposals. The follow-up call is also a great opportunity to gather customer feedback on the rollout of the CPQ solution and reassure your buyers that they still can access sales reps as required while experiencing the independent shopping experience. Every proposal that your company ships should include ways to get in touch with your company and share feedback or pose any questions.

Other ways to address the customer hesitancy is to provide as much information as possible upfront, producing FAQs, user manuals, video tutorials, either before or immediately after rolling out the new system. Prepare your salespeople to answer all software-related questions when the customer calls or emails about them. The ultimate goal here is to provide assistance to customers limiting erroneous configurations and facilitate customer adoption of the new technology.

Your CPQ solution should surely be enriched with visual representation, 2D or 3D visual imagery, or augmented reality (AR) whenever possible. By leveraging the power of CPQ visualization software, you can show your customers a configuration solution in real-time, complete with selected options and inputs. Visualization software can help customers not only select the right parts but also guide them through installation instructions and simulations.

As mentioned earlier, the most promising actions of making the customer experience easier include personalization of shopping experience and product/service recommendations, such as

  • Recommending products customers are most like to buy based on what’s in their carts or what other similar customers purchase;
  • Prompting customers to buy what they have previously purchased.

However, the personalization and any other add-ons should not add complexity to the customer buying journey, which should remain as intuitive as possible. Recommendations and personalizations work not only by offering more products and services but also by limiting the products that can be bought together through guided selling, which alleviates the risk of a customer buying incompatible products and removes any customer uncertainty.

It goes without saying that customer dashboards need to be user-friendly, comprehensible, and relevant to your buyers’ job functions and activities. Moreover, if customers feel like talking to a sales rep at any point during their buyer’s journey, ensure they can do so by requesting information or a callback. For example, after adding coffee machines to their carts, customers might be interested in receiving an additional discount on their bulk orders. By placing the “Request a Quote” button on their checkout page, you’ll ensure they have an opportunity to further negotiate the pricing. In return, salespeople can call back, or immediately approve or decline requests for quotes and even apply the discount for further purchases.

By making products and pricing all in sync, ensure your customers can return for touchless repurchasing – user dashboards need to offer the ‘reorder’ and ‘status’ buttons to either repeat the last order or track the status of the current or previous orders without the need to contact a sales rep.

Creating a customer-centric search or procuring a powerful search engine, which utilizes natural language processing and, if possible, advanced image and video recognition will help your customers find the information and products on the fly and greatly enhance customer satisfaction. It is surprising, but many B2B customers abandon ecommerce platforms because the product results displayed are not relevant. People take relevant search results as a given, so ignoring the power of a good search is no longer an option.

Put a Live Chat box on your platform to deliver instantaneous and personalized support via chat and even SMS messaging apps of their own choice. If a live conversation is not possible or a real person is not available, ensure your customers can talk to a chatbot or leave a message in case they don’t find the right information.

To incentivize customers to try new software, mention on your website that the fastest way to get a quote or response is to use your system and that, due to demand, other general sales inquiries can take a longer time to respond. You may want to look at the Buyer Enablement guidance by Gartner to get some general insights into how to structure a customer's journey and apply them to your complex sales process.

To put it shortly, you have to do everything possible to achieve a consistent, transparent, and comprehensive customer experience. A positive buyer experience changes the way customers see your brand. And if the buying process is easy, they are more likely to come back.

How to adopt a CPQ software  with Virto Commerce

Virto Commerce, as a headless and extensible open source ecommerce asp net B2B  platform, can help you streamline your CPQ solution and make sure it seamlessly integrates into other systems.

The choice of a B2B ecommerce platform is vital because if it fails to deliver on its technological promises and cannot be extended or customized, you’ll never be able to realize the full potential of your CPQ software. Re-platforming at a large scale to accommodate your new CPQ solution can prove costly and challenging, so you need to choose an ecommerce platform before any other add-on technologies.

Why is a headless platform a good choice for B2B ecommerce? With headless, the front end and back end communicate with each other through APIs. You can choose any front end you like and use as many presentation layers as you want, and your customers can reach you through any channel or device. Adding new technologies on top is as easy as a summer breeze and has no risk to the stability of your existing ecommerce infrastructure. While you’re layering your front end, the back end stays the same, so you don’t have to worry about the backend technology. This is exactly why a headless ecommerce platform is the best choice for adopting a CPQ solution. It might be more technically involved but it’s the only one that can guarantee the flexibility and agility that CPQ technology typically requires. 

If you’re interested in learning more about Vitro Commerce headless B2B ecommerce platform, reach out any time.

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