Price optimization to unlock ROI potential
The Configure-Price-Quote (CPQ) software market growth is exploding. According to Gartner, CPQ market revenue was approximately $878 million in 2016, with a 20% CAGR expected through 2020. However, CPQ is not new, and many organizations that have invested in CPQ solutions are failing to meet expected ROI. So, what’s going on?
Pricing has the potential to offer more financial value than the value gleaned from operational efficiencies associated with improved configuration and quoting. For example, a landmark study published in Harvard Business Review examined the unit economics of 2,463 companies and found that a 1% price improvement results in an 11.1% increase in operating profit. With this amount of bottom-line impact, price optimization is the key that can unlock ROI realization for CPQ.
However, price optimization is arguably a complicated challenge to solve. Identifying a customer’s willingness-to-pay for a product and/or service in real-time requires numerous data sources, complex predictive models, and intelligent software that is easy enough for salespeople to eagerly adopt. Typical challenges include data that is not readily available, frequently changing market conditions and large distributed user communities to manage. This complexity magnifies when considering that optimal pricing can span a large set of products and services in every quote. To achieve success, deep analytics powered by advanced techniques such as machine learning and artificial intelligence, are required.
While price optimization isn’t always easy, the proper convergence of price optimization with CPQ solutions can present new opportunities for optimal business outcomes and sustained competitive advantage. An integrated approach will facilitate:
- Enablement – CPQ emerges as a sales enablement tool rather than just a sales transaction tool. Put differently; sales can configure the deal, rather than configure the physical products.
- Actionability – The solution provides actionable insights for sales to increase the likelihood of an auto-approval, deliver faster time-to-quote, and increase profitability on a deal-by-deal basis.
- Visibility – Users receive improved visibility into win-rates, product performance, customer behavior and market changes unveiling the potential to capitalize on massive profit opportunities.
The CPQ process is ready to evolve, and price optimization is the prime candidate to deliver the ROI expected of CPQ. However, the complexities of advanced pricing capabilities need to be properly addressed to elevate the CPQ process and deliver direct impact to a business’s bottom line. For over 15 years, Vistaar has been dedicated to delivering world-class price optimization solutions and understands how to expand pricing capabilities in the CPQ process for a successful next generation Configure, Price, Quote solution.
Please click here to learn how to properly manage and optimize the CPQ process for your organization with Vistaar’s SmartQuote.
This article was authored by:
Kelly Capizzi, Associate Director, Marketing
Graduate from Millersville University of Pennsylvania