We've been taking a deeper dive into the real benefits of Configure, Price, Quote (CPQ) solutions and what lies beneath the headlines for a few months now.
In this article we'll change the focus to a benefit that is felt further down the 'quote-to-order' process. CPQ marketing materials often state that it can provide 'Error-Free Orders', but what does that really mean, and why should we care?
Firstly let's look at where CPQ typically sits in the quote to order process:
There can be quite a few variations on this, but fundamentally one of the key jobs of a CPQ system is to deliver information to a 'down-stream' system that will handle the order, process it and turn it into reality - whether that's delivery of goods, provisioning of a service or any other 'deliverable' in return for the customer’s order.
Sometimes these ‘down-stream’ systems are highly structured and automated like an Enterprise Resource Planning (ERP) system. Sometimes they are simpler (and often older) order management or provisioning IT systems. Sometimes they are manual or paper based processes or a collection of disparate systems. Believe us when we say that we've seen all kinds, but for simplicity we'll refer to them now as 'the ordering system', whatever form that system takes.
The ordering system requires inputs. Normally these are all the data elements required to make that order happen. They can be product detail, customer information, billing factors, service levels and many more. Every organisation (and every system) is different.
So how does CPQ help provide 'Error-Free Orders'? Let's pull apart the initials to see. Firstly 'C' - Configure. An integral part of a CPQ system is the configuration engine. One of the main roles the configurator fulfils is to ensure that the salesperson or user can only generate a valid configuration, list of parts, or a valid service description. Configuration rules limit the choices that can be made, so that, for example, if you are selecting components of a car you can't select rear electric windows on a 3-door car! In short, the configurator ensures that only a valid combination of parts or services are generated as part of the order.
Secondly 'P' - Price. The pricing element of CPQ typically refers to the commercial and contractual aspects of a deal. Again, rules are enforced at this stage of the process to ensure that all critical information is captured, regardless of the deal type. All customer information can be mandated, or even integrated with a Customer Relationship Management (CRM) system, and billing terms can be specified and prices established. A good CPQ system will allow for every element of your workflow to be defined and all critical information specified.
One of the most important elements of the commercial terms is the approval of pricing levels and any other non-standard elements of the deal. Discounts can be tracked and approved according to business rules, and elements like expedited delivery or customer specific terms can be checked and approved, before the quote is finalised with the customer.
Finally 'Q' - Quote. In most CPQ systems this refers to the ability to take the information that's been captured and to present it in the most appropriate way. This usually means customer-facing documents like proposals, quotes and contracts are accurate and well designed. Equally though, it can refer to the presentation of all the deal information in a structured way such that downstream systems can interpret it easily - either via direct integration, or at the very least making manual re-entry as simple as possible.
So why should we care? When we think about the consequences of an order being generated with inaccuracies, after customer sign-off, we'll see that there are two main potential problems:-
1) Failed orders - at the simplest level, the order may 'fail' at the point an attempt is made to push it into the ordering system. Most ordering systems have controls over what can be entered, and systems that are not designed with each other in mind may simply refuse to play nicely together.
2) Incorrect fulfilment - some inaccurate orders may pass through validation in the ordering system and parts may actually be delivered before anyone realises that they simply don’t work together. If you've ever planned a meal, created a shopping list and visited the store to buy everything you need, but then got home to find you didn’t buy a key ingredient, you'll understand this. Individually all the items make sense, but together they don't give the desired end result (and you end up ordering a takeaway instead…)
When we look at what either of these scenarios can mean, the cost to the organisation quickly mounts up. Orders that stop at the administration stage will often be delayed. This can mean missed shipment dates and in some cases can impact on service level agreements (SLAs). Admin time to put things right costs money, and inevitably the sales person will need to provide input too. If this means going back to the customer to explain the error, it reflects badly on the salesperson, and in some cases can cost you the deal.
Sadly, this isn't the worst-case. When inaccurate orders aren't trapped before delivery or provision, the customer will receive the wrong thing, or a product or service that just doesn't work. This can range from a mild annoyance to severe dissatisfaction - especially if the purchase was something the customer was relying on for a mission critical process. The knock-on effects can be enormous.
The cost of non-conformance of inaccurate orders can be huge - from the time taken to understand and rectify the mistake, through to the cost of re-providing the right thing, potentially collecting and handling returns, writing off the failed delivery, and in extreme cases providing compensation or goodwill gestures to a customer to appease them. Couple this with the loss of credibility and perhaps the loss of business, it is clear why inaccurate orders are a grim thing indeed.
With a well-designed CPQ system that implements well-defined business rules, all these problems can be avoided. Of all the benefits CPQ can provide, ‘Error-Free Orders’ is one of the most important, and with potentially the biggest impact to the bottom line.
The series ‘What CPQ Can REALLY Do For You’ is written by Walpole Partnership’s MD, Andy Pieroux. Don’t miss out on further parts in this series which can be found on the news section of Walpole Partnership’s website.