CPQ stands for "Configure, Price, Quote". It's a tool that was created back in the 90s and 00s to make sales processes faster. Before CPQ, creating a quote for a customer could take several months because it was done manually. But with CPQ solutions, quotes can now be created digitally in just a few days or weeks. Before CPQ, quotes were made in person, then printed out and sent or faxed to customers. While this was faster than manual methods, it still took a lot of time.
The 3 steps in CPQ are…
Configure. This is where you customize the product and offer you’re sending out. You can load up products from your product book, add extras, change payment terms, and more. Complex software products can have dozens of points to configure.
Price. This is where you adjust the pricing of your offer. Software tends to have low incremental costs, so it’s up to providers to decide how much to charge. As a result, pricing is an important part of the quoting process. (Learn more in our article on SaaS pricing models).
Quote. This is where you actually create the quote. It can be simple or complicated, depending on the software you choose. With most CPQ software, the quote pages are static and can't be changed easily, which means editing and perfecting quotes can take a lot of time.
The benefit to CPQ is that it automates quote creation. It’s a lot easier and faster than manual quote creation. And it works; most sales teams still use CPQ, even though the technology’s a few decades old.
The downsides to CPQ are...
This was fine in the early days of the Internet. But today, there’s a better way to go about quote creation and other processes. Enter Quote-to-Cash (QTC)!
Competitive pricing strategies can come in many forms, a business can choose to always be the cheapest of their competitors or always offer the average price of the highest and lowest priced competitors
A competitive pricing strategy is a price-setting that is based on your competitors’ prices. This pricing method focuses solely on the prices of your competitors that are public, but it does not take into account how much customers value the product or production costs.
A strong competitive pricing model is based on thorough market research. When you know how the prices of your top competitors in your market and how those prices might meet customer expectations, you have a basis for determining the rates of the prices of your own products or services. Competitive pricing strategies can come in many forms, a business can choose to always be the cheapest of their competitors or always offer the average price of the highest and lowest priced competitors - they all count as competitive pricing strategies.
QTC, or quote-to-cash, is a term used to describe end-to-end sales processes from quote to cash. It describes everything that happens during a sale:
QTC processes span departments and functions, with dozens or hundreds of touchpoints involved. Solutions like Salesbricks help automate these touchpoints and processes.
Salesbricks helps create quotes in minutes but also helps automate and improve subscription management, entitlements management, and billing/payments.
In this sense, QTC is the logical successor to CPQ. It does what CPQ does faster and better while shaving off dozens of touchpoints and processes across the sales cycle. To elaborate, let’s compare the two more directly.
The terms “QTC” and “CPQ” are often used interchangeably. But as we learned above, the two are different.
Configure, price, quote (CPQ) solutions were popularized in the 90s and 00s. They helped create quotes on-premise before mailing them out (or faxing them) to prospects. Quotes took a few hours to generate, but this was better than spending days building each one manually.
CPQ was a typical pre-cloud technology; it worked but was neither fast nor elegant. Today, the technology has fallen behind the rest of the sales cycle. Sales reps don’t like spending hours each day preparing quotes. Prospects don’t like waiting for quotes that often come in PDF format and can’t be reconfigured on-the-fly.
Last but not least, there’s a lot CPQ doesn’t do. It doesn’t collect signatures. It doesn’t process payments. The quotes are hard to reconfigure; every small adjustment means another email, another file, and more time wasted. This is where Quote-to-Cash (QTC) comes in.
QTC is a cloud-based, modern technology. It’s easy to use; for example, Salesbricks - the leading QTC solution - generates quotes in minutes using your product price book. It also collects signatures, accepts payments, and manages subscriptions and entitlements.
This basically makes CPQ technology obsolete (sorry, dinosaur!). CPQ only produces quotes - and QTC does the same thing better while delivering huge value to your sales team. Here are the 3 main reasons CPQ is made obsolete by QTC.
Better quotes. Salesbricks can create interactive, configurable quotes in just minutes. No spreadsheets, ugly PDFs, or human errors here. And you can package your product any way you like, designing beautiful quotes quickly and easily.
Fast, lean sales. Once a quote has been approved by the buyer, Salesbricks can collect signatures and process payments automatically.
Effortless subscription management. Post-sale, Salesbricks manages subscriptions, billings, and entitlements. It does this seamlessly even if you’ve got customers with different payment conditions and in different cohorts. Salesbricks also integrates with CRM and ERP solutions easily, helping you manage quotes and sales end-to-end.
Aside from the pricing model type, you must consider many other factors. Ask yourself the following questions when deciding what model works best for your business:
Don’t worry about choosing the wrong pricing model. The idea isn’t to do a perfect job; it’s to do the best job possible.
Once you have launched your product and corresponding pricing model, never stop testing, gathering feedback, and analyzing data. This way, you’ll always be in a good position to switch to a better pricing model.
CPQ solutions are easy to understand. All they really do is create quotes. Since QTC is a lot more complex, let’s go over key terms and concepts to tie this all together.
Accurately defining your products and pricing gives QTC solutions data to work with. This data gets pulled when it’s time to create quotes, manage subscriptions, etc.
Orders and subscriptions are the lifeblood of any software business. That’s why QTC solutions like Salesbricks feature a suite of tools that keep revenue flowing, makes customers happy, and free sales reps from repetitive tasks.
Salesbricks was created because our co-founders lived through the pain of managing $2 billion dollars in SaaS contracts with legacy processes. There had to be a better way - so they created Salesbricks, which helps startups:
Hit us up! Let us show you why Salesbricks is the best solution for you and your software company with a quick demo.