Configure-Price-Quote (CPQ) refers to a system that allows a sales rep to configure a package, generate a pricing quote (including internal approvals on discounts, etc.) and the contractual paperwork for their deals. This enables fast deal closure while keeping a record in the CRM of what exactly was sold, and for how much.
Another larger benefit is that it enables complete adherence to the pricing model. Because a software quoting implementation imposes guardrails on use cases and limitations to manually closed deals, it forces sales reps to strictly adhere to the pricing model deployed.
I pulled out three revealing opinions from top SaaS pricing experts on the pros and cons of CPQ from my book, Price To Scale
1. Johnny Cheng, Former Director of Product Marketing at Gainsight
“Whenever I mention CPQ, a lot of people feel it is one of the worst tools to implement in the history of software. But I’m a huge fan of CPQ because it gives all that guidance and all those instruments. It also means less reliance on the Deal Desk and allows your company to scale. This is while giving you a lot of data on the backend. There are a lot of positives about CPQ, but it is painful to implement, especially if never done before.”
2. Pranav Kashyap, Group Product Manager & Head of Pricing at Mixpanel
“I am not a fan of CPQ. What we did to get around CPQ was to have an online Google Sheet to calculate. It just literally lists out every single price point and MTU podium, and our sales people just use that. When they need to make up a quote, they go there, figure out the price, and all of the back and forth with the customer happens off the Google Sheet. Finally, when they’re ready to submit an actual contract, they go into CPQ and put in the details.”
3. Joshua Bloom, Managing Partner (North America) for Simon-Kucher & Partners
“Some CPQ tools are an overkill for software companies, too. I’ve dealt with companies where they have 100 Sellable items and need a CPQ tool to be able to capture the levels of complexity and come up with the right quote. But by and large, the more common challenge I would attribute to those companies (and what I’ve seen from those companies asking for help with) is - doing away with 100 Sellable items, and maybe taking a more structured packaging approach to turn them into 12-15 packages, at the most. This is enough so that you don’t need to use CPQ anymore, but you just need really good marketing and discovery material for your salespeople to train them on the different options.”
How I contextualize these opinions:
To put things in perspective, fast-growing companies where the pricing structure may undergo evolution every other quarter may not want to overinvest in CPQ capability.
Primarily because CPQ implementations take a long time, and by the time you have put something into product use, new requirements come up - sinking a lot of time and resources in this never-ending process.
At some point you may still need to do this. I would personally live on a Google spreadsheet-based calculator until ~$15-20M revenue which would provide (hopefully) enough time to have a mature internal deal closure process.