Choosing Quoting or Agreements & Promotions in CPQ: A Guide

The purpose of Quoting or Agreements (contracts) & Promotions (discounts) in CPQ solutions is clear in theory, but in practice, we might find that these distinctions aren’t always cut and dry. And while these two modules are interconnected, they do produce varied results depending on their application.

How can your team know when it’s in their best interest to use Quoting or Agreements & Promotions in negotiations?

At Pricefx, as a cloud-native pricing software vendor, we pride ourselves on offering a robust solutions suite that allows our customers to centrally manage quotes, agreements, and promotions with a higher grade of efficiency and accuracy. In fact, these features are among our most used capabilities this year.

In this article, as a current or prospective user of a CPQ solution, you’ll learn key differences between Quoting and Agreements & Promotions and how to use them strategically in your CPQ process to ensure profitable outcomes.

So, let’s dig in!

Understanding Quoting and Agreements & Promotions in CPQ

Most CPQ software solutions provide companies with tools for managing quotes, agreements, and promotions.

Among them, each has its role to play in enabling profitable selling and long-term relationships with customers. Let’s explore what each does, including ideal scenarios for using it and the benefits to expect.

Quoting

What It Is

As a dynamic tool for pricing, Quoting precedes Agreements & Promotions to set the right prices with customers before settling into a formal agreement. In that way, it is a sales tool first, with its automated quote generation and guidance features playing decisive roles in winning deals.

Ideal Scenarios to Use It

Companies should use Quoting when kicking off negotiations in complex or customized sales processes, particularly for products or services that don’t come with clearly defined or immutable price tags. This approach allows companies to tailor their price offerings to specific client needs while positioning themselves competitively using market insights and competitive data.

Agreements & Promotions

What It Is

In a CPQ solution, Agreements provides a space to manage customer contracts. These agreements are generally valid for the long-term and relatively stable in their conditions over time.

Promotions allow companies to offer special pricing conditions to their customers through discounts or other incentives. Typically offered upfront, these incentives can take the form of volume commitments, special bundles, short-term promotions, and more.

Ideal Scenarios to Use It

Contracts require significant deliberation between various internal and external departments, are valid in the long term, and can offer customers the privilege of on-invoice discounting.

Due to this, they are ideal for customers with complex operational and legal structures, and, when they involve extensive discounting, customers in which companies place a high degree of trust. Long-term commitment, in addition to a history of reliable behavior – for example, through rebate programs – rare two indicators of a trustworthy partner.

Promotions often involve discounts that are offered upfront, rather than earned proactively with good behavior. Due to this, they are ideal for rewarding dependable long-term customers or starting new but strategic partnerships on the right foot.

Beyond the customer profile, discounts are effective in exceptional situations to quickly incentivize a short-term outcome; for example, clearing inventory to make way for new products.

Choosing Between Quoting or Agreements & Promotions: Key Factors to Consider

In the enterprise-level pricing process, Quoting and Agreements & Promotions are interconnected, and shouldn’t be seen as mutually exclusive options. In practice, this means that when a quote is created for a customer, an agreement will be automatically reflected in that quote – that’s the beauty of the platform.

However, their impact varies at different stages and across product types, customer relationships, and sales strategies. In this section, we’ll explain what we mean by that by outlining the factors that make one approach more effective than the other.

1.     How Complex Are Your Products and Services?

First, consider the intricacy of the products or services your company sells.

Are they legacy products with features that don’t change much over time? Innovative products with several layers of customization or parts that are continually swapped out for better ones? They might be products in their rawest form that help other companies power theirs. Or maybe they aren’t “products” in the classic sense, but a way to get other products from point A to point B.

For highly complex, customizable, or configurable offerings, Quoting is a good choice. It allows for several price iterations within a short timeframe and enables tailored price offers using AI-driven recommendations and price setting logic. The sky’s the limit with the number of parameters to pull in to arrive at the right price.

On the other hand, more straightforward or standardized offerings, for which pricing is expected to be relatively stable, benefit from a durable option like Agreements & Promotions. Using Quoting as the primer, customers can then configure their long-term contracts in Agreements & Promotions, only revisiting whenever adjustments or renewals are needed.

2.     What Do Your Customer Relationships Look Like?

Next, consider the nature of each of your customer relationships. Which are one-off commercial partnerships? Long-term relationships forged from years of mutual commitment and trust building? And among your newer customer base, are there any industry household names that hold strategic value for your company?

Quoting is ideal for nurturing ongoing customer relationships with personalized quotes tailored to a customer’s unique needs. Likewise, and as mentioned earlier, it’s also beneficial for customers that require custom solutions.

Meanwhile, Agreements & Promotions are appropriate in a few customer scenarios: while promotions can incentivize one-time customers to drive short-term sales, formal contracts can build trust with newer but strategic customers.

However, these strategies are less effective the other way around; one-time customers will be likely turned off by a convoluted contract process. And newer customers, as decisive as they may be for that year’s targets, shouldn’t be granted extensive discounting at the onset – a rebate program to test their reliability prior to doing so is a better idea.

3.     What Is Your Sales Strategy?

Finally, when deciding when to use Quoting or Agreements & Promotions, conduct an audit of your upcoming sales efforts and campaigns for the upcoming year. They should also align with what these CPQ features do best to plan these sales initiatives strategically.

Quoting is a useful pricing tool for sales efforts that require extensive customization, as it provides detailed breakdowns that more complex initiatives require. On the other hand, Agreements & Promotions, but particularly discounts, are useful in short-term campaigns, as they are a powerful way to share terms for time-bound offers and propel customers into action. Because while quoting can serve as a useful starting point in discussions, a formal agreement drives performance.

Find Out What Pricefx’s CPQ Software Can Do For You

By now, we hope that you have a clearer understanding of the unique but equally vital roles Quoting and Agreements & Promotions both play in streamlining and optimizing your company’s sales processes – and more importantly, the underlying conditions for using them strategically.

In this article, we described many of the key benefits your business can expect when using Pricefx’s CPQ software, among other solutions. Want a closer look? Consider checking out our recent article on how our solutions can enhance your team’s quoting process: