What Is the Difference Between CPQ and Pricing Software?
You’re looking to update your pricing and you’ve heard that Configure Price Quote (CPQ) solutions can boost sales teams’ proficiency by 45% and that improvements in price, like those achieved with pricing software, can result in three to four times profitability. Very impressive. Just what you’re in need of. But which better aligns with your goals? What exactly is the difference between a CPQ and pricing software?
Let’s explore the differences between a pricing solution and a CPQ by focusing on the key capabilities they deliver and benefits they bring.
What Do You Get with a CPQ?
CPQ solutions enable the creation of quotes based on customer-specific sales inquiries. You’re able to configure a specific product portfolio (based on your overall product catalogue), set related pricing, get internal approval for outputs, negotiate with customers and re-iterate on specific quote conditions.
Good CPQ solutions deliver pricing guidance that provides optimal price recommendations based on historical sales data and potential up-sell and cross-sell opportunities.
(See this article for some inspiring CPQ statistics.)
A good CPQ will help accelerate your quoting by streamlining and automating workflows and approvals and by providing quote summaries and predefined output templates that include contractual documentation and e-signature handling.
It’ll keep you in check by providing defined pricing rules, quote scoring based on set goals (like % margin), clear deal guidance with price corridors and benchmarking of current quotes using historical data.
Those with an end-to-end approach bring trackable deal processes and will empower you to create fully transparent quotes that help show the value of your pricing and to capture objectives and value drivers from both sides of a deal. You’ll have access to all information about all deals in one place and can learn from historical deals as well as monitor and record ongoing negotiation rounds.
You’ll be able to boost your negotiations by finding the common thread between your customer value drivers and decision-making processes and design profitable quotes within the pricing corridor.
The main advantage of a CPQ is you’re able to get a larger number of more accurate quotes to more customers faster, giving you the edge for winning more opportunities and increasing deal size.
What’s Different About Pricing Software?
Pricing software helps you manage your price lists, even dynamic ones, with automated recalculation based on defined triggers, and gain full control of all of your price-related campaigns by helping you set list prices and manage discounts and promotions of any complexity before pushing them live to your multiple systems.
Moving you away from a cost-plus approach, pricing software puts you on the road to segmented pricing and value-based selling, helping assure you’re achieving the best possible price.
Using dynamic price lists, you can calculate prices according to multiple time-critical factors and organize your pricing to enable fast re-calculations across product groups, customer segments and regions to ensure that you always provide the right prices at the right time.
The advanced analytics consolidate your data for deep and actionable customer, product and sales transaction insights and to help you identify pricing and sales opportunities to increase margins and revenue, and hardcode profitability into your price setting. Visual pricing summaries will help you identify where you are losing income if prices are too high or losing margin if they are too low. And being able to react in real-time keeps you ahead of the game.
Good pricing software can help companies optimize prices for their goods and services by providing functionalities that use machine learning and algorithms to process large amounts of historical data to generate an optimal price recommendation based on factors like market conditions, the competition, promotions, product availability and revenue KPIs.
The main advantage of pricing software is that you can leverage artificial intelligence to optimize prices and react swiftly and appropriately to your competition and the market. You’re able to plan a more profitable pricing strategy and make better, data-informed pricing decisions to drive revenue growth.
… Not All Pricing Software Is Created Equal
As with all technological advancements, you have traditional pricing software (as described above) and next-gen pricing software, which takes things to a whole other level.
Whereas typical pricing software allows you to manage complex pricing and to optimize prices, you’re limited to optimizing just one element of the price waterfall at a time. It doesn’t consider the impact of the recommended price change on surrounding products in your portfolio, which can very easily lead to cannibalization. Neither does is show you how it got to its recommended price.
Next-gen software takes more of a holistic approach and uses advance self-learning multi-agent artificial intelligence to fine-tune all pricing elements simultaneously, in real time, and in the context of your entire portfolio. And it does so in a transparent way that increases comprehension and visibility among all stakeholders.
‘What-if’ simulations help you simulate, predict and visualize the likely impact of a change to your bottom line by predicting customer, competitor and market response before execution, so you can practice your strategies without the fallout. You can also model various types of discounts to forecast their impact and avoid leaving money on the table.
This new generation of pricing software enables superior price optimization through predicted end-to-end impact simulations that ensure your pricing decisions are aligned with your business strategy.
Pricing Software vs. CPQ
Both tools help you deliver optimal prices to your customers.
CPQs are most helpful to companies selling based on customer-specific quotes, while pricing software is most relevant to companies selling based on a price lists (global, per region, etc.).
For those doing both, there’s Pricefx.
The Pricefx Profit package is an award-winning CPQ wrapped in industry-leading pricing software. It reduces quote turnaround by an 90% and empowers you to autonomously and efficiently handle sales inquiries at a granular level while reaching the best deal outputs to let your profits grow. It improves accuracy, transparency, conversions and revenue, while reducing losses, errors and the time spent doing repetitive manual tasks.
AND it can be fully integrated with the Pricefx Plan and Price packages which bring all the power of advanced analytics, price management,next-gen AI-driven pricing and are designed to help you reach pricing excellence and your revenue goals in one of the shortest times on the market.