Automating a lot of manual work seems like it would make configure, price, quote (CPQ) software an obviously worthwhile solution. Yet calculating an accurate return on investment (ROI) for CPQ isn’t as straightforward. The ROI formula is easy enough, but determining CPQ’s measurable benefits in dollar-value terms can be a formidable challenge. Nonetheless, it is the crucial first step necessary to establish a business case and, equally important, for creating and executing an implementation plan that maximizes the value of the CPQ system over time.

What Is CPQ (Configure, Price, Quote) Software?

CPQ software is aimed at businesses that sell highly customizable products to automate the manual process of configuring the extensive number of variations and customization choices available for such products—and, crucially, avoids configurations that are impossible or illegal—and generates quotes for the customer’s desired configuration. If you have ever customized a car purchase online, you have a good sense of what CPQ software can do. Though cars are complicated enough from a consumer product perspective, CPQ software is most advantageously applied to even more complicated products, including airliners, medical equipment, software as a service (SaaS), and construction projects.

CPQ software can do its work well only when provisioned with high-quality, up-to-date product configuration and pricing data.

Key Takeaways

  • By automating manual processes and standardizing configuration decisions for complex products, CPQ software helps sales teams boost their productivity.
  • CPQ software ensures that product rules and discounts are consistent, even when different team members interact with the customer.
  • The speed and accuracy improvements usually lead to shorter sales cycles and better sales conversion rates.
  • For optimal results, companies must keep their data valid and up to date.

Cost-Saving Benefits of CPQ

CPQ software delivers measurable cost savings by automating and streamlining complex sales processes. Automating product rules that would otherwise involve sending emails to multiple departments to gather information and painstakingly compile it not only reduces errors and accelerates quote generation, but it also helps organizations cut operating costs. CPQ software’s standardized pricing and automated workflows create both immediate and long-term cost benefits, such as:

  • Boosts sales productivity: Manual processes and long email chains sap sales team productivity. CPQ addresses these inefficiencies by automating product configurations and standardizing discounts and discount approvals. Instead of waiting for responses from multiple departments about product specifications or pricing approvals, salespeople can generate accurate quotes instantly using prebuilt rules and workflows. This automation also reduces training costs for new sales representatives—building product configuration rules and pricing structures directly into the CPQ system allows new reps to create accurate quotes sooner.
  • Improves quote accuracy: Businesses sometimes struggle with individual reps promising unauthorized discounts, offering discounts too early, or working from outdated pricing sheets—all of which translates into additional costs, in the form of revenue leakage, that directly reduces profit. CPQ can eliminate these expensive mistakes by ensuring that all quotes reflect current pricing, approved discounts, and accurate product configurations. This level of improved accuracy not only protects profits but also reduces the costs associated with subsequent quote revisions and billing corrections.
  • Increases sales conversion rates: Automating the configuring, pricing, and quoting process significantly shortens the sales cycle—and a shorter sales cycle means lower costs per sale. Presenting quotes and orders to the customer with speed and accuracy helps sales teams close deals faster, in part by eliminating delays that can cause customers to reconsider or check out competitors. When customers receive professional, error-free quotes promptly, they are more likely to proceed with the deployment, which reduces the cost of sales and improves overall sales efficiency.

Calculating CPQ ROI

The formula for calculating the ROI of any investment is actually quite simple, and the math is straightforward:

ROI = [(Benefit from investment – Cost of investment) / Cost of investment] × 100

What’s harder is quantifying the dollar-value of the benefits that the investment will return to the organization, because those benefits are often indirect or intangible. For a CPQ software investment, IT and business leaders must consider how the software will improve customer quotes and related workflows, and how those improvements will translate into dollar-value benefits in terms of cost savings and incremental revenue.

Many organizations start measuring benefits by estimating the direct cost savings that can come from the reduced errors, revisions, and administrative workload that CPQ automation makes possible. Doing so requires that they track metrics, such as time spent generating quotes, error rates in proposals, and quote revision frequency, before they implement CPQ software. They apply assumptions about improving these baseline measurements to factor into the ROI calculation—for example, if sales representatives previously spent 50% of their time on quote-related administrative tasks, they can estimate the monetary value of redirecting that time to active selling. Post-implementation, they can measure performance to quantify the actual improvements.

Less obvious benefits that contribute to ROI include reduced customer acquisition costs from higher conversion rates, decreased revenue leakage from pricing errors, and lower training costs for new sales staff. Though these benefits may be harder to quantify precisely, they do significantly impact the overall return on a CPQ investment.

On the cost side of the ROI equation are obvious expenses, such as software licensing and implementation fees. But indirect costs, including employee training time and temporary productivity dips during the transition period, also must be included. The cost of integrating the CPQ software with existing systems, such as those handling customer relationship management (CRM) or enterprise resource planning (ERP), should also factor into the total investment figure.

CPQ ROI Example

To illustrate the CPQ ROI calculation, consider a fictional midsize manufacturing company named TechPro Solutions. TechPro calculated the three-year ROI on its proposed new cloud-based CPQ software by first determining its total investment costs, then estimating its measurable benefits, and plugging the results into the ROI formula.

TechPro’s total investment costs over three years came to $375,000, and included the following:

  • CPQ software licensing ($50,000/year): $150,000
  • Initial implementation and integration: $75,000
  • Initial employee training (40 hours × 20 sales staff × $50/hour): $40,000
  • Productivity loss during transition (estimated 20% reduction for one month): $35,000
  • New staff training and refresher courses ($10,000/year): $30,000
  • Custom feature development ($15,000/year): $45,000

The measurable benefits over the three years totaled $2,955,000, comprising:

  • Increased quote volume (gradual increase from 1,200 to 1,500 quotes/year at $5,000 average value): $450,000
  • Improved conversion rate (from 60% to 65% on quote volume): $375,000
  • Reduced quote generation time (saving 10 hours/week × 20 sales staff × $50/hour × 150 weeks): $1,500,000
  • Fewer pricing errors (reduced from 5% to 2% of total $10 million annual sales at 20% margin): $180,000
  • Reduced quote revisions (saving 3 hours/week × 20 staff × $50/hour × 150 weeks): $450,000

Plugging this information into the ROI formula, we get:

ROI = [($2,955,000 – $375,000) / $375,000] × 100 = 688%

Despite its up-front and ongoing costs, TechPro’s cloud-based CPQ investment yields a substantial return through increased sales capacity, improved operational efficiency, and error reduction. The cloud-based solution’s included maintenance and automatic updates further enhance the value proposition by eliminating traditional IT infrastructure expenses. Of course, this is a simplified example, focusing on readily quantifiable benefits. A real company, for example, might gain additional value from improved customer satisfaction and faster sales cycles, which would further increase the ROI.

Tips for Maximizing CPQ ROI

Deploying CPQ software is merely the first step toward gaining a strong return on investment. If a business’s product catalog, pricing, and configuration rules aren’t clearly documented, for example, its CPQ system will be less effective than it could be—and its ROI will be lower than it could be. If sales and support teams are slow to adopt the system, ROI will be similarly diminished. Taking some or all of the following concrete steps can help businesses make sure their CPQ rollouts are maximally effective.

  • Clearly define product catalogs and configuration rules: A well-organized product catalog helps sales teams locate the right products faster and more intuitively, while accurate configuration rules avert invalid combinations and help to ensure proper pricing. So it’s a good idea to organize products in a way that matches how sales teams think about them. It’s equally important to define clear rules about which products work together, what options are available, and how different choices affect pricing. This foundational information makes the CPQ system more intuitive for users and prevents costly quoting errors. Moreover, defining these aspects of the system early and clearly can help the system “feel” right to users, accelerating adoption and improving ROI.
  • Identify stakeholders who can help champion CPQ adoption: Making sure a CPQ adoption process goes smoothly requires active support from multiple departments. Sales managers can help define optimal quote workflows and gain buy-in from their teams. IT leaders oversee proper integration with existing systems and maintain data security. Finance stakeholders help establish pricing and discount rules that protect margins. Product managers check the accuracy of product configurations and dependencies. These champions should participate in early planning sessions, help define requirements for their areas, and actively communicate the benefits to their teams throughout the rollout. Getting these key business leaders to champion CPQ adoption helps speed up buy-in throughout the company.
  • Introduce changes incrementally to encourage adoption: Business teams sometimes react defensively to changes in their workflow, so be prepared to use change management techniques as needed. A good one is to introduce features of the CPQ software gradually, starting with those that address common pain points in team workflows. Similarly, it’s a good idea to introduce standard quotes before tackling custom proposals. Track metrics, such as quote completion time and error rates, at each stage to demonstrate early wins. These can increase buy-in and set up the organization to achieve a better ROI than it might by introducing all CPQ features at once.
  • Invest in user training and experience: While CPQ vendors may provide initial training for current employees, some employees are likely to train new hires down the line, so it’s worth investing in comprehensive training materials and processes. To improve user experience after adoption, track specific key performance indicators (KPIs), such as quote generation time, error rates, and conversion rates. Share these metrics with teams regularly: Seeing concrete improvements in sales efficiency and accuracy can motivate them toward further adoption.
  • Earmark enough resources to support CPQ implementation: A CPQ implementation budget should cover system customization, data migration, integration with existing systems, comprehensive testing, and—perhaps most important of all—several months of dedicated effort from internal subject-matter experts. For example, a CPQ implementation team should include a project manager, business analysts who understand the company’s sales processes, technical experts who can manage system integration, and experienced sales reps who can validate workflows. Their expertise will help ensure that the system is properly configured and tested before launch. Investing this way in both technical infrastructure and human resources will likely lead to faster adoption and better ROI.
  • Integrate the CPQ solution with other business systems: Integrating a CPQ solution with other business systems in the organization makes for more than just a more efficient sales process. Integrated systems typically deliver higher ROI by eliminating manual data reentry (for example, of sales and customer data between CPQ and CRM systems), reducing errors, and automating more of the quote-to-cash process. By integrating CPQ and ERP, for example, sales teams can get accurate, real-time product and pricing information—and completed orders can be automatically pushed to fulfillment. Plan carefully for integrations, though, to avoid common challenges, including data synchronization, mapping custom fields, and maintaining accurate user permissions.
  • Adopt a continuous improvement mindset: Don’t ever stop refining processes and sharing knowledge, no matter how good the ROI becomes. Practically, this means measuring and tracking KPIs, such as quote turnaround time, error rates, win rates, and average deal size, to identify areas for optimization. Regularly gather feedback from sales teams about system usability and workflow bottlenecks. When someone discovers a more efficient way to use the system—say, new templates or a streamlined approval workflow—share these best practices across the organization.
  • Ensure that the CPQ solution you pick supports your needs: CPQ solutions are themselves highly configurable products that vary significantly in capabilities from vendor to vendor. Evaluate features that directly support your company’s operations, such as the ability to generate professional proposals, create detailed bills of materials, or support subscription-based pricing models. Consider scalability requirements: Will the system handle your product catalog size, user count, and transaction volume, both now and as the business grows? Integration capabilities are also crucial—the solution should work seamlessly with existing CRM, ERP, and ecommerce platforms.

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Seamless Integration With NetSuite CPQ

As a native part of NetSuite’s ERP solution, NetSuite CPQ eliminates many common integration challenges while delivering key cost-saving benefits. Sales teams can move seamlessly from CRM opportunities to accurate quotes, using automated workflows and guided selling features that reduce quote generation time. The system’s rules-based configuration engine helps prevent ordering errors and invalid product combinations. Automated approval workflows maintain pricing consistency and protect margins.

Furthermore, NetSuite CPQ can help organizations maximize ROI. Its cloud-based architecture contributes to reduction of on-premises infrastructure costs and maintenance concerns. Built-in analytics help track KPIs, supporting continuous improvement efforts. The system scales easily to accommodate growing product catalogs and user bases. Most important, as part of the unified NetSuite platform, CPQ data flows automatically to order management, billing, and fulfillment systems, streamlining the quote-to-cash process and maximizing the return on your CPQ investment.

Any business that sells highly configurable products can likely make a strong case for a CPQ solution. CPQ software can accelerate sales cycles and make quotes more accurate, cutting costs and saving time across the entire business. While calculating the ROI of a CPQ implementation helps build the business case and get teams on board with the plan, it should be a starting point—not a destination. Organizations that follow best practices for implementation and maintain a focus on continuous improvement often find their actual returns exceed their initial projections.