What is CPQ? Explained simply

In plain words

Think of a pizza place with an ordering screen. You pick a base, a sauce and toppings. The screen works out the price straight away. When you're done, you get a receipt with everything on it. Nobody has to write anything down or check the sums.

CPQ works the same way, but for more complicated products. CPQ stands for configure, price, quote.

• Configure. You pick options. Rules make sure you can only pick what works. This part is the configurator.
• Price. Pricing rules work out what each choice costs. That can be per metre, per piece or as a surcharge.
• Quote. The system turns the choices and price into a quote, with all the lines, prices and terms.

The point is that the three are joined up. You never retype anything from one step to the next.

An example

A machine builder sells machines with lots of options. An enquiry used to go like this. The sales rep filled in a spreadsheet. They called engineering to check if a combination would work. Then they copied everything into a quote template. Something could go wrong at every step.

With CPQ, the rep picks the options on one screen. Anything that doesn't go together can't be picked. The price is right there. One click and the system makes the quote. If the rep gives a bigger discount than allowed, the quote goes to the sales manager first.

Why it matters

At a manufacturer with many product versions, the knowledge often lives in a few people's heads, or in a spreadsheet only one person understands. That works until that person is off sick or retires.

CPQ captures that knowledge as rules. Then everyone makes the same correct quote, including a new sales rep and sometimes a dealer. There are fewer mistakes from retyping. And the quote is a better match for what the shop floor has to make.

CPQ only covers the start, though. After the quote, other systems take over, such as your ERP for the order and production.

Not to be confused with

A configurator. A configurator only puts the product together. CPQ then also works out the price and makes the quote. So a configurator is often part of CPQ.

ERP. An ERP handles what happens after the order: stock, purchasing, production and money. CPQ comes before it, when the product is built and quoted.