Top 6 Trends Shaping the CPQ Industry

Unknown Author – Epicor

The global Configure Price Quote (CPQ) Software market, once valued at US$2.2 billion in 2023, is predicted to reach a remarkable US$7.3 billion by 2030.  In addition to its rapid growth, the industry is on the verge of seismic change.

Join us as we delve into the key trends set to reshape the CPQ industry and unveil the future of this tech-led revolution:

 First,  let’s define CPQ and explain how cutting-edge CPQ solutions operate today.

What Is CPQ?

Configure, Price, Quote (CPQ) is an indispensable step-by-step process used by businesses dealing with complex and configurable products. CPQ software  streamlines the process, boosting efficiency and productivity and enhancing the customer experience.

A robust CPQ solution can shrink sales cycles that once took weeks down to a few minutes. This speed can significantly increase your win rate and deal size¹, while offering significant advantages in these areas:

  • Tailored Configurations: CPQ allows you to effortlessly customize your offerings to meet each customer’s unique demands. With it, you can navigate through the complexities of product variables, dependencies, and exclusions, helping ensure that the final product configuration precisely matches your customer’s needs. No more one-size-fits-all; you can now deliver mass customization at scale.
  • Flexible and Dynamic Pricing: Pricing is more than just attaching a number to a product. With CPQ, you’re equipped with a dynamic pricing tool that accounts for volume discounts, promotions, and other pricing strategies. It’s intelligent enough to automatically adjust prices based on product configuration and pricing rules, helping ensure that you maintain profitability while remaining competitive.
  • Accurate and Professional Quoting: CPQ reduces the time to create detailed and professional quotes. It also significantly minimizes human errors. Your customers receive a clear, concise quote outlining the cost of their unique product configuration, leading to faster approval times and increased customer satisfaction.

An effective CPQ also streamlines the sales process and automates many transactional engineering tasks required to sell engineer-to-order and configure-to-order products. These include auto-generating CAD files, BOMs, and sales drawings, along with routing them to the appropriate person or system.

In changing markets where efficiency is critical,  CPQ enables end-to-end file-to-factory automation, which can make dramatic net positive impact on costs–manufacturers can produce more products, in less time, with a reduced headcount across sales, engineering, and the shop floor.

1. Greater Utilization of Cloud-Based CPQ Products

There are two main types of CPQ products: cloud-based and on-premises. Cloud-based CPQ products are hosted on the internet and accessed through a web browser, while on-premises CPQ products are installed and maintained on your business’s own servers.

The CPQ industry is on the rise generally, but cloud-based CPQ is experiencing the most rapid growth. Growth in the cloud segment is forecast at 17.8% CAGR for the next 8-year period, while on-prem is projected to record a still fairly strong 15.1% CAGR .

So why do we see more and more businesses opting for cloud-based CPQ products over on-premises ones? Here are some of the main reasons:

  • Cost: Cloud-based CPQ products typically have lower upfront costs than on-premises ones, as they do not require investment in hardware or expensive software installation. They also have lower maintenance costs, as the vendor handles updates, security, and backups. On-premises CPQ products, on the other hand, require more investment in infrastructure, licenses, and IT staff.
  • Scalability: Cloud-based CPQ products can quickly scale up or down according to the business’s needs without affecting performance or availability. They can also handle peak demand and high volumes of data without any issues. On-premises CPQ products, however, may need more capacity and require additional hardware or software upgrades to support growth or changes in demand.
  • Accessibility: Cloud-based CPQ products can be accessed from anywhere, anytime, and on any device with an internet connection. This allows sales teams to work remotely and collaborate with customers and partners across different locations and time zones. On-premises CPQ products, on the other hand, may have restricted access and require VPN or other solutions to enable remote work.
  • Innovation: Cloud-based CPQ products are constantly updated with new features and functionalities that enhance user experience and help provide competitive advantages. On-premises CPQ products may have slower or less frequent updates and lag in innovation and customer experience.
  • Integrations: Cloud-based CPQ solutions integrate seamlessly with other cloud solutions such as CRM or ERP. This is essential for driving efficiency and creating a single source of truth for business data.

2. Prioritizing Remote Sales Management and Mobile Solutions

Here’s a powerful statistic: According to a report by McKinsey, 75% of B2B decision-makers prefer remote interactions with sellers over in-person interactions with sales reps. This is why CPQ vendors are experiencing increased demand for CPQ products that support sales teams to optimize sales remotely or on the go.

Today’s leading CPQ solutions use technology to take products out of the showroom and into customers’ homes and offices (see Augmented Reality below). They’re also focusing on mobile accessibility for hybrid teams that work in and out of the office.

Companies leveraging remote sales through CPQ are seeing real benefits. These include reduced travel and operational expenses, enhanced scalability and flexibility, improved customer satisfaction and loyalty, and greater access to new markets. They can also cast a wider net when hiring and attracting talent worldwide.

3. Integrating Augmented Reality (AR) in various applications

Augmented reality (AR) is a technology that overlays digital information onto the physical world, creating an immersive and interactive experience for the user. The global AR market is skyrocketing, projected to grow from $62.75 billion in 2023 to $1,109.71 billion by 2030, at a CAGR of 50.7%, with leading technology companies like Apple, Meta, and Google all in on the action.

AR is set to have a massive impact on various industries, including gaming, education, healthcare, and retail. But one of the most promising applications of AR is in the CPQ industry, where it provides a more engaging and realistic way of presenting products to customers.

AR can allow the customer to see how the product would look in their chosen environment—for example, how a new sliding glass door would look on their property. It can also enable the customer to interact with the product or service, such as changing its features, colors, or dimensions, to see how these changes affect the price and value.

By using AR in the CPQ process, sales teams can achieve several benefits:

  • Increased Customer Satisfaction: AR helps customers visualize and understand the product or service better, leading to higher confidence and trust in their purchase decision and fewer returns.
  • Reduced Sales Cycle: AR shortens the time needed to generate a quote, as well as to negotiate and close a deal, by eliminating the need for physical samples, prototypes, or demonstrations.
  • Improved Sales Performance: AR boosts sales revenue and profitability by enabling sales reps to upsell and cross-sell more effectively and differentiate themselves from competitors.

4. Integrating CPQ with B2B eCommerce Platforms

People underestimate not only the size of the current B2B eCommerce market but its immense growth potential. Valued at US$17.9 trillion in 2021, it’s more than five times that of the B2C eCommerce market and currently ballooning. Asia Pacific leads the way with a market share of 78%, leaving North America and Europe far behind.

One of the main reasons for the rise of B2B ecommerce is the changing expectations of buyers. Today’s B2B buyers are used to the convenience, speed, and personalization of online shopping in their personal lives, and they expect the same service when buying for business.

The rise of 3D visual product configurators is another potent driver. Embedded into an eCommerce website, buyers can see how their products will look and function in real time as they make changes to their configuration. They also provide feedback on the components’ compatibility, availability, and pricing and make suggestions for upselling and cross-selling.

Using visual product configurators, buyers can make informed decisions faster and easier, while sellers can showcase their products more effectively and increase conversions. They’re a win-win for both parties in the B2B ecommerce space.

5. Incorporating Artificial Inteligence and Machine Learning Capabilities

Artificial Intelligence (AI) and Machine Learning (ML) are transforming how businesses use CPQ software. These smart technologies learn and get better with each cycle of feedback, which means they’ll improve exponentially over the next year, making business operations more efficient and effective than ever before.

The impact of AI and ML can be felt across the entire Configure, Price, and Quote process, from the shopping cart to the shop floor. Here are some of the ways these technologies are having an impact:

  • Intelligent Product Configuration: AI can analyze customer data and preferences to suggest the best products and options for each customer, reducing errors and increasing customer satisfaction.
  • Dynamic Pricing: ML optimizes pricing strategies based on market conditions, customer behavior, and business goals, helping ensure that sales teams offer the most competitive and profitable prices.
  • Smart Quoting: AI generates professional and personalized quotes that include relevant information, such as discounts, terms and conditions, and upsell opportunities, as well as auto-generated sales drawings and CAD files. This speed and transparency improves conversion rates and customer loyalty.
  • Generative guided selling: Generative AI, a type of AI that builds new content from scratch, could soon greatly reduce the need for salespeople, supercharging efficiency. Generative AI uses “natural language” questions and answers to better interact with customers and understand their needs and preferences.

6. Applying No-Code Methodologies to CPQ Price Rules

Product rules engines are a vital component of CPQ (configure, price, quote) solutions. They allow users to define the logic and constraints for configuring complex products and services.

However, traditional product rules engines often require coding skills and technical knowledge, limiting the flexibility and efficiency of the CPQ process.

That’s why more and more CPQ solutions are adopting a no-code approach for their product rules engines. No code means users can create and manage product rules using a graphical interface, drag-and-drop elements, and natural language expressions. It makes the rules engine accessible to business users with no coding experience.

The no-code movement is growing fast and provides several benefits to CPQ rules engines offer several advantages:

  • Faster Rule Creation and Maintenance: No-code platforms enable business users to create and modify rules swiftly, improving the speed of operations and reducing the time it takes to update or launch new products. Businesses can react lightning-fast to market changes or customer demands, enhancing their competitive edge.
  • Reduced Dependency on IT Resources: As there’s no need to write or understand code, businesses can reduce their reliance on IT departments or specialized software developers, leading to cost savings and operational efficiency.
  • Enhanced Collaboration: A no-code approach facilitates greater alignment between business and technical teams, as both can effectively understand and utilize the system, improving coordination and reducing misunderstandings. Opening access to technology for more people within an organization promotes inclusivity and broadens the pool of potential innovators.
  • Improved Accuracy and Consistency: Pre-built elements and visual interfaces of no-code platforms can help ensure the consistent application of product rules, reducing errors and increasing the reliability of configurations.
  • Effortless Scalability: No-code platforms allow businesses to rapidly build and scale their CPQ solutions without worrying about the intricacies of programming, which contributes to faster growth.

It’s also worth noting that no-code doesn’t mean no-complexity. Advanced no-code tools can handle complex logic and business rules, making them suitable for even the most complex product configuration scenarios.

Looking to the Future of CPQ

As we look towards the future of the Configure Price Quote (CPQ), we see a landscape shaped by transformative technological advancements and shifting market dynamics. The challenge lies in keeping pace and harnessing these advancements to create value and deliver customer excellence.