Billing,  CPQ,  Pricing Strategy,  Recurring Revenue,  Revenue Operations,  SaaS,  Sales,  Tech

How Modern CPQ is the Future of Recurring Revenue Operations

Software businesses’ relationship with the buyer has transformed with the advent of subscription pricing models. The standardization of subscriptions has given the customer unprecedented buying power because they can switch to a competitor quickly. In the B2B subscription economy, the business is no longer selling a product, it is selling a symbiotic relationship with the customer. That relationship starts at your pricing and quoting.

If you read my previous article then you know that the subscription economy is changing how software businesses do pricing. Fundamentally speaking, usage denotes how essential the customer felt your solution was to accomplishing their goals. Pricing influences usage which, in a subscription economy, heavily correlates with renewals and upsells. Pricing a product too high may make a customer use the solution sparingly and look for a lower-cost alternative but too low pricing may erode trust in the product, reducing usage and giving the customer a reason to churn when the subscription ends.

Legacy CPQ is not equipped to manage relationships

The goal of legacy CPQ is to save the seller time on configuring product cost and quantity in a one-off sale. In the subscription economy, saving time on the seller-side is not going far enough. Now, the cost and quantity of a product is just one factor that goes into a mutually-beneficial deal: deals now include various pricing models, billing frequencies, and discounting strategies. Additionally, new factors in the deal after signing, namely extensions, ramping, and renewals, make deal configuration hard for legacy CPQ- which means complex deals still get manually reviewed. Using legacy CPQ to create modern deals means leaving money on the table each month in opportunity cost due to lower flexibility when creating deals.

What Sellers do with Modern CPQ

Sellers realize more recurring revenue with a modern CPQ by allowing for pricing experimentation, increasing user-friendliness, and enabling reps to spend more time engaging in revenue-generating activities.

Price Optimization: Modern CPQ allows reps to engage in live pricing experimentation. This helps sellers find a better product-pricing fit and helps buyers feel more agency during the quoting process as they can see their rates in real time as opposed to waiting several hours for a proposal to be sent to them. Pricing experimentation also helps businesses realize more revenue, research from Price Intelligently shows that even a 1% pricing optimization can create up to 11.1% more profit.

User-Friendliness: Deals become so easy to create that your Sales reps are doing it live on call with prospects. Not only does it help the seller, but it also helps the customer. The ease of configuration enables multi-channel purchasing for customers. According to research from Forrester, 59% of B2B buyers prefer to not talk to a Sales rep and 74% of buyers find buying from a website more convenient. A powerful yet flexible CPQ can enable online purchases of your complex solution.

Increase Time Spent Selling: Reps that utilize a modern CPQ experience 2-3 hours saved per day which is then reinvested towards prospecting. According to HubSpot, reps only spend 39% of their time actively selling which means there is great value in unblocking reps during operational tasks. Simply put, reps who spend more time selling generate more revenue than reps who don’t.

How Modern CPQ does it

Modern CPQ utilizes a one-time configuration of deal templates that are pre-approved by Finance and Legal which means Sales reps can auto-generate deals live on call with their prospects, substantially reducing time-to-value for the customer. Since modern buying is about building relationships, allowing the customer to collaborate with reps about pricing means increasing trust and transparency during the buying process.

Whereas legacy CPQ could only configure a one-time sale, modern CPQ is equipped to configure the relationship by becoming a source of truth for your deal. Everything from pricing, quoting, redlining, document storage, e-signature, billing, usage, and renewals can be managed on a single platform, giving the business powerful insight into their pricing strategy. As Price Intelligently puts it, “the key to retaining customers and increasing their profitability is to find a balance between providing them enough value through your product and charging them an appropriate price for your business.” Pricing is the first impression a business makes on a potential customer relationship and modern CPQ is the tool that will help your business intelligently create long-lasting deals in the subscription economy.

 

If you want to talk in more detail about how modern CPQ can help your business build stronger relationships with your customers, you can connect with me on LinkedIn or by email at aditya@revops.io!

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