Everything You Need To Know About The P In CPQ

Pricing is notoriously complex. An effective pricing strategy can be a challenge to achieve, particularly if your sales team relies on manual pricing methods or complicated algorithms.

Configure Price Quote (CPQ) software can significantly simplify your pricing strategy, enabling you to select and price different combinations of products and services accurately. But to take full advantage of CPQ pricing software, it’s important to understand the different pricing methods and how to apply them consistently.

CPQ Pricing Methods Explained

Across various industries, there are different pricing methods so it’s advisable to understand which strategies your sales team uses before implementing a CPQ software solution.

  • List pricing: the simplest approach to pricing, each product has a fixed price which is stored in a price list, book, or database. When a customer registers an enquiry, your sales team look up the price of the product(s) to build a quotation.

  • Cost + markup: an approach commonly used by resellers; the price of a product is determined by adding a desired markup to the initial cost. 

  • Percentage of total: also known as dynamic pricing, this method calculates the list price of a product by applying a percentage to the price of other products or services. For example, support services for a software licence may be priced at 25% of the licence price.

  • Volume pricing: with volume pricing, (also known as price breaks) the list price for a product is determined by the quantity that the customer requires. The higher the number, the lower the list price per item. 

  • Term pricing: when revenue products are offered over a fixed contract term, the list price is varied. The price, for example, may be different over a 12-month term compared to a 24-month term.

  • Block pricing: with block pricing, products are sold in a block or bucket for a set price, irrespective of whether they are all used. This method is commonly used for mobile phone plans which offer a fixed number of minutes or volume of data. Instead of having a fixed price per unit, the final per unit cost to the customer depends on their consumption.

  • Attribute-based pricing: the price of some products varies according to the specifications chosen by the customer. For example, the price of a car may change if a customer requests a particular paint or interior finish. If many different combinations of attributes are possible, this pricing model can become complex.

  • Customer-specific pricing: usually offered for a limited period, pre-negotiated prices are offered to customers.

Planning For CPQ Implementation: Your Pricing Strategy

Optimum CPQ return-on-investment is more achievable if you understand your current pricing strategy and where you want it to be in future. Different scenarios will highlight potential problems and complexities which, when evaluated and planned for, make CPQ implementation smoother.

At Quintadena, we work with QuoteWerks to deliver quick proposals with multiple benefits, with rapid streamlined quoting that makes it easier for customers to purchase and pay, without the complications and expense of credit control limitations.

To find out more, please contact us today.

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