Introduction to Salesforce CPQ
Salesforce CPQ is one of the major Configure, Price, Quote (CPQ) solutions in the market. It is typically used when the product configuration is more complex than what standard Salesforce can normally support.
Throughout this article, we walk you through the core functionalities of Salesforce CPQ, but before diving into that let’s take a brief look at the Configure, Price, Quote (CPQ) process.
Configure, Price, Quote (CPQ) process
CPQ is a subprocess of the sales process. Here is a generic representation of the sales process (this can change as per the companies’ business needs) :
When a new opportunity is created, the sales rep needs to:
- Configure: Put together the list of products that answer the customer’s need.
- Price: Find the right price for the products. Apply discounts if any.
- Quote: Send the quote to the customer to be signed.
As the CPQ process gets more and more complex, it gets harder and harder for sales rep to create accurate quotes. Salesforce CPQ provides sales teams with a set of automations and tools that facilitate and enhance the CPQ and Sales processes. In the coming sections, we explore these automations and tools.
Configuration with Salesforce CPQ
Product Types
There are two types of products in Salesforce CPQ : Non-subscription and subscription products. The following table illustrates the main differences between these two types :
Product Bundling
A bundle is a collection of products that are sold together as a package. For example, the laptop, power cable, mouse, keyboard and warranty can all be bundled together.
Salesforce CPQ allows to create bundles by adding product options to a product that becomes then a bundled product. In the previous example, the laptop is the bundled product, the power cable, mouse, keyboard and warranty are product options.
Salesforce CPQ also allows to group product options into features and to group features into predefined categories.
Product Rules
Product rules are a set of conditions that need to be respected by the list of products selected on a quote in order for the quote to be valid. Here are some examples of product rules:
- Product D can be sold only if product E is sold.
- Product F cannot be sold with product G.
- Product H is sold starting from 20 units if product I is sold.
There are four types of product rules in Salesforce CPQ :
Pricing with Salesforce CPQ
Pricing Tools
Salesforce CPQ can change the product price that is retrieved from the price book using different pricing tools.
# Block Pricing
In block pricing, the price of a product depends on the range of the quantity that is being purchased. Quantities inside the same range get sold with the same total price. Here is a block pricing configuration example :
If the customer requests 150 printer papers, the total price will be 50 $. And if he requests 180 printer papers, the total price will still be 50 $ because 150 and 180 fall in the same range.
# Percent Of Total (POT) Pricing
In percent of total (POT) pricing, the product price is calculated as a percentage of the sum of other products’ total price. For example, when you go to a restaurant, you calculate the tip as a percentage of your total bill amount.
# Option pricing override
If a product is present as a product option inside a bundle, then the product option price will override the product price. For example, the keyboard unit price if sold individually is 100 $, and when it’s sold inside the laptop bundle is 80 $.
# Cost plus markup pricing
In cost plus markup pricing, the product price starts with a base price (cost), then the sales rep can adjust it by adding a markup (fixed amount or percentage of the cost). For example, it costs 30000 $ to fabricate a car but it was sold to a customer for 40000 $. In this case the cost is 30000 $ and the markup is 10000 $.
# Contracted pricing
The product price can be adjusted for a certain customer by adding a contracted price on the customer’s account record. For example, the laptop unit price is 1000 $ but it’s sold to customer XXX for 950 $.
Pricing Rules
Pricing rules are used to conditionally update the value of any field in the quote, quote line or quote line group. They are useful when you need product values to change dynamically based on other products in the quote. Here are some examples of pricing rules:
- If product A ’s quantity is greater than 10, then Product B should get a 5% discount.
- If product C is present on the quote and the quote start date is less than 01–01–2025, then product D ’s unit price should be updated to 50 $.
Discounting Tools
# Discount Schedule
Discount schedule is used to create volume discounts based on quantity or term. Here is an example of a discount schedule :
There are two types of discount schedules:
- Range : Based on the tier in which the quantity/term falls a discount will be applied
- Slab : The product’s quantity/term will be distributed on the tiers and different discounts will be applied.
Product A ’s unit price is 20 $, let’s assume that the customer wants to buy a quantity of 150 units:
- Discount schedule type is range :
Total price = 150*20*(1–0.2) = 2400 $
- Discount schedule type is slab :
Total price = 50*20*(1–0.05) + 50*20*(1–0.1) + 50*20*(1–0.2) = 2650 $
# Additional discounts
- Manual discount : Allows the sales rep to apply their own custom discount on the quote, quote line group or quote line.
- Partner discount : Extra discount on the quote based on the opportunity’s partner.
- Distributer discount : Extra discount on the quote based on the opportunity’s distributor.
Quoting with Salesforce CPQ
Quotes
In Salesforce CPQ, quotes are associated with opportunities, they contain the products that your customer is interested in, associated with the prices and different discounts that your company proposes.
The following diagram represents a simplified Quote-Opportunity data model in Salesforce CPQ. You should note that Salesforce CPQ uses its own Quote and Quote Line objects and not the standard Salesforce Quote and Quote line object.
Each opportunity can be associated with multiple quotes, but only one of these quotes can be set to primary.
The primary quote is the quote that will most likely be accepted by the customer and that will get converted to an order, it is also automatically synchronized with the opportunity which means any change to the quote line items in the quote syncs with the opportunity products on the opportunity, and vice versa.
Quote Templates
Ones the quote is finalized, the sales rep needs to send it to the customer to be signed. Salesforce CPQ supports generating doc and PDF versions of your quote using quote templates.
Quote templates contain customizable sections which allows you to choose which quote elements you want your customer to see. This can be integrated with a third-party e-signature tool like Docusign.
More about Salesforce CPQ
This article focuses only on the core functionalities of Salesforce CPQ. If you want to have a broader idea about this solution, here are some important functionalities that weren’t covered in this article :
- Order and contract generation with Salesforce CPQ.
- Contract amendments with Salesforce CPQ.
- Contract renewal with Salesforce CPQ.
