Every now and then, new developments come up in the market to aid businesses with their operations. Similarly, when it comes to pricing, there are multiple tools that cater to various pricing niches. For example, data scraping systems help businesses get their competitors' prices from multiple online platforms. Price analytics and optimisation assist in studying the sales and pricing patterns of products and suggest prices accordingly.
Note: Here’s a read about the 10 best competitive pricing tools in 2023.
However, of all the present developments, there is a tussle between two niches that businesses need to know while making an effective and sustainable buying decision: Configure, Price, Quote or CPQ system and an integrated pricing management system. The difference between the two is significant.
Simply put, CPQ software helps customise prices for different individual customers according to their varying needs. At the same time, an integrated pricing management system considers multiple factors to help optimise profit margins in the long run. Moreover, the latter involves leveraging advanced datasets, an algorithm to analyse historical data, run future scenarios and forecasts and suggest intelligent and optimal prices.
To understand better, let’s start to break down what a CPQ system is, explore what integrated pricing tools entail, and how they can be combined for maximum efficiency.
What is a CPQ Tool?
CPQ stands for Configure, Price, Quote. It's a term that's often brought up in sales and business environments, but what is CPQ exactly? Simply put, a CPQ tool, or a CPQ system, is sales software for companies to quickly and accurately generate quotes for orders. It allows businesses to configure products or services, adjust pricing, and create sales quotes with ease.
- The "configure" in CPQ refers to the ability of the system to customise product offerings based on customers' needs.
- The "price" component enables businesses to modify the pricing structure according to various factors, including customer relationship, volume of sales, and more.
- Lastly, the "quote" feature provides the ability to generate accurate and professional sales quotes.
How does a CPQ tool work?
Understanding how CPQ works is integral to grasping its value.
- CPQ software streamlines the quotation process by integrating product, pricing, and customer data. This eliminates the need for manual calculations and reduces the chances of errors, making it possible to generate accurate quotes swiftly.
- A CPQ software starts with the product configuration, matching the customer's needs with available offerings.
- It then applies the pricing rules, considering factors like discounts, bundles, and other customisations. After pricing, the system generates a quote ready for delivery to the customer.
What is an Integrated Pricing Management Tool?
Switching gears, let's delve into another critical business tool: an integrated pricing management tool. But what is price management? Price management involves advanced strategies and technologies that optimise the pricing of goods or services to maximise profits.
An AI-driven integrated pricing management tool assists businesses in setting, managing, and adjusting prices accurately based on various internal and external factors such as costs, market demand, competitive pricing, and customer behaviour.
How does an Integrated Pricing Management Tool work?
A price management tool works by gathering and analysing data related to the factors that impact pricing. Let’s look at some of the crucial aspects that a pricing management tool caters to.
- Better yet, such integrated pricing management systems consider diverse aspects from a macro and a micro level through advanced datasets. This ensures accuracy in setting optimal prices across your product portfolio.
- Depending on competitor pricing, market demand changes, consumer preferences, geographical and seasonal aspects and much more; an integrated pricing tool will ensure accuracy without having to deal with chaotic manual data work.
- After considering and analysing the various aspects, such tools then use the data to suggest an optimal markup strategy, helping businesses stay competitive while also ensuring profitability.
Disadvantages of Configure, Price, Quote CPQ Sytems
While CPQ systems help find handpicked pricing for individual customers, they carry multiple shortcomings. When it comes to pricing products efficiently, the pricing process should involve deep analysis from both macro and micro points of view to maintain accuracy.
CPQ systems only cater to a specific part of pricing, that is, the personalisation of prices according to different customer demands. However, this may not be a sustainable process when we automate prices. Let’s look at a few spaces where Configure, Price, Quote (CPQ) tools fail to maintain a seamless pricing process.
- Complex & Inefficient Implementation:
A CPQ software is complex and often requires significant time and resources to implement effectively. This can include training staff to use the system correctly, integrating the system with existing technologies, and customising the tool to fit the company's specific needs.
- Integration Challenges:
CPQ systems must be integrated with other business systems such as CRM, ERP, or e-commerce platforms. This integration can be challenging, especially if the systems are not designed to work together or if they use different data formats.
Hence, a specific limitation to integrating CPQ tools may act as a hindrance to perfect pricing.
- Limited Pricing Capabilities:
While CPQ software can handle complex pricing scenarios, it might not offer the full suite of pricing capabilities that a dedicated price management tool provides. For example, they might be unable to handle dynamic pricing based on real-time market trends: a feature critical to an integrated pricing system.
This is when integrated pricing platforms enter the picture. Now, let’s look at the main differences between the tools and understand which one of them would be a sustainable choice.
5 Key Differences between a CPQ tool and an Integrated Pricing Management Tool
To make a sustainable choice, you must know the differences between CPQ tools and integrated pricing management systems. The key is to make the pricing process efficient and seamless.
1. Functionality:
While both tools aim to optimise business profitability, they do so in different ways.
- A CPQ software focuses on simplifying the sales process by automating the configuration, pricing, and quoting of products or services.
- On the other hand, pricing management is more about developing a robust and integrated pricing strategy using an array of data points.
2. Scope:
CPQ systems handle just a single part of the pricing process. In contrast, an integrated pricing management tool covers all facets of pricing, making it a more comprehensive solution for businesses looking to optimise their pricing strategies.
- A CPQ software has a really narrow scope when it comes to optimising prices for different customers. Plus, it’s time and energy-consuming for pricing managers.
- An integrated pricing management platform enables a company’s pricing department to set different strategies and combine them with their own businesses rules to set a sustainable and automated pricing process.
- An integrated pricing tool leverages historical data, market scenarios, competition, product segmentation and much more before suggesting prices. You can find out how to conduct a competitive analysis for price setting.
3. Data Utilisation:
A CPQ tool uses existing data to create quotes, whereas a price management tool uses data to not only set prices but also to adjust them dynamically based on market conditions.
- Integrated pricing relies on advanced data quality and real-time price suggestions based on market shifts.
- Moreover, you can also set the price changes to take place automatically across multiple online platforms and websites to show correct prices consistently, in a blink of an eye.
4. Application and integration:
CPQ tools are often used in B2B sales where product configurations can be complex, and pricing varies significantly. Pricing management tools, however, are applicable across various types of businesses, irrespective of the complexity of their offerings.
- CPQ tools may not always be compatible with all online platforms, ERP systems and CRM systems to fetch data. This becomes a limitation for its users as they can stick to only a few selected compatible ones.
- Integrated tools, on the other hand, are able to connect with most other applications to retrieve data- CRM software, ERP systems, etc.
5. Strategic Impact: While CPQ helps improve sales efficiency and customer experience, an integrated pricing strategy can have a broader impact on a company's bottom line by optimising prices for maximum profitability.
Can a CPQ Tool and an Integrated Pricing Management Tool Work Together?
Although a CPQ tool and an integrated pricing platform are significantly different in their functionalities, companies can use both of them together. You can use pricing management software to compute the list prices and send it to the CPQ software to calculate it on an individual customer level.
Likewise, you can leverage the power of an AI-driven integrated pricing tool to analyse prices and use the hyper-personalisation functionality of a CPQ tool.
Which industries do CPQ and Integrated Pricing systems cater to?
Understanding both pricing management systems is vital for businesses that leverage technology for revenue optimisation.
- CPQ systems are particularly beneficial for companies with complex product portfolios and customised offerings. They streamline the sales process, reduce errors, and increase efficiency by automating the configuration, pricing, and quoting process.
- Pricing management tools are essential for businesses that operate in dynamic markets where prices need to be adjusted frequently.
These tools allow businesses to stay competitive and maximise profitability by employing an integrated pricing strategy based on a thorough analysis of various internal and external factors.
How SYMSON Helps as an Integrated Pricing Platform
SYMSON leverages Artificial Intelligence for all its pricing operations to automate otherwise mundane tasks. Moreover,
- It allows for seamless integration with ERP, CRM and online platforms to fetch data swiftly and not lose any insights.
- SYMSON continuously analyses current market conditions - from both macro and micro levels - to dynamically suggest optimal prices for your product assortment.
- It considers not only the competition but also identifies the kinds of products in your portfolio- whether they are price sensitive or not- and tally their prices and demand with the market to suggest the right prices.
Better yet, you can combine different pricing strategies, but also apply your own business rules for maximum impact on your pricing. Likewise, SYMSON ensures to help increase the profit margin of a company in a sustainable manner.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!
