The Breaking Point for CPQ: Why It Won't Work for Your Renewals Business



Your sales team already uses a CPQ, and you're starting to think you need something to help process renewals quotes as well. As your business grows, and as cloud subscription models become a new norm, effective annuity sales is becoming a critical revenue generator and key player in the customer success equation. So can you just deploy your CPQ system across your renewals team too?

The answer is no, a CPQ system will not work for renewals. And here's why:

  1. CPQ was designed for net-new sales. How many net new deals does a single salesperson process a quarter? Let's say the number is around 10. A CPQ is an effective and efficient tool for processing 1-2 quotes a week. CPQ is a great first step to take a company from spreadsheets to a web portal where account reps can be slowly and methodically guided to create an accurate quote.
  2. A renewals business is fundamentally different than net-new sales. Unlike a net-new account rep, a typical renewals rep might process hundreds to thousands of renewals in a quarter. That includes not just the quote itself, but the countless revisions and changes requested from an end user, reseller or distributor. A business could easily be hit with 10,000 low-value renewal motions in a single month. There are simply not enough hours in a day to force a rep or a partner through a CPQ cadence. Ask the reps who transact over 100 quotes a month… they will testify to this!
  3. CPQ is an un-scalable model. How much time (or how many renewals reps) would it take to go into each individual quote and walk through the CPQ process for thousands of renewals? Processing each renewal one-by-one isn't a realistic or efficient business model, the way it is in new-sales. Applying the assumptions and workflow processes of CPQ into a renewals organization will break the business. The standard CPQ is not designed to manage quoting, re-work, install base sync, follow-up, validation and recurring revenue campaigns, with high volumes and the deadlines of fixed expiration dates driving quick turnaround.
  4. CPQ depends on data quality, which isn't reliable in renewals. In addition to the problems of quote volumes and quarter end deadlines, there is also a core problem with the sources of data, which drives the renewal business. CPQ is designed to start from fixed data sets (like price books and sales catalogs); however, renewal data typically is not pre-validated. It comes in from multiple sources—from inside the vendor, and from distributors and resellers—with inaccuracies, missing data and frequent changes slowing down the process and creating unique challenges for renewals reps. Renewal reps need a solution that is designed to resolve an install base that is dynamic and constantly changing, and to make sure these changes are reflected in every communication with the channel.
  5. CPQ doesn't manage channel communications. The second largest drain on a renewal rep's time is the need for constant follow-up between vendors, distributors and resellers while shepherding the quote through to order. To address the problems of volume and deadlines, renewal reps also need a tool that can minimize the phone calls and emails required for every quote to give them more time back in their day, so they can move on to the next customer. CPQ only focuses on price books and product catalogs.

While every company is trying to enable self-service and CPQ seems like it could be a nice fit, not all quoting is created equal. And CPQ is not designed to manage the dynamic nature of the living install base. The renewals business is an entirely different animal, and it is interconnected throughout the channel. Distribution partners need to manage multiple vendor portals, and resellers are juggling distributor portals with even more vendor portals. Nothing is more frustrating for a distributor and reseller than a vendor who wants to enforce rules that slow down their business and make them harder to do business with.

So if a CPQ isn't a scalable solution for a renewals business, how should companies approach processing and automating their renewals quoting?

More Than Quoting: Business Processes for Annuity Sales

Renewal businesses require process automation and efficiency optimization to maximize their returns. More than the simple "guided clicking" of a CPQ, pacesetter renewals teams work to remove any manual interaction entirely. The solution to managing high volume, low value renewal sales is to look at renewals as an entirely different business model—one which requires its own business processes, people and workflows.

By automating much of the renewals business processes, renewal reps can be freed from data entry to take on a larger book of business. The results significantly increase renewals revenues and improve customer satisfaction.

Adding to the Workload

Renewal leaders know that as long as the business continues to grow, the number of renewals will grow as well. A renewals team that relies on manual tools will never have enough people to support it—which is why automation is required.

There is only one business process platform for managing an annuity business: The platform includes the functionality of a lifecycle CPQ for renewals and cloud as part of a comprehensive end-to-end system for managing annuity sales.

Renewal revenues can be significantly more profitable than new revenue. When done well, the majority of the revenue attributed to a single sale will actually result from renewals, upsells and cross-sells… up to 22 times the revenue as from the initial sale.

Ultimate Renewals Playbook

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