From industrial equipment to cloud storage to telecommunications packages and beyond, B2B companies have long provided their business customers with customized products and services. Thanks to advances in technology and heightened expectations from consumers, demand for personalized solutions has extended to the B2C space, as well. Key to nailing these sales: the ability to quickly configure a complex solution, price it, and deliver an accurate quote to customers. The best way to measure the success of this CPQ process? With the right set of key performance indicators (KPIs).

What Is CPQ (Configure, Price, Quote)?

Configure, price, and quote (CPQ) is a process salespeople follow to configure tailored products and services, price them fairly and accurately, and deliver resulting quotes and proposals to potential customers.

Getting quotes to prospects as quickly as possible is critical to sealing these deals—and so is software designed to support the entire process. Companies that invest in CPQ automation are better equipped to balance customization and speed, reduce the frequency of errors, save salespeople time and hassle, and improve the customer experience.

Key Takeaways

  • Improving the accuracy of the CPQ process speeds up the sales cycle, improves the customer experience, and boosts revenues.
  • Tracking specific KPIs enables business and sales leaders to accurately assess CPQ performance.
  • Important CPQ KPIs include percent of quotes created, quote accuracy rate, and average quote value.
  • Investing in purpose-built CPQ software that integrates with other enterprise systems can optimize the process.

Why Is CPQ Performance Measurement Important?

Continually assessing and improving the CPQ process through data collection is a best practice that helps businesses streamline their sales methods, increase revenue and profit, and build strong customer relationships. By monitoring CPQ performance through KPIs, organizations can pinpoint bottlenecks or find problems in their systems and then address them, thereby elevating the benefits that CPQ software can deliver.

Measuring CPQ performance can enable the organization to:

  • Make more data-driven decisions: First and foremost, having CPQ performance metrics in hand gives company leaders hard facts on which to base any changes to sales strategies or tactics, as opposed to acting on limited or subjective feedback or gut instinct. This leads to more targeted and effective improvements.
  • Optimize key sales processes: Access to relevant data and analysis can help company leaders identify opportunities to shorten sales cycles, speed up quote-to-cash processes, and boost conversion rates. CPQ KPIs are vital to increasing efficiency in the sales function and closing deals more quickly.
  • Increase user adoption of CPQ systems: CPQ software can deliver benefits only if salespeople are integrating it into their workflows or customers are willing to use them. Specific CPQ KPIs can help identify lack of adoption or issues with the user experience, paving the way to corrective actions that ultimately result in increased returns on the CPQ investment.
  • Improve quote accuracy: CPQ KPIs can uncover issues related to pricing errors, miscalculated discounts, and lack of compliance to internal policies. This can safeguard the company from financial risk and increase customer confidence.
  • Free sales reps to focus on selling: A 2023 analysis of more than 5,000 public companies by McKinsey found that “growth champions”—those that profitably outgrew their peers over a 10-year period—were able to increase their sales productivity by as much as 30% by using automation to increases sales teams’ effectiveness. Ensuring that the CPQ process is as streamlined as possible helps sales teams focus on selling.
  • Protect and grow revenues: Tracking CPQ KPIs grants business leaders insight into opportunities to optimize their pricing strategies, increase upselling or cross-selling, and stem any revenue leakage that results from an ineffective or inaccurate CPQ process. This can have a measurable impact on the top line and increase business growth.

10 CPQ KPIs That Measure Success

Input from internal users, leaders, and customers about how well a company’s CPQ process is working can be helpful, but establishing and monitoring KPIs paints a holistic, timely, and data-based picture of performance. Over time, the data can also serve as the basis for AI-enabled analysis into further improvement and refining of CPQ over time.

Though it’s up to each company to choose with KPIs to emphasize KPIs, 10 of the most commonly tracked metrics are presented in the following list.

1. Percent of Quotes Created

A piece of technology will only deliver benefits if it’s being used. The percent of quotes created KPI measures the percentage of quotes sent to customers that are created using the company’s preferred CPQ software, versus those being performed manually or by using some other tool or method.

Ideally, every salesperson will be using the prescribed software, but there are many reasons they might not be, such as technical issues, lack of training, change resistance, or an unfriendly user interface. When the percent of quotes created by using the system dips below the company’s preferred baseline, sales and technology leaders can look into and address the root causes for lack of adoption. Working toward 100% compliance is the goal, as it creates more consistency internally as well as externally for customers on the other side of the process. Getting everyone to work with the same software also means that the company will be able to gather more enterprise data centrally, resulting in better CPQ analysis and decision-making going forward.

The formula to calculate percent of quotes created is:

Percent of quotes created = (Number of quotes created via CPQ / Total number of quotes) x 100

2. Quote Error Rate

All kinds of errors can make their way into a customer quote—especially when it’s generated manually—such as inclusion of the wrong products or services, missing items in the bill of materials, incorrect pricing, or misapplication of discounts. The best CPQ tools will incorporate rules or constraints to make sure the user doesn’t inadvertently introduce pricing or discounting errors into the customer quote, for example.Companies with an elevated quote error rate are likely to experience slowdowns in the sales process, problems with customers, and, ultimately, loss of sales and revenues.

The formula to calculate quote error rate is:

Quote error rate = (Number of quotes with errors / Total number of quotes issued) x 100

3. Quote Accuracy Rate

This KPI is the flip side of quote error rate—it measures the percent of quotes generated by a CPQ system that contains all of the right information about product or service configurations, descriptions, pricing, terms, and conditions. In many cases, deployment of leading CPQ software—especially tools that natively integrate with other enterprise systems, such as enterprise resource planning (ERP) and customer relationship management (CRM)—will significantly boost the company’s quote accuracy rate, particularly when compared to manual quoting processes.

The formula to calculate quote accuracy rate is:

Quote accuracy rate = (Number of error-free quotes / Total number of quotes issued) x 100

4. Elapsed Time to Respond

The longer a company takes to deliver a quote, the more likely the would-be buyer will be to take their business elsewhere. That’s why it’s important to track the number of business days between when a customer initially requests a quote until the moment the business delivers it. Companies will need to determine a benchmark for how long that should be and measure its timing against that goal. Lengthy response times should compel leaders to investigate and rectify the reason for delays, while decreases in response times can point to successful efforts worth replicating elsewhere in the business.

The formula to calculate elapsed time to respond is:

Elapsed time to respond = Date quote delivered – Date quote requested

Some companies may opt for a CPQ system that permits customers to configure and create quotes themselves, which virtually eliminates any waiting time.

5. Quote Cycle Time

A subset of the elapsed time to respond KPI, quote cycle time examines the total amount of time it takes to create an accurate price for the customer. Shorter quote cycle times are typically better because they improve the customer experience and speed up the overall sales cycle. Of course, different types of configurations may take longer to price accurately. It’s a good idea for companies to additionally analyze quote cycle times by product line, quote type, sales representative, and so on: Certain products may simply take longer to price than others. But digging into the details can point to targeted solutions that improve this KPI, such as additional training for specific salespeople, reconfiguration of the CPG software to streamline the process, or providing greater clarity around pricing.

The formula to calculate quote cycle time is:

Quote cycle time = Total time spent creating quotes / Number of quotes generated

6. Quote Conversion Rate

Also referred to as win rate, the quote conversion rate measures how well the overall CPQ process brings in new business. This KPI tracks the number of closed sales relative to the total number of quotes issued during a given period. This metric is typically used to measure the effectiveness of sales strategies overall, but it can also serve as an indicator of difficulties with the CPQ system, since an effective, accurate, and speedy CPQ process would be more likely to increase conversion rates.

The formula to calculate quote conversion rate is:

Quote conversion rate = (Number of quotes converted to sales / Total number of quotes) x 100

7. Customer Acquisition Cost (CAC)

Like the quote conversion rate, this KPI is used more broadly to measure the financial effectiveness of a company’s overall sales function. But it can also play a key role in tracking CPQ performance by calculating the total costs of successfully closing a deal with a customer, including marketing, advertising, sales efforts, and labor. A cumbersome, error-prone CPQ process will naturally push customer acquisition costs up, while an accurate and speedy process will drive them down. Although this can be a complex KPI to calculate—because accurately attributing marketing and sales expenses to specific customer acquisitions is tricky—it can help pinpoint specific CPQ issues that may be negatively impacting financials.

The formula to calculate CAC is:

Customer acquisition cost = Total sales and marketing costs / Number of new customers acquired

8. Discount Performance Trend

Discounted prices can certainly sweeten the deal for customers, but they may not always deliver the business benefits that companies hope they will. Monitoring the performance of discounts over time offers a data-based opportunity to understand their impact on sales, revenue, and profitability. Companies can also delve deeper into the data to explore, for example, discount performance trends by product, region, sales rep, and/or sales channel. This allows sales teams to gauge how effective their discounts have been and to adjust their pricing strategies to improve sales performance.

The formula to calculate discount performance trend is:

Discount performance trend = (Current period discount rate – Previous period discount rate) / Previous period discount rate

Where:

Discount rate = Total discounts given / Total sales (before discounts)

9. Sales Cycle Length

Sales cycle length measures how long it takes to convert a new lead into a finalized sale—from initial contact to completed purchase. By tracking sales cycle time, organizations can identify bottlenecks in their sales processes, make changes to strategies, and improve overall sales performance. Overly long or increasing sales cycles may suggest problems or inefficiencies in the CPQ process that require attention.

The formula to calculate sales cycle length is:

Sales cycle length = Date of purchase – Date of initial contact

10. Average Quote Value (AQV)

Sometimes referred to as average deal size, AQV measures the average amount of revenue generated by a CPQ system in a given time frame. It provides insights into the size of deals being proposed, which can inform sales and pricing strategies and resource allocation. This KPI is also useful for tracking the success of upselling and cross-selling initiatives and their impact on overall revenue over time.

The formula to calculate AQV is:

Average quote value = Total revenue generated / Total number of deals closed

Software Can Make or Break Your CPQ

Technology that automates the CPQ process can positively impact sales team productivity, as well as sales growth, profitability, and the customer experience. NetSuite CPQ is specifically designed to help salespeople price and sell configurable products and services with ease, transforming labor-intensive, manual processes into modern, click-of-a-button digital experiences that accelerate the sales process.

The NetSuite cloud solution offers a number of additional features, including a new AI agent for product recommendations based on natural language conversations, a configurator for customizing products, dynamic pricing based on rules-based calculations, live quotes for interactive customer communication, and a proposal generator with customizable branded templates. The CPQ module integrates directly with NetSuite’s ERP, CRM, and ecommerce solutions, so companies that opt for NetSuite CPQ get the benefit of shared pricing, inventory, and profitability data. Connected workflows extend from sales to generation of bills of material, routings, and work orders for production up to ultimate delivery.

CPQ processes and systems can have a broad and lasting impact in terms of customer and employee experiences, sales volume, revenues, and overall business growth. The best way to ensure sales performance and necessary improvements is to regularly measure, report, and act on CPQ KPIs. Once the KPIs are established, the effort pays off significantly in the form of data-driven CPQ insights.

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CPQ KPIs FAQs

What is the SMART criteria for KPIs?

SMART is a framework leaders use to help design effective and usable key performance indicators (KPIs) to assess business success. SMART is an acronym for specific, measurable, achievable, relevant, and time-bound.

What are the 4 steps of creating a KPI?

The four primary steps involved in developing a KPI are:

  1. Clearly define goals and objectives: It’s important to understand what aims, strategies, or tasks the KPI is intended to reflect.
  2. Determine the critical success factors in achieving those aims: Identify the biggest contributors to the success (or failure) of those goals or objectives.
  3. Decide on the most relevant metrics: With goals and success factors clarified, determine which measures will most accurately and effectively reflect the company’s performance in those key areas.
  4. Refine the KPI: Clearly define the KPIs. Document how they will be measured, what the targets are, and how frequently they should be tracked and reported.