Configure, price and quote (CPQ) software has been traditionally viewed as a specialist outpost of software, almost exclusively B2B and predominately used in manufacturing or specialty chemicals or other industries where there were large variants of similar products that required careful configuration, pricing and ultimately generating a quote that could be forwarded to a prospective customer for consideration. But in recent years, this has changed, both in the number of vendors offering CPQ products, either standalone or more commonly as part of a broader offering, and the number of selling organizations recognizing the value of either the “C,” the “P,” or the “Q” or some combination of these.
The topic of revenue operations has been extensively covered recently, not least by vendors extolling the virtues of their particular offering. But as with much of the software industry, vendors often see the market through the lens of their current product capabilities rather than what is necessarily needed. With the rise of the mixed-revenue model that includes subscription and usage pricing as well as one-time sales, combined with the growth in self-service commerce, the result is more teams within an organization being directly involved with supporting revenue generation. In response, many organizations have appointed a Chief Revenue Officer (CRO) who is responsible and accountable for all sources of revenue for an organization. And with the rise of the role of the CRO, combined with an increasing adoption of mixed-revenue models, we see this as an increasingly necessary shift. We believe that leadership will need to drive this change in approach, recognizing that this will require a shift in responsibilities and, as importantly, accountability.
Much has been written in recent years on the emergence of subscription management as a new revenue model that both vendors and buyers are embracing as the future. The benefits speak to the value of a predictable revenue stream for the vendor, but more importantly, the advantages to the customer who needs a lower initial outlay, predetermined expense over the lifetime of usage and the ability to cancel or suspend on demand.
A year ago, I wrote about how technology could be useful in an inflationary period, correctly anticipating the world we live in now. Responding effectively to changes in costs is always challenging, but even more so because of the choppy and chaotic nature of the current environment. Many organizations have a limited or no ability to raise prices, and are forced to find ways to minimize the impact of rising costs. And while it’s true that some organizations have a degree of pricing power, behind this generalization there is a more complex reality because this ability to raise prices often varies depending on specific products, customers and channels. Companies can best address the challenges of inflation by adopting a technique that Ventana Research calls “profitability management.”
I have written about vendor efforts to use artificial intelligence (AI) and advanced analytics in their applications targeted at sales and revenue teams to improve focus and prioritize activities, both for pipeline management as well as individual opportunities. Since then, vendors have continued to innovate, and there have been more releases showcasing efforts to aid sales and revenue. And with this continuing innovation, we believe that by 2026, two-thirds of revenue leaders will begin considering a new generation of revenue analytics and data-driven applications designed to improve performance and productivity.
You would be forgiven for thinking that no one buys anything in person any more given the pages of digital ink spilled over the rise of digital commerce led by the rise and rise of Amazon. However, one quick errand run on a Saturday morning would easily give lie to this, as parking lots are full, not just at grocery stores but for everyday retail as well as big box stores. Likewise, in business-to-business (B2B) commerce, despite the advertised demise, person-to-person sales are still a major part of B2B purchases.
“Lead to cash” is an often-used term and is a companion to “quote to cash” and “order to cash”. What they all represent is an approach which recognizes that there is a process designed to convert a lead from a qualified interest to an active sale, through quote and contract negotiation, to order or contract, invoice and payment. “Quote to cash” and “order to cash” are subsets of this process, with different starting places, but ultimately end in the same place: with a payment for a delivered product or service.
As organizations shift focus to a broader definition of sales that includes all sources of revenue, vendors are also pivoting to include “revenue” as part of promotional messaging. But it’s my view that just changing your message or description does not necessarily deliver the capabilities and product experiences customers need to successfully plan, execute and achieve revenue targets and objectives. The just-completed 2022 Ventana Research Value Index for Revenue Performance Management addressed this shift, focusing on available product capabilities that support customer needs as well as their overall experience.
Ventana Research defines subscription management as the processes and technology needed to manage the subscriber experience from the first digital touch to the continuous modifications of orders for services and billing. Effective subscription management requires a new generation of applications designed to manage the life cycle of subscriptions and provide subscribers with the experiences they expect. The subscription business model has grown in popularity across many industries, and for many organizations it is now part of how they conduct business. Organizations, whether through line extensions, completely new businesses or through mergers and acquisitions, now have a mixed business model combining subscription and usage with one-time sales, often as a bundle of related products and services. The model establishes a regular, predictable income stream and monetizes existing and new assets. In addition, usage-based pricing is preferred by many consumers, both B2B and B2C, because it is more closely aligned to actual consumption patterns. For product companies, selling by subscription enables them to maintain ongoing contact with customers to facilitate future sales. Subscription is also popular with customers as it allows a degree of control from the buyer’s point of view and can be cancelled or modified, typically online, in a frictionless manner.
Digital Transformation. The Subscription Economy. Omni-Channel Selling. Customer Centric. These are all terms used to label trends and events that are changing the way business is being conducted, a change that has accelerated due to recent events. Regardless of the terminology, there is no doubt that the way vendors and buyers are interacting, whether B2C or B2B, is different today for many organizations than it was even five years ago. But to be fair, no technology on its own can transform your business without changes to the other two key elements: people and processes. In addition, change is unlikely to happen if you are also relying on your existing ERP or CRM systems.
There is much vendor activity and customer interest in making better use of data, to improve the sales process in the face of increased pressure to achieve organization revenue goals. As detailed in my Analyst Perspective: The Art and Science of Sales from the “Inside Out," enhanced buyer research as well as the inclusion of more people in the buying process, have made selling harder, evidenced by a general trend of declining quota attainment. There is no denying that better use of data can help in prioritizing and helping to advance the sales process more effectively. But this is not the whole story. Whereas generating interest and qualifying opportunity is a key part of the sales team’s role, all this progress can be undone with a cumbersome and clunky configure, price and quoting (CPQ) and contract life cycle management (CLM) process. Automated and digitized systems that handle these elements aid greatly toward a winning/successful close process and will set the right tenor for a continuing and sustained customer relationship. And although CPQ is often thought of as part of the finance department, as contracts are with legal, both of these processes should be seen as adjuncts of the sales process, and both sales and revenue leadership and operations teams need to align with finance and legal. My colleague Robert Kugel covers the finance perspective in more detail in his Analyst Perspective: Configure, Price and Quote Software Supports Profitability Management.
Despite all the advances organizations have made with respect to analytics, our most recent research shows the majority of the workforce in the majority of organizations are not using analytics and business intelligence (BI). Less than one-quarter (23%) report that one-half or more of their workforce is using analytics and BI. This is a problem. It means organizations are not enabling their workforce to perform at peak efficiency and effectiveness. It means the workforce in many organizations does not have access to the same information by which they are being measured. It means organizations must find other ways to communicate with, and manage, the workforce.
Topics: Sales, business intelligence, embedded analytics, Analytics, Data, Sales Performance Management, Digital Technology, Digital Commerce, natural language processing, Subscription Management, partner management, Revenue Management, Sales Engagement, Collaborative & Conversational Computing
Revenue performance management and the role of revenue operations is moving to the forefront of sales organizations, aligning departments around a single view of the business with shared revenue targets and goals. This facilitates the needs of the sales department as well as customer experience, marketing and renewals. The concept of RevOps does not yet have a widely shared common definition within organizations. Because revenue organizations include workers associated with sales operations, there tends to be a bias that RevOps leans towards sales management with the addition of customer success for retention and marketing.
Ventana Research was the first market research firm to focus on the emerging area of sales performance management (SPM), which we define as a coordinated set of sales-related activities, processes and systems that enable organization. Over the past decade, SPM has become more science than art. Properly managing a sales organization requires effective planning, which in turn requires key performance and sales indicators built on a foundation of relevant metrics. But this is changing. As more organizations embrace the subscription business model and engage with additional selling channels over and above direct sales, the concept of the primacy of new sales is transforming to a more holistic view of revenue.
Pricing is an issue that almost every for-profit company confronts – and usually agonizes over. Chief financial officers must play a part in setting the strategic direction of pricing in their organization. They should not be involved in tactical pricing decisions because they are not close enough to markets and customers, but they should be part of the strategic design of pricing, especially as part of a profitability management effort, which I’ve discussed before.
The internet is a rich source of information and is used by buyers to research new applications and offerings well before ever engaging a vendor and salesperson. Along with massive growth in offerings, this is a major reason why sales teams are facing increasing challenges to successfully sell and attain targets.
With the emergence of multiple selling channels and the rise of the subscription model, the need for a unified approach to revenue planning and execution should be a priority for every organization. As I have written about in my analyst perspective Revenue Management: The Opportunity for Innovation and Optimization, this need to unify the approach and focus on alignment across all revenue supporting teams in furtherance of an organization’s objectives and targets is of key importance to ensure that teams handle different aspects of a customer’s journey and experience. And, as I will further discuss, this alignment between groups is rarely a happy accident but rather the result of forward-looking, continuous planning.
The emergence of the Chief Revenue Officer (CRO) has mirrored the adoption of the subscription model and the development of multiple selling and buying channels over and above the traditional direct sales model, referred to as Revenue Management. Supporting the traditional sales team and management was the sales operations team with responsibilities around incentive compensation, territory and quota planning, sales metrics and reporting and sales forecasting as well as sales engagement and enablement tools and applications. Aligned with this functional area under the CRO is another set of roles and functions called revenue operations or RevOps.
Traditionally, price management and optimization have been contained to certain industries, such as large-scale manufacturing and chemicals. Those industries involve potentially tens of thousands of stock-keeping units (SKUs) covering a wide variety of products and price points. For many organizations, pricing systems are “cost plus” or “follow the leader,” not typically designed to invoke optimization but rather just move pricing along. Price management is often seen as a complex, arduous task that yields small returns for the effort it dictates, and not a strategic lever.
Price management and optimization is not a new discipline, but until now, it has been restricted to particular industries — such as discrete manufacturing and chemicals — where there are potentially hundreds if not thousands of stock-keeping units covering many interdependent products.