CLM vs CPQ: Understanding the Key Differences and How to Leverage Their Integration
If you depend on price sheets for complex calculations, your organization is vulnerable to contract delays, clerical errors, and revenue loss. In many organizations, Contract Lifecycle Management (CLM) and Configure, Price, Quote (CPQ) are perceived as two different systems, which is the biggest mistake they makeю Ignoring CLM vs CPQ differences results in costly errors.
It’s about time you understand CPQ and how its integration with Contract Lifecycle Management (CLM) empowers revenue teams with increased efficiency and eventually facilitates scalable revenue generation.
This article helps you understand the critical differences between CLM vs CPQ and how you can leverage their integration for a successful Quote-to-Cash process.
What Contract Lifecycle Management and Configure, Price, and Quote Systems Are?
CPQ is a software solution designed to organize and optimize sales processes by automating sales quotes and proposals rather than relying on flawed manual techniques. In contrast, the CLM system is an automation tool that facilitates organizations to streamline contracts throughout their lifecycle.
The Challenges Businesses Face in Contract and Sales Management
Managing contracts and sales cycles is itself a tedious task. On top of that, substandard methods make them tenfold more challenging. Constraints such as lack of visibility into sales and contract deals, ineffective collaboration between teams, and inefficient and complex sales processes can jeopardize sales and contract management.
What is CLM & How it Works?
CLM refers to managing the entire lifecycle of a contract from creation and signing to renewal and termination. Whereas CLM software automates the process to centralize contract storage, set predefined workflows, and monitor key contract regulations. Thus, it ensures on-time renewal and terminations.
Key Features and Benefits of CLM Systems
Accurate Contracts: The centralized repository and pre-approved templates allow you to store client data, negotiated prices, and contract terms in one place, which promotes easy navigation and helps you maintain contacts precisely.
No Missed Deadline: CLM system sends notifications regarding important dates and milestones to all the concerned parties, reducing the risk of non-compliance.
Effective Collaboration: CLM enables sales teams to collaborate with legal, finance, and other concerned departments, by providing a central platform for sharing and commenting on contracts.
What is CPQ, and How it Works?
CPQ is a software system that empowers businesses with a highly streamlined sales workflow. It simplifies complicated sales procedures by facilitating them with automated quotes and proposals. This, in turn, allows them to operate in a sophisticated manner so they don’t get overwhelmed and efficiently meet their business goals.
Here is how it works
● Configuration: CPQ enables sales representatives to configure customers’ needs and allows them to customize products/ services accordingly.
● Pricing: CPQ system does all the time-consuming calculations based on the provided data and factors such as discounts, quantity, promotions, etc.
● Quoting: CPQ generates a quote including all the information regarding the configured product, service, terms, and conditions etc.
Key Features and Benefits of CPQ Systems
CPQ is a breeze for sales representatives who otherwise spend most of their time generating quotes.
Time-Saving: CPQ helps sales representatives to save a lot of time that could be spent doing other productive tasks so that they can sell more effectively and contribute to revenue generation.
Fast Sales Cycle: As your company grows, the need to switch from worksheets to automated systems becomes inevitable. CPQ systems accelerate the sales cycle and ensure quick and accurate sales quotes and proposals.
No More Selling of Unfeasible Products: In haste to close deals and meet quota, sales representatives often unknowingly end up selling an illegal product/service or an item that does not exist. The CPQ system incorporates validation checks into the product configuration process to prevent illegal selling.
CLM VS CPQ: The Key Differences
Focus and Scope
CPQ and CLM systems work in sync to improve sales productivity, but both are not interchangeable. CLM focuses on managing the contract lifecycle from creation to completion and comes into the picture after CPQ has done all the math, such as pricing and quoting, and has acquired approval.
CLM tools help you generate legally binding contracts, whereas CPQ quotes are not lawfully critical. Hence negotiations may still take place to make amendments any time before the finalization and signing of the agreement.
Sales & Contract Management Processes
CPQ focuses on sales processes such as pricing, quoting, etc., to facilitate sales teams in generating accurate quotes. Whereas CLM deals with contract management, such as contract creation, collaboration, data management, etc., to automate and streamline contract processes.
Types of Data They Handle and Analyze
CLM handles contract information, including renewal/termination dates, contract versions and history, compliance data, and workflow information. In comparison, CPQ deals with pricing information, pricing rules, configuration rules, discounts and promotions, quote information, and workflow information.
Leveraging Integration between CLM and CPQ Systems
Think of CPQ as the fine ingredients such as pricing, product configurations, etc., and CLM as a recipe book containing instructions for creating a dish using those ingredients.
Just as a chef with access to the right recipe and ingredients makes world-class dishes, organizations that integrate CLM and CPQ organize their contract management effectively and eventually create the best quotes for their customers.
Benefits of CLM and CPQ Integration
Bridge the Gap between Internal Teams
CLM and CPQ integration brings the internal stakeholders on the same page. For instance, the sales team uses CPQ to generate quotes, and the legal team uses CLM to create contracts. Integrating these systems provides access to the same information so they collaborate more effectively to achieve the combined goals.
Ensures Customer Satisfaction
If you unknowingly quote a price that does not conform with the contract, you will have to go back to negotiations, and this will leave a bad impression on your customer; worst, you may end up losing the deal.
CLM and CPQ integration ensures the customer-facing team has the same data as the pricing and contract terms. Hence it ensures the minimal risk of inconsistencies and improves customer satisfaction.
Centralized Data
CRM and CPQ integration presents you with consolidated data, including contract terms, pricing, quotes, and other deal specifics, in one place. It saves you from making wrong data entries and other costly risks and errors. Moreover, CLM and CPQ integration enables automated contract generation using up-to-date and accurate information.
Best Practices for CLM & CPQ Integration
1. Understand your current quote-to-cash process and assign each team clear roles.
2. Start with the CPQ to understand how the sales team prices the products and the billing process.
3. Define quantifiable KPIs such as fewer billing disputes etc.
4. Set up the communication channels between the teams involved.
5. Choose a compatible CLM and CPQ solution that integrates seamlessly.
6. Conduct thorough testing of the integrated systems to resolve potential issues.
7. Monitor and evaluate integrated systems periodically to ensure smooth performance.
8. Provide training and support to involved stakeholders so they are comfortable with integrations.
Examples of Successful CLM and CPQ Integrations
Dell: The company has integrated its CLM and CPQ systems which helped them in reducing quote-to-order time.
Accenture: Their CLM and CPQ integration helped them improve sales efficiency and resulted in increased revenue generation.
Hitachi Vantara: Their salesforce CPQ and CLM integration helped them streamline their sales processes and enhance their contract management.
CLM vs CPQ: Key Takeaways
High-growth businesses need to automate contract management to scale and meet contract requirements; CPQ can’t do it independently. Thus, it must be integrated with CLM to provide your sales with accurate and up-to-date contract information and other necessary tools to close more deals efficiently.
In a nutshell, CLM vs CPQ integration is the secret to effective organizational growth and customer satisfaction.
