Introducing CPQ 2.0 - Advanced Configuration with AI Automation and Immersive Technology

The CPQ software market, valued at $2.2 billion in 2022, is on a remarkable growth trajectory. Projected to expand to $7.3 billion by 2030, it reflects a robust compound annual growth rate (CAGR) of 16.4% over the period from 2022 to 2030. It's a major signal of how important CPQ solutions became, and how much value they offer to businesses.

Let’s talk about what CPQ is and why you and your business should care about it.

What is CPQ?

CPQ – Configure, Price, Quote – is a crucial process for businesses managing complex, configurable products. It works as an automation system to streamline the mechanisms of configuration, pricing and quoting to compress sales cycles from weeks to mere minutes. It’s a deal breaker for manufacturers or vendors and their customers, as it significantly simplifies and shortens the entire process from the beginning to the end. It consists of three main mechanisms:

Configuration

One of the main features of CPQ is product customization, usually facilitated by an in-built 3D configurator. Products need to meet individual customer requirements, and the configuration functionality navigates the complexities of product variables, dependencies, and exclusions, so the final selection aligns precisely with customer needs. This approach moves away from one-size-fits-all solutions, and enables mass customization at scale.

Pricing

As a second feature, CPQ provides a dynamic pricing tool that adjusts prices based on configuration and pricing rules, and if necessary, it accommodates volume discounts, promotions, and other variables.

Quoting

Finally, CPQ creates detailed, clear and concise quotes that are not affected by human errors.

What Role Does XR (Extended Reality) Play in CPQ?

Virtual Reality and Augmented Reality provide an immersive dimension to CPQ software. It is mainly tied to the visualization aspect or visual configuration in 3D within the virtual space. The processes are tied to viewership of the multiple variations to the product offering.

Product visualization with XR technologies – Virtual space is used to get customers familiar with the visual of the configured product. Customers can view, rotate, zoom in and out, try different setups in a simulated virtual environment. This can be both AR and VR – AR in forms of digital overlays, and VR in a form of fully immersive digitally created virtual space.

Configure products while interacting with them – XR enables manipulation and customization of products in real-time. You can modify colors, sizes, and features of a product and instantly see how these changes affect the overall design and pricing. Interactive experience is proven to rapidly increase engagement and provide a clear understanding of the final product.

Streamlined sales processes – Sales teams can eliminate the need for physical prototypes and extensive product demos, because XR tools can both simulate product performance and showcase a variety of configurations without any logistical constraints.

Customer engagement – Interactive XR creates interesting experiences for customers. Virtual or augmented environments capture much more attention than regular sales techniques, and make the sales process faster and more efficient, which is proven to lead to higher conversion rates.

Artificial Intelligence and Machine Learning in CPQ Solutions

And finally, the powerhouse – Artificial Intelligence (AI) and Machine Learning (ML) can be incorporated at every stage of the Configure, Price, and Quote process, from initial product selection to sales execution. Here’s how:

Intelligent product configuration – AI analyzes customer data and preferences to recommend the most suitable products and configurations with nearly eliminated errors.

Dynamic pricing – ML algorithms can analyze market trends, customer behavior, business objectives or other variables to refine pricing strategies

Smart quoting – AI creates tailored quotes that include details like discounts, terms and conditions, and upsell opportunities

Generative guided selling – Generative AI can be used to create new content based on natural language interactions. Conversational AI can be utilized to understand and address customer needs and preferences, without or with reduced dependency on human sales representatives.

Integrating CPQ with B2B eCommerce Platforms

The B2B eCommerce market surpasses the B2C eCommerce market by more than five times and continues to expand rapidly. Why is there such a need on the B2B level?

The surge in B2B eCommerce is driven by evolving buyer expectations. Modern B2B buyers want convenience, speed, and personalization of their e-commerce platform. Customers demand better experiences and that’s why they demand the same level of service for their business purchases.

A key factor fueling this growth is the adoption of 3D configurators and other new technologies to upgrade the product showcase. These tools, integrated into eCommerce platforms, allow buyers to see real-time visualizations of their product configurations. They can view how changes affect the product's appearance and functionality, receive information on component compatibility, availability, and pricing, and get suggestions for upselling and cross-selling opportunities. It’s an unbeatable service for the eCommerce sector.

Conclusion

The growth of the CPQ software market is clearly influenced by requirements for business efficiency. Advanced technologies like Artificial Intelligence, Machine Learning, and Extended Reality play a vital role in upgrading the Configure, Price, and Quote process, ultimately positively affecting sales cycles and decision-making.

The integration of CPQ solutions with B2B eCommerce platforms is the next step that companies choose for convenience, speed, and personalization, which are the primary markers of what current customers expect from services.

At Digital Tails Group we specialize in custom software development and CPQ for various industries. Reach out if you have any questions of if you'd like to discuss your case.