What is CPQ in SAP? A Comprehensive Guide

The shift toward digital-first and customer-centric sales has changed customer expectations. They now expect fast and personalized buying journeys.

How can businesses provide such a journey for their customers? With Configure, Price, Quote (CPQ) software, that automates and simplifies sales processes.

In the past, sales teams suffered from old and redundant systems that reduced their productivity and affected customer satisfaction in quite a negative way. And now, with CPQ solutions, they can sell faster and more efficiently. 

One such solution is SAP CPQ which integrates with the broader SAP ecosystem and helps with product configuration, pricing calculation, and quote generation. 

What is CPQ?

Configure, Price, Quote is software that streamlines sales processes for organizations’ multi-tiered services. Here’s a breakdown:

1. Configure

The “Configure” aspect in CPQ software eliminates errors in product selection and helps reach component compatibility. 

Let’s take a car manufacturer. It might give its customers a wonderful opportunity to choose colors, interior materials, advanced safety features, and entertainment options – all while adhering to the technical limitations of the vehicle’s design. Similarly, a furniture retailer uses CPQ to help customers customize sofa dimensions, fabrics, and leg styles to match their home decor.

This configuration process is useful in industries with complex products, such as industrial machinery, high-tech equipment, or even bio laboratories. For Automata, we made it possible for customers to choose either pre-set configurations (they act as a base, letting users tweak configurations, and they don’t have to start from scratch) or from-scratch configurations (where customers have a complete customization journey). 

Without CPQ, you must manually cross-reference product components. This often leads to errors or delays. CPQ reduces the time required for configuration and improves accuracy. What is the result? Your customers receive exactly what they need.

2. Price

Pricing is one of the most critical and complex components of the process. CPQ software automates pricing calculations based on predefined business rules, which can include volume discounts, regional pricing adjustments, taxes, and special promotions. This dynamic pricing capability is useful for businesses that work globally, as it makes sure prices reflect local market conditions.

Let’s talk about a few real-world examples. A manufacturer selling industrial equipment can offer some discounts for large purchases. At the same time, profit margins remain intact. Applying such rules manually can lead to errors. Additionally, CPQ systems integrate with tools to calculate taxes, shipping fees, and currency conversions in real time, providing clients with a clear and accurate total price.

3. Quote

The final stage of CPQ is the generation of a professional, detailed quote. The selected configurations and calculated pricing are transformed into a certain document or a specific digital format. Quotes often include itemized lists of product components, pricing breakdowns, terms and conditions, and even visual elements like 3D product renders or AR previews.

As for Automata, CanvasLogic provided a configuration summary, and a QR code to view the configuration in VR, and there was an opportunity to copy the link, download it as a PDF, or share it via email. 

Modern systems (SAP CPQ) take the quote generation process further and integrate branding elements into templates. As a result, every quote aligns with the company’s identity, reinforcing professionalism. For example, a technology company offering custom servers could include visualizations of the server configuration alongside technical specifications and pricing. Customers not only get a clear understanding of what they’re purchasing but also feel reassured about the attention to detail.

This stage also facilitates faster decision-making. A well-crafted quote, delivered promptly, demonstrates the efficiency and reliability of the seller.

What is SAP CPQ?

What is CPQ in SAP? SAP CPQ is SAP’s specialized solution for Configure, Price, and Quote functionality. It integrates with the SAP ecosystem. It’s great for those who already use SAP ERP, CRM, or Commerce Cloud. 

Scalability and flexibility

SAP CPQ’s cloud-based architecture means scalability. Whether you’re a small business managing a handful of configurations or a corporation dealing with thousands of complex product combinations, SAP CPQ can handle your needs, from custom workflows to designing industry-specific pricing models.

Key Features of SAP CPQ

SAP CPQ has several key features to deliver personalized and accurate solutions, reduce errors, and improve customer satisfaction. 

Product configuration

SAP CPQ software simplifies even the most intricate product configurations. Sales teams deliver accurate and personalized solutions. The platform supports multi-layered configurations, making it ideal fo industries like automotive, aerospace, and healthcare.

For example, a medical device manufacturer could use SAP CPQ to help hospitals configure custom imaging. The system would validate each selection to reach compatibility with the device’s technical specifications and regulatory requirements. Additionally, when integrated with CanvasLogic’s 3D visualizers, the system provides real-time previews of the configured product, helping customers visualize the end result and make informed decisions.

Pricing management

Pricing in SAP CPQ is highly flexible, adapting to complex rules and market conditions. The system supports advanced pricing strategies, such as:

• Tiered discounts: Automatically applies discounts based on order size or customer category.
• Regional adjustments: Reflects local taxes, shipping costs, and currency differences.
• Real-time updates: Syncs with external data sources for accurate pricing.

For instance, a SaaS provider could use SAP CPQ to offer customized subscription plans based on the number of users, storage requirements, and desired features. The system would calculate pricing dynamically, and the plan will meet both the customer’s needs and the company’s profitability goals.

Quote generation

Quote generation in SAP CPQ is not just about providing a price, it’s about creating a polished, professional document. Quotes generated by SAP CPQ can include:

• Detailed configurations.
• Pricing breakdowns with applicable taxes and discounts.
• Custom branding elements ( logos and color schemes).
• Visual aids like 3D product renders.

When paired with CanvasLogic’s visual tools, quotes can also include interactive 3D or AR previews. For example, a retailer selling custom furniture might include a link in the quote so that customers can visualize their chosen configuration in their living space using AR. This enhances the customer experience and builds confidence in the purchase decision.

How SAP CPQ Works

SAP CPQ streamlines sales performance by integrating with ERP and CRM systems to pull real-time data for product configurations, pricing, and customer details. It guides users through error-free configurations, dynamically calculates pricing, and generates professional, branded quotes. Automated workflows handle approvals and transition quotes into orders seamlessly, while AI-driven features provide predictive insights and recommendations, making the sales process faster and more efficient.

Benefits of SAP CPQ

Below, we explore the key benefits of SAP CPQ, structured by its most impactful capabilities.

Pricing models with secured margins

One of the core benefits of SAP CPQ is its ability to implement dynamic pricing models. They protect profit margins while remaining competitive. Businesses can create complex and sophisticated pricing rules discounts, orders, regional adjustments, and cost variations. By automating these calculations, SAP CPQ makes every quote align with business objectives.

• Dynamic adjustments: SAP CPQ applies real-time pricing updates based on market trends, currency exchange rates, and customer-specific terms. This prevents underpricing or overpricing. As a result, you get accurate and fair quotes.
• Profit safeguards: The system includes margin controls to prevent sales reps from offering discounts that would erode profitability. For instance, a sales team configuring a high-value machine might only be allowed to apply a specific percentage discount, preserving the company’s margins.
• Real-world example: A global electronics manufacturer uses SAP CPQ to standardize pricing across different regions. This leads to uniform profitability and accommodating to local market conditions.

Personalized reports and dashboards

SAP CPQ empowers businesses with insightful analytics through personalized reports and dashboards.

• Sales analytics: Dashboards provide a clear view of sales pipeline performance, highlighting conversion rates, and key customer segments.
• Customer insights: Reports detail customer preferences, helping businesses customize their offerings according to customer needs and improve the buyer experience. For instance, tracking frequently selected product configurations can guide product development or marketing campaigns.
• Operational metrics: SAP CPQ monitors accuracy, quote-to-order times, and system usage.
• Real-world example: A software company uses SAP CPQ’s dashboards to analyze the performance of various subscription plans, identifying which combinations drive the highest renewals.

Increased sales efficiency

SAP CPQ significantly enhances the productivity of sales teams. Time-consuming processes like configuration validation, pricing calculations, and quote generation are handled seamlessly so that reps can focus on building customer relationships and closing deals.

• Faster sales cycles: The automation of manual processes reduces delays, and helps achieve quicker response times. Sales teams can generate and send quotes in minutes rather than hours or days.
• Error reduction: Automated validation means that configurations meet technical and business rules, minimizing costly mistakes and rework.
• Resource optimization: Sales teams can dedicate more time to strategic activities, such as engaging high-value prospects or identifying upselling opportunities.
• Real-world example: A manufacturing company reported a 25% reduction in quote-to-order times after implementing SAP CPQ, and its sales team can manage a higher volume of deals.

Intelligent workflow

SAP CPQ includes intelligent workflows that streamline collaboration between sales, operations, and customers. These workflows guide users through the sales process, and each step is completed efficiently and accurately.

• Automated approvals: Workflows automatically route quotes requiring managerial or legal approval, reducing bottlenecks. For example, a quote exceeding a specific discount threshold might automatically trigger approval from a sales manager.
• Guided selling: The system recommends optimal configurations and pricing strategies.
• Collaboration tools: SAP CPQ improves communication by centralizing data and sharing real-time updates across teams.
• Real-world example: A B2B distributor uses SAP CPQ to manage complex workflows, such as negotiating bulk orders with multiple stakeholders. 

Enhanced operational performance

SAP CPQ integrates seamlessly with other business systems, such as ERP and CRM, to create a unified sales ecosystem. This integration eliminates data silos and enhances operational performance across the organization.

• Real-time data synchronization: The system makes sure that pricing, inventory, and customer information are always up to date, reducing the risk of errors.
• End-to-end automation: SAP CPQ automates the entire sales process, from configuration to order fulfillment. This means a frictionless experience for both sales teams and customers.
• Scalability: The platform is designed to support growing businesses, offering multi-language, multi-currency, and regional pricing capabilities for global operations.
• Real-world example: A multinational company implemented SAP CPQ to standardize its sales processes across five regions, achieving a 20% increase in operational efficiency.

Tailored configurations

With SAP CPQ, it’s possible to create tailored configurations that meet the unique needs of each customer. The system provides a flexible framework for managing complex product and service offerings.

• Rule-based configurations: SAP CPQ enforces compatibility rules. A customer configuring a high-tech medical device would only be able to select components that meet the device’s technical requirements.
• Customizable solutions: Businesses can offer an extensive range of options, from product features to service tiers, without overwhelming customers. 
• Visual enhancements: SAP CPQ customers can view 3D renders of their configured products, getting a clearer understanding of their selections.
• Real-world example: A home furnishings retailer uses SAP CPQ to let customers design modular shelving systems, tailoring dimensions and finishes to their exact specifications.

SAP CPQ delivers these benefits with automation, intelligence, and integration. Thus, it helps businesses enhance their processes and deliver improved CX.

Steps to Implement SAP CPQ

A successful implementation of SAP CPQ, enhanced by CanvasLogic, requires a structured approach. Here’s a detailed roadmap:

Assess business requirements

What should we begin with? With identifying issues and challenges in the current sales process. For example:

• Do configuration errors cause mistakes?
• Is the sales cycle too long due to manual pricing calculations?
• Are customers hesitant to finalize purchases because they can’t visualize the product?

With the help of visualization, customers can see and interact with their configurations in real time. Businesses should analyze their unique challenges and determine how these tools can solve them.

Plan and design the solution

Once we’ve identified the pain points, we should design a solution that aligns with business objectives. What does it include?

• Establishing configuration rules for SAP CPQ.
• Creating workflows for dynamic pricing and quote generation.
• Designing interactive visual elements (with CanvasLogic’s 3D & AR).

For example, a kitchen manufacturer might design a workflow where customers configure their kitchen layout, select finishes, and view the result in AR.

Configure and customize SAP CPQ

During the customization phase, SAP CPQ is tailored to meet the specific needs of the business. This includes:

• Setting up product hierarchies and configuration options.
• Creating pricing rules to reflect discounts, margins, and taxes.
• Customizing CanvasLogic’s visualizers to display accurate product renders.

Integrate with existing systems

Integration means that SAP CPQ and CanvasLogic work harmoniously with ERP, CRM, and e-commerce platforms. This step involves:

• Synchronizing customer data from SAP CRM to personalize configurations.
• Pulling inventory and pricing data from SAP ERP for real-time accuracy.
• Embedding CanvasLogic’s configurators into the e-commerce platform for a unified experience.

Test, train, and deploy

Before launching the solution, thorough testing is essential to make sure all components work as expected.

Training is equally important. Firstly, you train sales teams so that they know how to use the new tools. Secondly, customers learn how to navigate the configuration.

The final step is to deploy the solution and see how it will perform. Businesses usually get feedback from both sides: customers and sales teams, and then they can figure out whether there’s still an area for improvement. 

Why Choose CanvasLogic?

CanvasLogic has been creating visual product configurators since 2001 and has served 20+ countries. With over 1000+ configurators created, CanvasLogic is a reliable partner if you need to create engaging, intuitive customer experiences, and this is proven by numerous positive reviews from global customers:

– “From the start, the CanvasLogic team was receptive to our feedback and ideas, and they took the time to understand how the configuration tool could integrate with, and develop our business model.”