Needs-Based Configuration

What Is Needs-Based Configuration?

Needs-based configuration is a dynamic Configure Price Quote (CPQ) software feature designed to enhance the user experience by intelligently selecting the most suitable combination of product options in real-time, based on the user’s specific requirements. This capability is essential to efficiently creating custom-manufactured products from a selection of product options and ensuring the configuration is valid.


  • Needs-based product configuration
  • Product configuration in CPQ

Importance of Needs-Based Configuration

Configuring products with high product variability requires sophisticated technology to produce accurate quotes and bills of material (BOMs). Needs-based configuration ensures that as new items, components, and product characteristics are added to the system, they seamlessly integrate into the sales application. This unlocks product configuration possibilities for customers and increases sales revenue for the organization. Additionally, the application’s rules-based logic ensures that only valid product configurations and BOMs are sent to engineering for production.

Below are some advantages of using needs-based configuration in selling complex, customizable products, such as industrial equipment.


Needs-based product configurators allow for a high degree of product customization. Customers can specify their unique requirements, and the system will generate a tailored product configuration that precisely meets those needs. This level of customization enhances customer satisfaction by providing products that align perfectly with their specific use cases.

Faster Sales Cycle

Manually configuring complex products can be time-consuming and error-prone. Needs-based configuration automates this process, reducing the time it takes to create accurate quotes and proposals. This efficiency leads to shorter sales cycles, enabling companies to respond quickly to customer inquiries and secure orders more swiftly.

Accuracy and Consistency

Automated configuration eliminates the risk of human errors in product configuration and quoting. This ensures that the products offered to customers are always accurate and consistent, reducing the likelihood of costly mistakes, rework, and disputes.

Upselling and Cross-Selling

Needs-based configuration software can suggest complementary or upgrade options based on the customer’s requirements. This presents opportunities for upselling and cross-selling, increasing the business’s average order value and revenue.

Improved Customer Experience

Providing customers with a streamlined, user-friendly process when generating complex product configurations enhances their overall experience. Customers can easily explore product options, make informed decisions, and receive tailored solutions, ultimately leading to higher customer satisfaction and loyalty.

Product Visualization

A visual configurator is a crucial component of needs-based configuration in many CPQ solutions for manufacturing. A visual configurator offers a graphical interface that simplifies the configuration process. Users can interact with product options and components using intuitive visual elements such as drag-and-drop, selection menus, and 3D models. This user-friendliness makes it easier for both customers and sales teams to define their requirements.

Efficient Resource Allocation

Needs-based configuration enables companies to allocate resources more efficiently. Sales and engineering teams can focus on more complex tasks and customer interactions while the software handles routine configuration tasks.

Adaptability and Scalability

As customers’ needs change or new products are introduced, CPQ systems can be easily updated to accommodate these changes. This adaptability ensures that a company’s product offerings remain relevant and competitive.

Data Insights

These systems capture valuable data during the product configuration lifecycle, helping companies make informed decisions about product development and marketing strategies.

Cost Reduction

By streamlining the configuration process, CPQ reduces the labor and resources required for manual configuration and quoting. This leads to cost savings and improved profitability.

The Needs-Based Configuration Process

This functionality relies on a robust rules-based configuration engine embedded within CPQ software. Using artificial intelligence to interpret rules and constraints based on product characteristics streamlines the configuration process for complex products. It also enables different teams within a company to manage the creation of available items, rules, and market-specific logic separately.

Here’s how it typically works:

User Input: The process starts with the user, often a salesperson or customer, inputting their requirements into the CPQ software. These requirements can include technical specifications, features, quantity, budget constraints, delivery timelines, and more. The software may provide a user-friendly guided sales interface or questionnaire to collect this information.

Product Catalog: The CPQ software is integrated with a comprehensive product catalog that contains detailed information about all available products, options, and components. This catalog includes data on product features, compatibility, pricing, and availability.

Rules and Constraints: Within the CPQ software, there are predefined rules and constraints. These rules specify how different product options and components can be combined or restricted based on technical, operational, or business logic. These rules can be expressed in terms of compatibility, dependencies, or exclusion criteria.

Configuration Engine: A powerful configuration engine is at the core of the CPQ system. This engine utilizes artificial intelligence (AI) and algorithms to analyze the user’s input, product catalog, and applicable rules. It intelligently navigates through the vast number of possible combinations and permutations to determine a valid and optimal product configuration.

Optimization: The configuration engine may incorporate optimization algorithms to suggest the best configuration based on predefined criteria. These criteria can include factors such as cost, lead time, weight, performance, or any other measurable parameter. The goal is to find a configuration that aligns with the user’s needs while optimizing other relevant factors.

Real-Time Feedback: As the user enters their requirements or makes changes to their selections, the CPQ system provides real-time feedback. It instantly validates the choices against the rules and constraints, ensuring that the user’s selections are valid and compliant.

Quote Generation: Once the user has finalized their product configuration, the CPQ software generates a detailed quote or proposal. This quote includes the configured product with all specifications, pricing information, lead times, and additional terms and conditions.

Documentation and Approval: The generated quote can be further customized with additional documentation, technical drawings, or contractual terms. It can then be sent for approval within the organization or directly to the customer.

Integration and Collaboration: CPQ software often integrates with other enterprise systems, such as CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning), to ensure seamless order processing and inventory management. Collaboration features allow different teams within the organization to work together on complex configurations and quotes.

Scalability and Updates: Needs-based configuration systems are designed to be scalable and adaptable. They can accommodate changes in product offerings, rules, and market conditions, ensuring the software remains up-to-date and relevant.

How Needs-Based Configurators Extend Guided Selling

Companies can offer a highly personalized and interactive sales experience by integrating needs-based product configurators into guided selling. As customers answer questions and input their unique criteria, the configurator intelligently navigates through complex product catalogs and rules to present them with optimized product configurations. This streamlines the decision-making process and builds trust and confidence in the recommendations provided. Whether configuring industrial machinery, complex software solutions, or customizable vehicles, needs-based configurators empower guided selling by delivering tailored product options that meet customers’ needs, ultimately leading to more successful sales outcomes and enhanced customer satisfaction.

People Also Ask

What are the major features of product configuration?

Product configuration is a crucial capability in various industries, offering a range of features to tailor products to specific customer needs and optimize the sales and manufacturing process. The first major feature is rule-based logic, which ensures that selected product options are compatible and valid, preventing customers from choosing incompatible combinations. Customization is another key element, allowing customers to personalize products by selecting from various options, such as colors, sizes, and features.

Compatibility checks are another vital component, with configuration tools performing real-time assessments to ensure that selected components or features work seamlessly together, preventing fit, function, or performance issues. These tools also provide product visualization, often through 3D models or renderings, allowing customers to visualize the final product during the configuration process, which enhances their confidence and understanding of their choices.

Moreover, product configuration systems calculate pricing based on selected options and generate detailed quotes, simplifying cost transparency for customers. They integrate with inventory management systems to ensure that configured products can be produced or shipped efficiently and in the right quantities. These systems are also designed to seamlessly transform configured products into orders or manufacturing instructions, streamlining the process from configuration to production or delivery.

What is an example of needs-based product configuration?

Needs-based product configuration is essential to provide customized solutions that meet customers’ specific requirements in industries like construction, mining, and agriculture. Here’s an example of needs-based configuration in the heavy equipment sales process.

Imagine a heavy equipment manufacturer specializing in bulldozers. These bulldozers can be used in various industries, but mining companies have distinct needs due to the challenging conditions in which they operate. Needs-based product configuration comes into play to tailor bulldozer configurations for mining applications. The following illustrates this example:

1. Input Parameters: The user (typically a mining company representative or a sales rep) begins the configuration process by inputting parameters such as the type of ore being mined, the terrain conditions, the required engine power, and any specific safety features needed for underground mining.

2. Rules and Constraints: The system has predefined rules and constraints that consider factors like the type of ore (abrasive or non-abrasive), environmental regulations, and safety standards for underground operations. For instance, it ensures that the bulldozer’s materials and components are corrosion-resistant and meet safety guidelines.

3. Configuration Engine: The configuration engine utilizes this input, processes it through the rule set, and recommends the optimal bulldozer configuration for the mining application. This might include specifying a heavy-duty undercarriage, reinforced blade, enhanced cooling system, and specialized operator cabin with additional safety features.

4. Visualization: A visual configurator may provide 3D models and real-time visualizations, allowing the user to see how the customized bulldozer will look and how it aligns with their mining requirements.

5. Quote Generation: Once the configuration is finalized, the system generates a detailed sales quote, including specifications, pricing, lead times, and any necessary documentation for the custom bulldozer tailored to the mining needs.

This example illustrates how needs-based product configuration can help heavy equipment manufacturers deliver highly specialized solutions to meet customers’ unique requirements in demanding industries like mining. It streamlines the configuration process, ensures compliance with industry standards, and ultimately leads to more effective and customer-centric product offerings.