Quote Accuracy

What is Quote Accuracy?

Quote accuracy refers to a business’s ability to generate sales quotes that properly reflect the products and services they offer. This includes the correct pricing, product configurations, descriptions, and terms and conditions associated with the sale.

Companies that can’t deliver accurate quotes to customers on a consistent basis suffer from a variety of issues — delays in the sales process, incorrect pricing, miscommunication with customers, and, eventually, lost sales. To improve quote accuracy, businesses use CPQ software to automate the data entry and approval functions of the quoting process.

Synonyms

• Accurate price quote
• Sales quote accuracy
• Quote accuracy in CPQ

Importance of Quote Accuracy in the CPQ Process

Customer Trust and Satisfaction

A simple mistake on a sales quote might not seem like a big deal. But quoting errors aren’t normally noticed right away.

It’s quite common for sellers to send a price quotation to a prospect that doesn’t accurately reflect the final cost. If the sale price or terms of sale don’t align with what’s feasible for your company, you probably won’t figure this out until much later when your deal desk reviews the quote.

If your buyer has made it all the way down the sales funnel believing your product or service would cost a specific amount, but at the last minute learns it’s more expensive than they anticipated, it might come off as shady or misleading. If they drop out of the deal, you’ve just wasted weeks (or months) working a deal that was ready to close.

Even if they’re still interested in making a purchase, their buying group will have to reevaluate their budget and expectations. So, there will be at least some degree of frustration no matter what.

Avoidance of Pricing Errors

Other than meeting customer expectations, pricing errors can have serious implications for your business. Let’s say you inaccurately quote a potential customer, and it ends up going through.

• Underpricing would mean you’re taking a loss on the sale (or, at the very least, a less-than-feasible margin).
• Overpricing will result in a dispute, lost trust, and potential lost business once your customer finds out. If you have to repay the difference, it’ll also cause cash flow problems.

For large, complex deals using quote-based pricing (e.g., an enterprise SaaS contract or a distributor pricing agreement), the potential for error grows because they require multiple internal approvals before they go out to the customer. The stakes are higher, too — most of these are six- and seven-figure contracts.

If a leader from your sales or product team misses quote details (or worse, the approval altogether), you’ll have to rework the quote. If you’ve already sent it out, you’ll also have to go back to the customer and admit to the (significant) error.

Streamlined Sales Processes

Using CPQ to generate accurate sales quotes is literally the difference between running an efficient sales operation and losing tons of potential customers.

According to data compiled by LLCBuddy sales teams using CPQ…

• produce quotes 10x faster
• reduce approval times by 95%
• onboard new reps 30% quicker

It’s also worth mentioning the average rep only spends ~28% of their workday selling. The rest of that time goes toward administrative tasks like writing emails, entering data, and creating quotes (with or without CPQ).

Achieving quote accuracy across your sales departments enables reps to spend more time on what matters most: closing deals and building customer relationships.

Compliance and Legal Considerations

On its own, a sales quote is not legally binding. It’s simply a document outlining the terms of service and pricing a vendor proposes to a customer. However, it can become a legally binding contract under certain conditions:

• The customer accepts the quote, either through email confirmation or by signing it.
• Both parties formally agree upon the terms.
• The customer makes a payment based on the quote’s terms.
• The vendor accepts and fulfills a purchase order (PO) based on the quote’s terms.

If there’s no way to exit the contract, a legally binding agreement allows either party to take legal action if the other side does not fulfill their obligations. So, if you wind up going through with a deal based on inaccurate sales quotes, you could find yourself dealing with a contract compliance nightmare.

5 Factors Influencing Quote Accuracy

1. Product Information

While the components of a sales quote might vary depending on the nature of your business, they’ll always include product information.

• Product descriptions
• SKU or product code
• Quantities
• Customizations
• Warranties and guarantees

Each of these product details helps the customer understand exactly what they’re buying. But it impacts order accuracy, too.

Assuming you close the deal, quote details will eventually be sent to your engineering or fulfillment team. If this information is incorrect or missing, you could end up selling a product that doesn’t exist, delivering the wrong item, or creating unrealistic expectations.

2. Pricing Variables

A detailed quote contains a breakdown of costs.

• Base-level product pricing (flat rate and/or price tier)
• Usage-based components
• Additional products and services
• Costs of individual components
• Taxes
• Fulfillment charges (e.g., a shipping fee)

A simple typo on one of your line items can cause serious problems. Suppose you accidentally enter pricing data for the wrong product, or miscalculate a formula that adds up all your line items. In that case, you might end up quoting a price that’s tens of thousands of dollars less (or more) than it should be.

3. Configuration Details

Messing up the configuration details has potentially huge negative implications for your company, especially if you’re selling a highly configurable engineer-to-order product (e.g., a medical device or piece of industrial machinery).

In addition to misconstruing the actual product to your customer, you risk sending it on to your engineering or production team and producing the wrong thing. Fixing this issue will require making an entirely new product and, of course, eating the costs associated with the mistake.

4. Discounts and Promotions

SaaS vendors normally discount customers who commit to long-term contracts (e.g., annual vs. monthly), especially for software that typically has a high churn rate. Manufacturers, wholesalers, and distributors use special pricing agreements to sweeten the deal for high-value buyers or sell through excess inventory.

When these types of discounts are incorrect on a sale, it makes your company seem untrustworthy and creates friction in the customer experience. And if your sales reps offer a discount your back office didn’t approve, you’ll probably end up honoring it anyway, which eats into your margins.

5. Currency and Exchange Rates

If you’re selling to international customers, you’ll have to consider price localization. Although billing software generally handles currency exchange on the payment side of things, you have to send an accurate quote and close the deal before you get anywhere near that stage. 

Sales reps must be aware of the current exchange rate, and quote software should automatically update prices to reflect changes in real time. That way, your new customer won’t be thrown off when they see a charge on their credit card statement.

Challenges in Achieving Quote Accuracy

Data Quality Issues

Modern quoting tools deliver accurate quotes because you (or an admin from your team) add all your product and pricing details into the system. For physical products vendors, it also connects with your ERP system to pull real-time availability data. For customized products, you might use a tool that auto-calculates the best pricing based on production and operating costs.

Every time one of your sales reps adds items to a quote, the pricing engine automatically calculates the total cost based on your product and pricing conditions. To ensure quote accuracy, the information in your CPQ has to be up-to-date and your software has to integrate with ERP to create a bidirectional data flow.

Complex Product Configurations

Manufacturers of highly configurable products must create a solution that delivers the right combination of product options. Of course, “right” means it’s sellable and producible in a way that’s feasible for your business. This extremely complex process requires advanced algorithms and custom software to do it well.

Dynamic Pricing Strategies

Industries like ecommerce, retail, distribution, hospitality, and travel use dynamic pricing to reflect real-time market conditions and supply/demand levels. Doing so, however, requires custom software that takes into account external factors (like changes in the stock market or weather conditions) and internal data (like inventory levels).

If your system’s data sources are delayed, you’re leaving money on the table, either by not reflecting the current market value of your product, losing sales during a period of slow business, or losing profit during peak demand times.

Global Operations and Currency Challenges

It’s remarkably challenging to develop an efficient process for managing global deals. Issues like language barriers, currency conversions, and legal compliance make it hard to scale internationally while maintaining quote accuracy and sales volume.

Today’s software handles currency conversion fairly easily, but fluctuating exchange rates can make pricing a challenge. It’s wise to set prices that give your profit margin some wiggle room for when currency values fluctuate.

Strategies for Improving Quote Accuracy

Standardization of Product Information

Create detailed product rules that cover every possible outcome of a sales quote.

• Product components, costs, and features should be standardized across all channels.
• Bundles, add-ons, and upsells should be clearly defined and priced.
• Set limitations and restrictions in CPQ for products/components that can’t be sold together or require approval.
• Use consistent naming conventions for the same products across all platforms.
• Maintain a centralized database of your products and their specifications (either CPQ or a product information management system).

When everything is in order, your system is able to guide your team through the quoting process.

Real-time Integration with Pricing Data

You’ll keep your pricing data accurate and up-to-date if you have a CPQ that integrates with your billing software, inventory system, and ERP.

In addition to keeping prices correct, integration between systems ensures your sales reps can get an accurate estimated delivery time to share with prospects. And they’ll know whether certain products are available.

Automation of Configuration Processes

Manual configuration requires sales reps to pull information from multiple sources, including spreadsheets and internal documents. Sellers are there to sell — you can’t expect them to be familiar with all the technical aspects of your products or the hundreds of possible configurations, rules, and exceptions.

That’s why automating the configuration process with guided selling and a product configurator improves quote accuracy. It eliminates the need for sales reps to configure products on their own.

Regular Audits and Quality Checks

As you roll out new products/features, update existing ones, adjust your pricing, and refine your business model, you’ll make plenty of changes. Successfully implementing even the smallest change requires you to be aware of how that change will affect your entire system.

Audit your product and pricing data consistently in order to avoid errors and misquotes. It helps to have software with version control, audit trails, and a change management process so you can easily track all the updates to your system and schedule routine quality checks.

How CPQ Software Ensures Quote Accuracy

Advanced AI and Machine Learning Applications

Modern configure, price, quote (CPQ) software uses AI to:

• Gather product and pricing data
• Make price-optimized calculations that are feasible for your business
• Generate quotes from scratch or from templates
• Suggest cross-sells and upsells
• Configure products based on customer needs
• Provide accurate delivery dates
• Automate quote approvals and workflows

As data changes, machine learning algorithms use past information to learn how pricing variations affect sales volumes. So, even for the most complex products and pricing models, the software can give you accurate quotes quickly.

Enhanced Integration Capabilities

Cloud-based CPQ integrates with…

• CRM
• ERP
• Billing
• Contract management
• Subscription management (for SaaS)
• Supply chain portals (for manufacturers)
• Ecommerce
• Design software (like CAD)

…for a streamlined sales cycle from start to finish.  That way, quote accuracy ties into order fulfillment, financial reporting, customer relationship management, and just about every other business function related to revenue.

Industry-Specific Customizations

Certain industries have special requirements that standard quoting tools can’t handle out-of-the-box. There are, however, dozens of platforms with industry-specific functionality and software integrations.

Enterprise manufacturers generally need visual configuration to communicate complex product specs to prospects and customers. With CAD automation, these configurations can go straight to engineering teams for production as soon as the seller closes the deal.

SaaS vendors need a platform that quotes for recurring revenue, tiered and usage-based pricing components, and non-recurring costs like implementation. DealHub is an example of a platform that automates the quote generation and contract management processes, but also handles recurring subscription billing for intricate tiered/usage-based models.

Pricing Rules

Setting pricing rules in CPQ allows for consistent, accurate quotes that reflect your business’s pricing strategy and align with your profitability goals.

For instance, you can set rules to keep discounts within an acceptable range to maintain profit margins. You can also create rules that adjust prices based on customer type or the volume of products in a particular quote.

Configuration Logic

Like pricing rules, configuration logic tells your sales team and customers what you can and can’t offer them. It keeps product combinations within your business’s capabilities and prevents errors.

You can set configuration logic for standard products, bundles, upsells, add-on products, and subscription packages. That way, your reps can quickly guide customers through the configuration process and give them accurate quotes every time.

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