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Configuring CPQ for Zoho CRM: A Step-by-Step Guide

Published April 26, 2024
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Start with Example - Meet Zylker Apparel

Zylker Apparel, a clothing brand, uses Zoho CRM to manage its customer database. However, they needed a more efficient way to handle quotes and pricing. That's where CPQ comes in - a powerful tool that automates line items and streamlines quote management.

Zylker Apparel's Requirements

To make their quote management system more efficient, Zylker Apparel had the following requirements:

  1. Automatic Product Addition: When adding a specific product to a quote, they wanted other related products to be added automatically, such as free accessories or matching items.
  2. Conditional Pricing: They needed a way to apply pricing rules based on various factors, including:
  • Time of year (e.g., annual clearance sales)
  • Deal size
  • Region
  • Other custom factors

How CPQ Delivers

Check out the video to see how CPQ meets Zylker Apparel's requirements!

CPQ in Action

When a sales rep adds a specific sweatshirt to a quote:

  1. Automatic Product Addition: Two matching scarves are added as separate line items.
  2. Conditional Pricing: A 20% discount is applied to the sweatshirt's list price.
  3. Suggested Products: The sales rep is prompted to add two pairs of jeans to the quote.

Streamlined Quote Management

With CPQ, Zylker Apparel can now enjoy a more efficient and automated quote management process, saving time and reducing errors. The result? A better sales experience for their customers!

How CPQ Works in Zoho CRM

The CPQ system in Zoho CRM is built on the following core components:

  1. Product Configurator
  2. Price Rules

Important Notes:

  • Both Product Configurator and Price Rules can be set up for default and custom modules in Zoho CRM.
  • Only modules with at least one sub-form (and at least one lookup field in the sub-form) will be listed. This is because CPQ rules are designed for line item automation and cannot be set up for modules without line items (sub-forms).
  • CPQ rules can also be set up for default and custom fields.

These building blocks work together to enable powerful line item automation and dynamic pricing in Zoho CRM.

Product Configurator

The Product Configurator is where you define automated actions triggered by specific product selections. These actions can include:

  1. Add Product
  2. Suggest Product
  3. Quoted Item Field Update

1.      Add/Suggest Product

When customers order a product, it's common to add related line items, such as free products or accessories, depending on the context.

Example: Zylker Apparel's Year-End Clearance Sale

Zylker Apparel wants to ensure that whenever a customer orders a specific sweatshirt, a matching scarf is added to the line item for free. To make this a consistent practice across the organization, they can set up a rule in the Product Configurator.

Rule:

When the product "Zylker Men Grey & Black Pure Cotton Colour blocked Hooded Sweatshirt" is added to a price quote and the quote is saved in CRM, the CPQ engine will automatically add the scarf to the quote based on the product configuration.

Consult 2 Manage Configuring CPQ for Zoho CRM: A Step-by-Step Guide 1

 Line item 1 is added to the quote and saved

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 Mandatory products added on the quote via CPQ rules

2.      Suggest Product

The Suggest Product feature enables you to cross-sell relevant products to customers based on their initial purchase. This ensures that sales teams never miss an opportunity to suggest complementary items, enhancing the customer experience and increasing average order value.

Example 1: Zylker Apparel

When a customer orders a specific sweatshirt, the system suggests the best pair of jeans to complement their purchase. This ensures that sales teams consistently offer relevant products, increasing the chances of a successful cross-sell.

Example 2: Zylker Watches

Upon purchasing an expensive heritage wall clock, the system suggests additional items, including:

  • Annual repair package
  • Suitable batteries
  • Additional wristwatches

This enables sales reps to cross-sell relevant products, enhancing the customer experience. If the customer accepts the suggestion, sales reps can bulk-select the required items and add them directly to the quote, streamlining the sales process.

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3.      Quoted Item Field Update

The Quoted Item Field Update action allows you to automatically update field values for quoted items. This feature is useful when you want to add a note or reference to a quoted item, indicating that CPQ rules were applied.

Example:

You can use Quoted Item Field Update to add a note like "CPQ rules applied" in the Description column of the quoted line item. This helps you quickly identify which quotes have been automated through CPQ rules, making it easier to track and manage your sales process.

This feature saves you time and effort by automatically updating field values, ensuring that your quotes are accurate and up-to-date.

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Adding a "Free Product"

Offering free products is a common sales strategy used by companies to incentivize customers. With CPQ, you can easily configure this scenario by marking a product as a "Free Product" in the product configuration setup.

Example: Zylker Watches

Zylker Watches offers a range of couple watches priced between ₹2500 and ₹50,000. Normally, these watches are sold at their list price when purchased separately. However, to promote sales, Zylker decides to offer a specific couple watch worth ₹2500 for free when a customer purchases a Zylker Heritage Wall Clock worth ₹10,890.

By configuring the Heritage Wall Clock product configuration setup to include the couple watch as a "Free Product", CPQ automatically updates the price of the couple watch to zero when it's added to the quote along with the Heritage Wall Clock. This streamlined process ensures that sales teams can easily offer the free product without manual interventions or errors.

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Step 1: Create a new product configuration rule. 

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Step 2: Select the primary product as the Heritage Wall Clock. Add Mandatory Product as the selected brand of Couple watch. 

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Step 1 — Search for Heritage Wall clock and select this as the Primary Product

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Step 2 — Add Couple watch as a mandatory product under selected actions

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Step 3: Select the "Set this Product as free" checkbox and update the quantity as an absolute number or from Quoted Items. 

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Step 4: Click Done and Save the rule. 

Important Notes:

  1. Price Rule Override: When marking a product as free, keep in mind that any existing price rules for the same product will take precedence over the free product configuration. In the example above, if there's a separate price rule for the Couple Watch, it will override the free product configuration and apply the specified price.
  2. Universal Application: The "Set this Product as free" option is available for all selected actions in CPQ, including:
  3. Product Addition
  4. Product Suggestion
  5. Quoted Items Field Update

This means you can apply the free product configuration across various CPQ actions, providing flexibility and consistency in your sales processes.

Dynamic Quantity Update for Added/Suggested Items

In some cases, you may want to automatically update the quantity of added or suggested items based on the number of primary products added. For instance, when a customer purchases a laptop, a compatible stand needs to be added, and the number of stands should match the number of laptops.

Example:

  • Primary product: Zylker Slim Black Laptop
  • Added/Suggested product: Zylker Slim Black Laptop Stand S405

To configure dynamic quantity update in CPQ's product configurator:

  1. Create a new Product Configuration based on the primary laptop.
  2. Select the specific product: Zylker Slim Black Laptop.
  3. Define the action required: Add Mandatory product, Zylker Slim Black Laptop Stand S405.
  4. Click Next.
  5. In the Set Values for <Product> screen, select the Quantity field.
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Note that there are multiple functions to format the values. They include Absolute, Ceil and Floor. 

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By configuring dynamic quantity update, the quantity field of the added/suggested product will automatically update based on the quantity of the main item, ensuring that the correct number of accessories are added to the quote.

Quantity Update Options

The Quantity update can be either an Absolute value or a Dynamic value.

Absolute Value

If you set an Absolute value, the quantity of the added/suggested product will remain constant, regardless of the primary product's quantity. For example, if you set the Absolute value to 5, the added/suggested product will always have a quantity of 5, even if the primary product's quantity changes.

Dynamic Value

If you want the quantity of the added/suggested item to dynamically change based on the primary item's quantity, select from Quoted Items and click the Configure link. This will open a configuration screen where you can create a formula for the dynamic update of the quantity field.

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Dynamic Quantity Formula

On the configuration screen, select the required parameters based on your needs and click Done. This will create a dynamic quantity formula that will update the quantity of the added/suggested product based on the primary product's quantity. For example, if you want the quantity of the added/suggested product to be equal to the primary product's quantity, you can select the primary product's quantity as the parameter.

By using dynamic quantity update, you can create flexible and automated quantity updates that adjust to the changing needs of your customers.

Dynamic Quantity Update Use Cases

The dynamic quantity update feature in CPQ allows you to automatically update the quantity of secondary products based on the quantity of primary products. The configuration formula includes the following parameters:

  1. Base product selection (e.g., Wall Clock)
  2. Base product field for quantity update (e.g., 3 wall clocks)
  3. Formula function (e.g., Multiplication)
  4. Selection of a number for calculation (Absolute number or custom field)

Use Cases:

  1. Absolute Value: Zylker Watch Manufacturers want to add 2 batteries with every wall clock purchase. Quantity * 2 (absolute number) = 8 batteries added dynamically if 4 wall clocks are added.
  2. Custom Field: Zylker Watch Manufacturers need to add watch cases based on the "Set of" custom field. If 5 "set of 3" watches are ordered, the formula calculates 5 * 3 = 15 cases.
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Notes:

  • Dynamic update applies to all Product Configurator actions (Addition, Suggestion, and Quoted Item Field Update).
  • Custom fields used in the formula must be number, decimal, or percentage fields.
  • Dynamic quantity update is only possible for specific base products, not "Any product".
  • CPQ currently calculates dynamic quantity values only for the first matching product in the list of line items. Ensure unique line items for accurate calculations.

The CPQ system is robust and flexible, accommodating various use cases for automatic dynamic calculation of secondary product quantities.

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Price Rules

Price rules in CPQ enable you to implement dynamic pricing strategies, allowing you to adjust prices based on specific conditions. For example:

  • Product A's default price is $100 (Amount X)
  • Customers referred by employees are eligible for a 10% discount on Amount X

By creating a price rule, CPQ will automatically apply this discount to the quote, resulting in a price of $90 for Product A.

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Price rules provide flexibility and automation in your pricing strategy, enabling you to:

  • Offer targeted discounts or promotions
  • Implement tiered pricing structures
  • Adjust prices based on customer segments or loyalty programs
  • Reflect price changes due to market conditions or regional variations

With price rules, you can streamline your pricing process, reduce manual errors, and ensure consistent application of your pricing strategy across all quotes and orders.

Price Rule Options

CPQ offers four options for implementing price rules, providing flexibility in conditional pricing:

  1. Direct (Static): Fixed price adjustment

Example: Product A's price is reduced to $90 (direct discount)

  • Direct Discount: Fixed percentage discount

Example: 10% discount on Product A's price ($100 - 10% = $90)

  • Direct List Price: New fixed price

Example: Product A's price is set to $90 (replacing the original $100)

  • Volume-Based (Dynamic): Price adjustment based on quantity

Example: 10% discount on Product A's price for quantities above 5 units

Volume-Based Options

  1. Volume-Based Discount: Percentage discount applied to the original price

Example: 10% discount on Product A's price for quantities above 5 units ($100 - 10% = $90)

  • Volume-Based List Price: New price applied based on quantity

Example: Product A's price is set to $90 for quantities above 5 units (replacing the original $100)

The Direct Method involves specifying a fixed discount value or list price for a product. This approach is straightforward and static, meaning it doesn't change based on other factors.

Direct Discount

  • Enter a fixed discount percentage (e.g., 10% off $100)
  • The system calculates the final price ($90 in this case)

Direct List Price

  • Enter a fixed list price (e.g., $90)
  • Alternatively, specify a percentage of the original price (e.g., 90% of $100)
  • The system applies the specified price or calculation to yield the final price ($90 in this case)

Both approaches achieve the same result, providing a simple and direct way to implement pricing rules.

Volume-Based Method

The Volume-Based Method uses a tier-based model, where the discount or list price varies based on the specified quantity range.

Volume-Based Discount

  • 10% discount for quantities 1-10
  • 20% discount for quantities 11-20
  • 30% discount for quantities 21-30

Volume-Based List Price

  • 90% of $100 for quantities 1-10
  • 80% of $100 for quantities 11-20
  • 70% of $100 for quantities 21-30

Pricing Options

When entering discounts or list prices, you can choose between:

  • Percentage: Enter a percentage value (e.g., 10% or 20%)
  • Absolute: Enter a fixed value (e.g., $10 or $20)

Flat vs Slab-Based Models

Volume-based discounts and list prices can be calculated using either:

  • Flat Model: Discount or list price remains the same for the entire quantity range
  • Slab-Based Model: Discount or list price changes for each specified quantity range

Choose the appropriate model based on your pricing strategy.

Percentage Discount vs Absolute Discount

When applying discounts, you have two options: Percentage Discount or Absolute Discount. Understanding the difference between these two is crucial, as it can significantly impact the final price.

Percentage Discount

  • Enter a percentage value (e.g., 10%)
  • Discount is calculated as a percentage of the original unit price
  • Final price = Original price - (Original price x Percentage discount)

Example:

  • Unit price = $100, Discount = 10% => Final price = $100 - (100 x 0.10) = $90
  • Unit price = $500, Discount = 10% => Final price = $500 - (500 x 0.10) = $450

Absolute Discount

  • Enter a fixed amount (e.g., $10)
  • Discount is subtracted directly from the original unit price
  • Final price = Original price - Absolute discount

Example:

  • Unit price = $100, Discount = $10 => Final price = $100 - $10 = $90
  • Unit price = $500, Discount = $10 => Final price = $500 - $10 = $490

Choose the appropriate discount type carefully, as the results can vary significantly depending on the original price and discount value.

Percentage List Price vs Absolute List Price

When setting list prices, you have two options: Percentage List Price or Absolute List Price. Understanding the difference between these two is crucial for effective pricing strategies.

Percentage List Price

  • Enter a percentage value (e.g., 90%)
  • List price is calculated as a percentage of the original unit price
  • Final list price = Original price x Percentage list price

Example:

  • Unit price = $100, List price = 90% => Final list price = $100 x 0.90 = $90
  • Unit price = $500, List price = 90% => Final list price = $500 x 0.90 = $450

Absolute List Price

  • Enter a fixed amount (e.g., $80)
  • List price is displayed as the entered amount, regardless of the original unit price
  • Final list price = Absolute list price

Example:

  • Unit price = $100, List price = $80 => Final list price = $80
  • Unit price = $500, List price = $80 => Final list price = $80

Summary

Price Rules offer various options for implementing variable pricing strategies:

  • Discounts or list prices can be direct or volume-based
  • Discounts or list prices can be entered as a percentage or absolute value
  • Choose the appropriate option based on your pricing needs

By understanding these options, you can effectively manage your pricing strategies and provide targeted offers to your customers.

CPQ for Custom Modules and Custom Sub-Forms

CPQ (Configure, Price, Quote) rules can be applied to any module and sub-form within that module, as long as there is at least one look-up field. This flexibility allows you to create custom pricing rules for various modules and sub-forms, tailoring your pricing strategy to specific business needs.

Case 1: Default Module, Default Sub-Form

  • Module: Quotes (default)
  • Sub-form: Quoted Items (default)

In this case, you can create CPQ rules for the default Quotes module and Quoted Items sub-form, which is commonly used for managing quotes.

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Case 2: Custom Module, Custom Sub-Form

  • Module: Custom Module (e.g., "Services")
  • Sub-form: Custom Sub-form (e.g., "Service Packages")

You can also create CPQ rules for custom modules and sub-forms, allowing you to apply pricing rules to specific business scenarios.

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Example

  • Module: "Services"
  • Sub-form: "Service Packages"
  • Look-up field: "Service Type"

In this example, you can create CPQ rules based on the "Service Type" look-up field, applying different pricing rules for various service types.

By applying CPQ rules to custom modules and sub-forms, you can streamline your pricing process, reduce errors, and improve sales efficiency.

Case 2: Custom Module, Custom Sub-Form

  • Module: Custom Module (e.g., "Sales Orders")
  • Sub-form: Custom Sub-form (e.g., "Product Accessories", "Spare Parts", "Warranty Details")

In this case, you can create CPQ rules for custom sub-forms within a custom module. This allows you to apply pricing rules to specific business scenarios, such as:

  • Product Accessories: Apply pricing rules based on the type of accessory or the quantity ordered.
  • Spare Parts: Apply pricing rules based on the type of part or the warranty status.
  • Warranty Details: Apply pricing rules based on the warranty type or duration.
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By selecting the respective custom sub-form, you can run CPQ rules to automate pricing calculations and ensure accurate quotes.

Example

  • Module: "Sales Orders"
  • Sub-form: "Product Accessories"
  • Look-up field: "Accessory Type"

In this example, you can create CPQ rules based on the "Accessory Type" look-up field, applying different pricing rules for various accessory types.

a) Custom Module, Custom Subform:

Example: Zylker Watches

  • Module: Estimates (custom module)
  • Sub-forms:
  • Primary Products
  • Product Accessories

In this scenario, Zylker Watches can create CPQ rules for the Estimates module and then select the desired sub-form (either Primary Products or Product Accessories) to apply the rules.

This allows for precise control over pricing calculations, enabling Zylker Watches to:

  • Apply different pricing rules for primary products and accessories
  • Automate calculations based on specific product or accessory attributes
  • Streamline the quoting process and reduce errors

b) Default Module, Custom Sub-form:

Example: Items of Interest in Deals Module

  • Module: Deals (default module)
  • Sub-form: "Items interested in" (custom sub-form)
  • Lookup Module: Products

In this scenario, a custom sub-form "Items interested in" is added to the default Deals module to capture a list of products that a customer is interested in. The Products module is used as a lookup to populate this list.

This setup allows you to:

  • Track customer interests and preferences
  • Associate products with deals
  • Analyze customer interests and preferences
  • Create targeted marketing campaigns

By adding a custom sub-form to the default Deals module, you can capture additional information and create a more comprehensive sales process.

Case 3: Running CPQ Rules for Purchase Orders, Invoices, and Sales Orders

You can apply CPQ rules to various inventory documents, including:

  • Purchase Orders
  • Invoices
  • Sales Orders

This enables automated processes such as:

  • Product additions
  • Product suggestions
  • Price calculations

Streamlining your inventory management and order processing, resulting in increased efficiency and reduced errors.

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Example:

  • Create CPQ rules for Purchase Orders to automatically add products based on vendor and product category.
  • Create CPQ rules for Invoices to calculate prices based on customer type and payment terms.
  • Create CPQ rules for Sales Orders to suggest additional products based on customer purchase history.

By applying CPQ rules to these inventory documents, you can automate and optimize your order-to-cash process, improving overall business efficiency.

Important Note:

When using default inventory modules (QuotedItems, OrderedItems, InvoicedItems, PurchaseItems) with their default subforms, please note the following:

  • System-mandatory Products lookup field: You can only create CPQ rules with this field.
  • CPQ user permissions: The sales reps (CPQ users) must have the necessary profile permission to access the Products module.
  • Products module activation: The Products module must be activated in your Org account and have at least one record.
  • Custom subforms: If you're using default inventory modules with a custom subform, you can create rules with any lookup field you need, provided you have the necessary profile permission and the field is in use.

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