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Measuring the Real Value of Configuration Lifecycle Management In Sales And Revenue Growth

Measuring the Real Value of Configuration Lifecycle Management In Sales And Revenue Growth

Taking a lifecycle approach to managing proliferating product lines, options, cross-sell, and up-sell accessories lead to faster revenue growth. It’s a well-known fact that the first complete quote received by a prospect has a greater than 50% chance of being given the sale. Getting to that level of speed, scale, and responsiveness every day is beyond the limits of any CRM system or CPQ application, however. What’s needed is a product-based platform that can flex and scale to rapidly changing customer requirements within challenging delivery schedules.

Balancing the need to make product configuration management scalable with the challenge of staying in step with customers exceed what CRM systems can provide, however. CRM excels at creating excellent customer relationships and enabling transactions. Integrating Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM) and CRM create what manufacturers need today: a customer-centered scalable platform that can turn products into revenue faster than relying on siloed, non-integrated systems. The goal is to gain access to the most valuable data a manufacturer has to exceed customer expectations of product quality, user experience, and value. And that is why taking a configuration lifecycle approach to managing products based on the most valuable customer data possible matters most.

How to Drive More Product Revenue With Clearer Configurations

The quickest path to increase product revenue is to define product lifecycles so they can flex to customer requirements over time. Imagine being able to define an entirely new product line by selecting the best features, options, configuration rules and constraints from previous products. Customer-centered configuration management is making this possible today. Reducing time-to-market for new product development while increasing the accuracy of each product produced are additional advantages. And best of all, taking this approach expands the revenue potential for every product.

The bottom line is that taking a customer-centric approach to managing configurations over their lifecycles delivers higher quality products that drive more revenue. The following graphic shows how manufacturers are attaining greater scale and speed of production by relying on customer-centric configuration management strategies.

Scale, Accelerate and Simplify Product Strategies In Response to Customer Requirements

All manufacturers grapple with the challenges of having incomplete, inconsistent product configurations defined across departments, divisions and production centers. Many also have to rework quotes and proposals multiple times to get pricing, product validation, and potential delivery dates accurate. Not getting product configurations right the first time slows down sales cycles and also reduces a company’s ability to launch new product lines faster.

The good news is there are a series of metrics and KPIs that can help to get manufacturing operations back on track. They bring a customer-centered view of configuration lifecycle management into production, reducing the most common errors while increasing quality and revenue:

  • Average Deal Size Of Configurable Products – Increasing average deal sizes is possible by providing sales teams with CPQ apps and platforms that only reflect buildable products, filtered by what marketing sees as those with the greatest revenue potential. What drags this metric down is when there are different technical and market configurations for products, creating a configuration gap due to multiple sources of data, leading to incorrect quotes and proposals. CLM platforms alleviate the configuration gaps and help to increase average deal size by providing recommendations for the best upsell and cross-sell options.
  • Order Completion Costs On Configurable Products – One high volume manufacturer was able to reduce the order completion cost from $165 to less than $100 by using a lifecycle-based approach to configuration management. When the manufacturer began working on this problem the Quote Approval Index was less than 60%. By creating a single system of record for all product configurations including specific rules and constraints and pricing they were able to reduce order completion costs and increase accuracy.
  • Parts Usage Efficiency Index – Knowing what the parts usage is by product line to better manage inventories and reduce the risk of out-of-stock and allocation is possible when an ERP and CLM system are tracking Bill of Materials (BOM) activity. Tracking how efficient parts are being used across all product configurations can also uncover additional areas for process improvement.
  • Percent (%) New Product Revenue – Typically measured monthly, with the first six months of a new product being tracked the most closely, Percent of New Product Revenue is an indicator of how successful a product introduction is. This is a lagging indicator of how well-orchestrated configuration management strategies are, as it reflects the level of coordination from one product generation to the next using CLM.
  • Profit Margin (Dollars & %) By Configurable Product – Quantifies the Gross Contribution Margin (GCM) by each configurable product in a product line. This metric is a leading indicator of how well configuration management is occurring cross-functionally throughout a manufacturing operation. Often manufacturers also track the attach rate of accessories, up-sells and cross-sells by product to increase product and revenue forecast accuracy.
  • Quote Approval Index – Measures how effectively the selling teams are learning and using CLM-based quoting and product configuration workflows to initially plan and submit their quotes for automated approval before being sent to customers. Dividing the number of quotes created by the number automatically approved and sent provides this figure. The more customer-centric a configuration lifecycle management system becomes, the higher this index increases.