Blog Category: Subscription Pricing

It’s Time to Configure the Optimal Deal with CPQ

First-class and high-quality products alone are not (anymore) enough. 

The good news at the beginning: Customers can still be won with first-class, high-quality products. However, hard performance figures and mechanical functions alone are no longer the most important arguments for the purchase decision. Criteria such as availability, energy efficiency, or total operating costs are playing an increasingly important role – and the provision of first-class services that are perfectly tailored to the product and intended use. 

In addition, the growing importance of the service business for corporate success and (once again) some trends spilling over from the consumer goods world mean that many machine and plant manufacturers have to rethink and adapt their traditional business model: 

  • The focus is not on the product or its ownership, but on its use. 
  • Benefit-based sales models are on the rise. 
  • Machine and plant manufacturers not only have to develop, manufacture, and sell their products – they also have to own and operate them if necessary. 

To put it bluntly: Customers are no longer interested in the product or in the functions 

They are interested in the results they want to achieve with the product. The right answer for machine and system manufacturers are therefore powerful sales tools with which they: 

  • Be able to configure the ideal solutions for customer requirements error-free and application-oriented, without getting lost in technical details 
  • Be able to offer the right service offerings based on the current product configuration right from the start 
  • Can optimize the service offerings according to the product configuration made 
  • Different pricing models (one-off costs, monthly subscription costs, usage-dependent) can be flexibly selected. 

Application-oriented product configuration and “best price” guarantee from a single source 

The new subscription or “X as a Service” world has a catch: In many companies, it takes place in different systems. Offer and sell capital goods together with services? A real challenge for companies, caused by isolated, decoupled systems and processes. This has negative consequences: 

  • Offering the right services for highly variable products is a lengthy and costly process. 
  • Service offers cannot be optimized for the characteristics of the customer-specifically configured product 
  • Product configuration and service offerings have to be configured in different systems. 
  • Double, error-prone data maintenance 

Subscription pricing for Tacton CPQ extends  

Tacton’s configuration engine to optimize products during configuration not only according to specific customer requirements (such as operating costs, consumption or performance characteristics) – but also the possible service offers that match the currently configured product. 

The result is a central CPQ system with which sales and distribution partners can configure customer-specific products and services without errors, price flexibly and create comprehensive offers at the push of a button. 

  • Flexible pricing of service offers (one-time payment, monthly costs, depending on usage) 
  • Offer tailor-made services based on the currently configured product. 
  • Create offers including discounts and ramp-ups. 
  • Forecast Monthly Recurring Revenue (MRR) and/or Annually Recurring Revenue (ARR). 
  • Visualization of payment plans including total order value (total net price), CAPEX and OPEX costs. 
  • Configure a complete solution – including industrial equipment, subscription-based services and spare parts based on the configured product. 
  • Create offers including discounts and ramp-ups. 

Configure highly variable industrial goods error-free and sell them efficiently. Tacton CPQ is the CPQ solution for sales, marketing, engineering, and partners. 

Tacton CPQ is perfect for you if you: 

  • Want to automate and accelerate manual processes in sales and distribution. 
  • Want to increase the success rate of your offers. 
  • Want to reach and convince your customers on digital sales channels. 

Tacton CPQ is the control center for all sales-related information, such as B. the offered product configurations, the created offer documents including the associated CAD documents, prices, and reliable delivery dates. Create the optimal offer based on reliable data and offer your customers the best product for their specific requirements.  No matter which criteria are important for your customer: Our CPQ solution enables the configuration of tailor-made, customer-specific products and solutions. Application-based and error-free.

Interested in learning more? Check out our latest ebook: The Future of Manufacturing Subscription Models or schedule your demo!  

Terminology Guide: CPQ & Subscriptions

cpq & subscriptions

CPQ & Subscriptions a quick guide

Working with contracts and subscriptions introduces some new nomenclature and to make it easier to understand and follow, the most common abbreviations are explained below. In contract and subscription, the content is about value rather than price and the reason is that when contracts are signed the payment will not be upfront, it will be paid over time and thereby bring value to the company. Service pricing comes with a lot of abbreviations, we’ve compiled a helpful list below

Abbrevations 

  • TCV = Total Contract Value 
  • ACV = Annual Contract value 
  • SV = Subscription Value 
  • PV = Period Value 
  • OTC = One Time Charge 
  • MRR = Monthly Recurring Revenue 
  • ARR = Annual Recurring Revenue 
  • TCO = Total Cost of Ownership 
  • EaaS = Equipment as a Service
  • CPQ = Configure, Price, Quote

Total Contract Value (TCV) 

Total Contract Value or TCV is the total value of all subscriptions over the length of a contract. 

Annual Contract Value (ACV) 

Annual Contract Value or ACV is the value per year within a contract. For a 1 year contract, the ACV is the same as the TCV. The TCV is the sum of all ACVs. The ACV is not the TCV/”Number of contract years” due to the fact that all One Time Charges (OTC) will be part of the Year 1 ACV and that over the contract length different periods can be present. 

Subscription Value (SV) 

The total value of one Subscription including all Recurring Charges and One Time Charges. 

Period Value (PV) 

The total value of recurring prices including discounts for a given period. 

One Time Charge (OTC) 

One Time Charges are charges that will be billed at one single occasion at the start of a subscription. 

Monthly Recurring Revenue (MRR) 

Monthly recurring revenue (MRR) is the revenue that this contract will have on a monthly recurring basis. 

Annual Recurring Revenue (ARR) 

Annual recurring revenue (ARR) is the revenue that this contract will have on an annual recurring basis. 

Equipment as a Service (EaaS) 

Equipment as a service or (EaaS) is a model where the producer of a product rents out equipment to end-users while collecting payments on a monthly, or yearly basis for the usage of the product.  

Bonus: Configure Price Quote (CPQ & subscriptions) 

Configure, Price, Quote (CPQ Software) is a sales tool that helps companies produce 100% accurate pricing and quotes for highly configurable products. CPQ helps drive revenue growth by making it simpler, and faster to sell complex products. Improve efficiency with CPQ by automating processes and eliminating errors.  

How does CPQ help optimize subscriptions? 

Creating new, predictable revenue is the desire of all businesses, and now leaders in your industry are finding new revenue streams to achieve that outcome. Implementing a proper CPQ with the ability to incorporate subscriptions—whether bundling the optimal deal with services or moving towards an equipment as a service model—is the only way to sell the highly customizable products that are essential to your business. Your customers want to purchase the outcome of uptime and you must prepare to deliver this experience to stay relevant to their business needs.

Interested in learning more about CPQ & subscriptions? Schedule your demo today! 

Or check out our latest eBook: The Future of Manufacturing Subscription models

The Subscription Business for Manufacturing is Here to Stay

A shift in buying preference is happening in real-time 

In the past decade alone, manufacturers have seen dramatic shifts in how they do business. In a response to Industry 4.0 and the Internet of Things (IoT), many businesses have expanded how they use data to transform their operations. The advancement of data usage was also seen in how manufacturers use analytics to better understand customers. These transformative efforts were then intensified by the COVID-19 pandemic. Investing time into new digital, customer-centric strategies has lead many manufacturers to subscription service models.  

Subscription business models are based on the idea of selling a product or service to receive monthly or yearly recurring subscription revenue, and these models have caught the eye of many manufacturers. Just how much consideration have manufacturers put into subscription models?  

According to the Business Innovation Observatory of European Commission, more than 70% of manufactures consider services to be a key differentiator. Manufacturers who shifted towards service-based models have seen 5% to 10% annual business growth with services generating 50% of that revenue.  

It’s clear that subscription models are an exciting way to drive recurring revenue while using the same data to understand customer needs and experiences better. Knowing what the customer wants, and when can help create a sense of loyalty and help them predict their costs in advance. Just think about how many subscriptions you have for your everyday life; with autopay, your customers will have a predictable expense every month.  Let’s look at how the shift from ownership to access, customer experience are impacting the need for subscription pricing for manufacturers and what’s really holding back manufacturers from entering the subscription economy. 

The shift from ownership to access has started.  

In heavy manufacturing, a substantial portion of your revenue and profit comes from one-time transactions of your highly customizable products. A prospective buyer comes in, the sales process ensues, they buy the product, and that’s the last time you hear from them. This business model has led to you losing touch with your customers whether through direct or partners for the lifecycle of the product. This means you’re missing add-ons, replacement parts, repairs, and opening yourself up to lose a re-order. This is where an opportunity lies to move towards a subscription model of selling. Whether this is bundling services or transitioning to an outcome-based model, you can begin focusing on access over ownership. 

By transitioning to include subscriptions into your business model, it becomes possible to stop relying on one time-sales and begin ensuring a predictable recurring revenue stream that has caught the eye of many companies. The ability to get closer to your customers and offer them the services they need to keep up and running will ensure you build brand loyalty and create lifetime customers. 

Manufacturers are focusing on a better customer experience, subscriptions help that focus

The COVID-19 pandemic has made many manufacturers rethink how they interact not only internally, but with customers as well with a renewed focus on digital transformation. When we asked C-level, vice presidents, and directors of manufacturing operations about the most important strategic areas to remain competitive and bolster economic growth, the customer experience was an important aspect.  

When asked, “Most important strategic areas to remain competitive and bolster economic growth”. Read more on the survey here 

With 49% of respondents noting the importance of customer experience it’s time manufacturers begin taking a deep look at how to improve this aspect of their digital transformation. Driving sales and revenue is directly impacted by the customer experience. That’s why subscriptions are so important to a great customer experience.   

With subscription business models now appearing in over 70% of companies across industries (Gartner), it’s time to create a strong, and loyal subscription customer base. This is a little different than the one-time sale manufacturers are accustom to. The one-time sale may be large, but having a customer for years can quickly eclipse the one-time sale. That’s why making a seamless subscription is so important to the customer experience. Instead of only one sale manufacturers must make it easy to buy, and upgrade products because customers can cancel a subscription at any time.

What’s holding manufacturers back from subscriptions?   

Today many manufacturers are struggling with selling capital equipment together with bundles and services.  As margins on product sales are declining, leading manufacturers extend their offering into service sales. These promise higher margins than one-time sales and offer a predictable, recurring revenue stream – which is particularly of interest in times of economic volatility. But many manufacturers are held back by a few familiar challenges.  

Inefficient quoting process  

Configuring, pricing, and quoting complex industrial equipment and service subscriptions in the same quote is challenging. If these sound familiar it may be time to consider innovative solutions: 

  • Multiple software needed to configure equipment and services  
  • Disjointed, inefficient processes with duplicate data  
  • Limited possibilities to optimize service contracts on input from the product configuration 
  • Lack of support for including one-time charges, recurring and usage-based pricing in the same quote  
  • Lack of support for including ramps and discounts in the quote 
  • Slow sales cycle and high sales cost due to alignment needs 

It’s time to configure the optimal deal 

Creating a subscription economy in manufacturing isn’t an easy undertaking. Subscriptions can create customers for life, so making that experience as smooth, and streamlined as possible needs to be a main priority of manufacturers entering the subscription space. Configure, Price, Quote (CPQ) software complete with subscription pricing is where companies can begin to see how exciting, and profitable subscriptions can beConfiguring a complete solution, including complex industrial equipment, accessories, and subscription-based services is possible, all in one product model.  

CPQ also enables users to combine one-time, recurring, and usage-based charges to optimize pricing structures. This is especially important for manufacturers who sell based on usages such as mileage, services, and more. It’s even possible to forecast the monthly recurring revenue (MRR) and annual recurring revenue (ARR) using CPQ.  

Interested in learning more? Schedule your demo today! Or read more on subscriptions in our eBook: The Future of Manufacturing Subscription Models

The Benefits of Equipment as a Service for Manufacturing  

The Benefits of Equipment as a Service for Manufacturing  

Manufacturing is changing faster than ever; we’ve seen how the industrial equipment makers are trying new ways to disrupt the typical sales model and capture more value by creating subscriptions and keeping ownership instead of selling products on a one-off basis. This move has been fueled by the Internet of Things (IoT) connecting nearly every piece of equipment in the factory.  

With IoT, many manufacturers have started the slow journey to selling their equipment as a service (EaaS). This movement is the next step for manufacturers looking to transform their business, let’s look at what EaaS is, the history, and some exciting examples of companies doing it.  

What is Equipment as a Service (EaaS)? 

Equipment as a service or EaaS is a model where the producer of a product rents out equipment to end-users while collecting payments on a monthly, or yearly basis for the usage of the product.  

This is beneficial to manufacturers because it delivers reliable streams of revenue if the machines are working, they can collect their payments. EaaS also enables both the manufacturer and end-user to collect data on how the product is used, which helps both understand how the product is used, and how.  

What are some common pricing models for EaaS? 

There are two major models for EaaS, outcome-based, and time and usage models. These are usually based on how the seller envisions the equipment being used.  

Outcome-based models  

Using an outcome-based model enables companies to charge based on operational or financial achievements. This model can be challenging if the manufacturer doesn’t fully understand the value of the equipment. If the value isn’t calculated correctly, it can be difficult to properly charge for a single piece of equipment.  

Time models 

A time-based model is just what it sounds like, a payment plan based on a fixed period. A great example of this is German power tool manufacturer Hilti. At Hilti it’s possible to pay a monthly subscriber fee for over 1 million tools. With Hilti Tool Fleet Management, there is no upfront capital investment to tool up for projects. Instead, Fleet tools come at a fixed monthly rate.  

This benefits customers by giving them controlled costs. The monthly fee covers unexpected costs, repairs, and even theft protection. Hilti also benefits from this relationship by letting the customer trade up to the latest tech without renewing at the end of every term. This increases the customer’s reliance on the product while making them less worried about costs, and unexpected spending.  

Usage model 

Usage models are tied to how much a product is used. One of the most famous examples of this is the Power by the Hour model by Rolls-Royce. Power by Hour is a way to manage engine maintenance for Rolls-Royce plane engine users. This removed the burden of engine maintenance for the customer and transfers it to the management of Rolls-Royce.  

This plan is exciting to many customers of Roll-Royce because the plan is charged on a fixed per hour basis, making it critical for the engines to perform. Creating a reliable product keeps Roll-Royce on the top of their game while keeping their easing worries of the customer on Maintenace and other challenges that airlines are accustomed to. Creating a joint focus on minimizing operational disruptions between buyer and seller really does go further than you’d think.  

The benefits of EaaS 

More revenue share  

This new, flexible way of working enables companies to subscriptions based on a bundle of services and products. This enables flexibility to both seller and user. Imagine how much easier it is to predict revenue as a business, while the customer only must click one button to get tools delivered to their job site as Hilti does. Check out just how much an ongoing service relationship can reduce the operating expenses for customers while also returning more revenue to the vendor: 

Source 

That’s right, the total lifetime value of the products using EaaS can deliver 50% more of the revenue to the vendor while staying in the traditional sales model only nets a possible 25% of revenue. 

Predictable costs  

This is a major selling point of EaaS, predictable costs for the user. Knowing how much each piece of equipment costs per month or year will allow for more flexibility in spending on other parts of the operation. Maintaining the product is also an important part of the cost factor. If a tool breaks down it can be quickly replaced without an additional charge to the user. This also includes updating software which is now the responsibility of the equipment provider.  

Predictive maintenance  

EaaS comes with a lot of data on how pieces are being used, this gives the provider an idea on how to best maintain the equipment to maximize the product and keep the customer happy. Keeping track of this will also reduce the chance of product failure, or disruption for the end-user, while also helping the provider learn new ways to give better product support.  

CPQ and Equipment as a service 

Configure, Price, Quote (CPQ) software is helping many manufacturers begin their journey to create these subscriptions essential for EaaS success. Manufacturers can create the product that their customer wants and include maintenance, service, and more all directly in a quote.  

CPQ also enables users to combine one-time, recurring, and usage-based charges to optimize pricing structures. This is especially important for manufacturers who sell based on usages such as mileage, services, and more. It’s even possible to forecast the monthly recurring revenue (MRR) and annual recurring revenue (ARR) using CPQ. 

The shift is scary but worth it  

Companies can no longer rely on one-time deals to keep customers happy. That’s a scary thought, but a change is necessary for manufacturers to succeed in today’s market. Factories need to be connected from the front office to the back and then to the customer. Taking advantage of ways to remove the worry from the customer through upgrades, and predictive maintenance will keep them connected to your subscription offering. This also creates what all companies want, reliable products and predictable revenue. Adopting the EaaS model is essential undertaking manufacturers are considering across industries. Discover how Tacton is helping these disruptors create value with EaaS and CPQ by scheduling your demo today! Or check out our latest eBook The Future of Manufacturing Subscription Models 

The 5 2021 Manufacturing Sales Trends You Can’t Afford to Miss

The 2021 Manufacturing Sales Trends  

The year 2020 has been a pivotal year for manufacturers. We have seen important shifts in manufacturing that have impacted many of our customers strategies for 2021 and beyond. We’ve curated these insights from our customers and analystscompiling the key trends expected from manufacturers in 2021. But first, let’s look at the year in review. 

 2020 a year like no other  

2020 was a tough year for everyone, manufacturers included. The COVID-19 pandemic has tested the digital-readiness of the industry as it was forced to shift to digital-first sales operations. As a result, there was an acceleration in digital transformation across the industry. 

The manufacturers that will thrive in 2021 are those that actively seek innovation and are willing to abandon old ways of doing things. This is what many experts refer to as “embracing the new normal.” 

Sales teams were one of the hardest hit by the pandemic amid travel bans with all on-site demos, negotiations, and crucial face-to-face meetings indefinitely ‘postponed’. Combined with economic uncertainly, sales teams were forced to interact in new, often uncomfortable ways as they transitioned to digital interactions. These challenges have shifted how and when we work, making it important to adapt to the current situation while also embracing the future with new ways to interact. Now as comfort with digital interactions grows, many of our customers have shared how they plan to embrace the new normal and take a digital-first approach to sell.  

Buyer Enablement is the key driver in manufacturing  

Traditionally the buying experience for manufacturing products is high-touch, very complicated, and often disjointed. Partner that with recent economic uncertainty, social distancing practices, and unease about travel– there’s a new sense of urgency to enable digital selling channels. 

New research from Gartner indicates an acceleration of B2B sales in digital channels. By 2025, the expectation is that 80% of interactions between suppliers and buyers will occur in digital channels. Partner that with current economic uncertainty, it’s clear there is a race to reinvent the buying experience across all B2B sales, specifically industrial manufacturing.  

With fewer deals to go around and a more competitive landscapeyou have to find new ways to differentiate yourself and provide a superior B2B buying experience that copes with the constraints of the times and that better suits the needs of the customer 

The leaders in your industries, and many of our customers, are already using or are well on their way to implementing disruptive technologies such as Configure, Price, Quote (CPQ), visualization, and even eCommerce, to meet customer expectations with a focus on buyer enablement. 

This trend is nothing new. Manufacturers have been slowly moving towards an online buying experience over the past years. However, the pace has now accelerated as B2B sales migrate online and critical buying decisions are made by teams working remotelyWe are certainly not the only ones seeing this trend towards online buyer enablement. In late 2020, Accenture published a report on the state of the B2B digital economy for manufacturers.  

According to Accenture’s research, the new normal has 74% of industrial buyers are researching at least half their purchases onlineThe trend from offline to online is bound the accelerate in the coming years. By 2025, the same study reports 20% of all customizable industrial purchases will take place online. This makes a shift to an online buyer-driven experience more important to the long-term success of your organization.  

Disrupting the traditional buying experience is the first step to success. So now, let’s take a look at the top trends we have gathered from our top customers and prospects. 

 1.) Building Self-service buying experience for highly configurable products 

With buyer enablement comes an increased focus on customer self-service. This has created a shift that enables customers to purchase manufacturing equipment using self-service without interacting with a sales team. While buyers are already accustomed to starting their process online and completing it with the help of a salesperson, they are expecting to do more and more on their own. The self-service experience is extending beyond the research phase and into the configuration, quoting, pricing, negotiating, and ultimately purchasing of your products—all online. 

Self-service empowers manufacturers to offer an experience that goes beyond traditional selling methods. Enabling self-service throughout the product lifecycle, from the first interaction to re-order, can help your company become more efficient and profitable. This is done by utilizing the wealth of unique product data from CPQ to make recommendations using Guided Selling1For example, you can cater to returning customers by offering specific product features to them, based on their past purchases or data gathered from past product configurations. Using analytics can take you one step further by showing which product features or addons are more likely to sell and which aren’t selling as quickly. These unique insights can drive your product development, inventory decisions, and protect your margins. 

Enabling self-service makes it easy for customers to engage remotely from their home office, the warehouse, or in the field for an expedited process. A great self-service experience for your customers will go beyond simply describing your product and features and into an experience that leads to them completing orders and making deals that are larger and with higher margins.  

Want bonus content? Check out our eBook on the top manufacturing trends!

2.Real-time 3D Visualization for configured products  

Everyone knows B2B customers have been starting their buying journey online for years. Buyers were limited by the product descriptions provided by the manufacturer, often listing the variable options and configurations possible, but without being able to explain if the product could be configured to their exact needs. 

This year has forced interactions between you and your customer to move online and this has made buyers expect more from their digital experience. Text and images are not enough to engage buyers when they engage digitally. This has put a lot of pressure on vendors to create digital-first disruptive experiences. This is where real-time 3D Visualization steps in and offers both an engaging and disruptive experience—all online. It’s clear no one will buy products sight unseen and that becomes increasingly evident as digital engagementnormalize. 

Visualization is the key to building self-service, digital-first experience on your website. CPQ paired with Visualization empowers anyone to configure highly customized products and see every change they make on their screen in real-time. This allows your customers to see the exact product as they configure and make changes to it. Additionally, features like Augmented Reality (AR) allow your customer to place a 3D image in a room and walk around it as if it was standing in front of them. Our customers are investing in delivering a best-in-class experience that ensures their customers get a personalized showroom-experience wherever they are working from. 

Manufacturers, especially those offering configurable industrial equipment, understand the challenges of visual configuration. Until just a few years ago, visual configuration, that is the ability to render real-time phot-realistic 3D images of a configured product, was deemed technically impossible. Prior to CPQ, product configuration was an error-prone process that was slow and costly. CPQ not only enables the configuration to be done in a matter of seconds, it also enables visualization to be done instantly with the assurance that errors eradicated, and prices are accurate. If implementedyou can put the power in the hands of your customers through your website.  

The benefits of Visualization do not end at customer experience. In fact, product visualization reduces reworks, increase deal margins, and accelerates the sales cycle. Leaders across all industries understand this and are making moves to put visualization into their 2021 strategy. 

3.) Support the complete customer buying journey with eCommerce 

Buying (and selling) goods online have become commonplace in B2C industries such as retail, services, and hospitality. eCommerce has normalized the online experience for the consumer and those same expectations are transferred when the individual consumer goes to work as a B2B buyerFor Manufacturing, however, the implementation of eCommerce has been slow and, until recently, technically impossible.  

Manufacturers’ sluggish adoption of eCommerce can be attributed to two primary factors. The first has to do with the technical difficulties in preparing a technically-sound, error-free, configured product quote. The task of configuring the product would require an entire team of sales engineers, working days, or even weeks to configure the product just right. Pricing the product was another hurdle for the sales teams to overcome. Before CPQ these tasks would be done manually (using numerous fragile and complex excel sheets).  

The second reason why manufacturers were slow at adopting eCommerce, was due to the size and complexity of the deals themselves. B2B manufacturers would rely on numerous face-to-face meetings, demonstrations, explanations from the salesperson in order to ensure the buyer that the product met spec and to demonstrate the value of the product before a final purchase decision was made.  

Today, CPQ has changed much of the way industrial equipment is bought and sold. With CPQ, salespeople can configure a product as they meet with the customer, and have the complete quote emailed to the customer before the end of the meeting. When CPQ powers your eCommerce platform, the customer can be assured at every step, that the options chosen are compatible with each other, and that the product parts are in stock. The buyers can also compare and contrast various alternatives and ensure that they are making the right decision.  

Providing fast accurate products will help customers get what they need when they need it, throughout the product lifecycle—all through your website.  

4.) Selling subscription services for Predicable Revenue 

Predictable revenue during times of economic uncertainty is the envy of all businesses. For the manufacturing industry, this could easily breimagining the way you commercialize your products and building new business modelsOur customers are thinking about servitization as a new financial model to enhance the way their customers experience their productsServitization refers to the phenomenon of offering the products and equipment as a service, where the customer pays a fee for the use of the product, reaping the value of the use of the productAirline jet engines is one of the most well-known use cases of servitization, where Rolls Royce or GE provides the power unit, maintenance, and upkeep of the engines, while the aircraft owner pays a fee for the usage 

By incorporating a service modelmanufacturers can provide more value to their customers while also building a predictable revenue stream. Additionally, customers can avoid big investments and unpredictable operational or maintenance costs by simply paying for usage. 

There are numerous ways to implement servitization. Two of the most common models follow the equipment-as-a-service model. This resembles more of a rental model where the equipment is maintained and serviced by the manufacturer. The other model is more closely linked to the actual output or value the equipment provides. Here, the manufacturer charges the customer based on the usage it delivers. Using the jet engine model explained earlier, the engine manufacturer would charge the owner of the airplane per mile flown. In the simplest instances, some are looking to utilize subscription management for aftersales service agreements. 

The benefits for both manufacturers and your customers are clear. As a manufacturer, you get to work closely with your customersbuilding relationshipswhile building predictable subscription revenue. The manufacturer provides a valuable service to the customer including maintenance and deploys field service that ensures the equipment continues performing at its best. All of this improves customer experience, builds brand loyalty, and bundles all service costs into a monthly fee. With subscription service contracts, your customers aren’t buying equipmentthey are acquiring value. 

Shifting or adding revenue models may seem daunting, but leaders in your industry are already seeking to build predictable revenue models that improve the experience of their customers. When implemented as part of a digital transformation strategy, you ensure your customers have a digital portal to manage their services and continue meaningful interactions. 

5.) Connect systems and processes with CPQ for data-driven decisions 

All these trends are insightful ways that manufacturers are re-designing the sales process to be buyer-drivenThese four trends rely on the ability for manufacturers to solve one of the most crucial challengesthe ability to manage product variance using data transportabilityManaging product variance is about going beyond the configuration of the product components and into interlinking the organization around a single source of truth for product data.  

By connecting all business functions, you give everyone in the organization one source of data to work fromensuring cohesion among the various parts of the organization. This means sales, marketing, and customers are configuring products that engineering can design, and engineering is designing a product the factory can build. The ability to cope with the complexities of all product data, pricing information to inventory, and production schedule can only be effectively managed by a central ecosystem with CPQ at its core. 

The benefits of a connected ecosystem don’t just end at data integrity or data transferability. In a post-Covid-19 study, Gartner claims that 60% of B2B sales decisions will be data-driven by merging sales processes and applications. In order for you to achieve this, data silos need to be dismantled. In doing this, commercial teams will be supported by systems that make product recommendations, suggest common configurations, prove services, and provides after-sales service quotes.   

The right CPQ software connects your CRM, ERP, CAD, PLM, PIM, pricing tools, eCommerce, and all other front, middle, and back-office software platforms. CPQ can collect and process data across departments, ensuring accuracy and consistency across all customer-centric and product-centric processes.  

Managing product variance and integrating data can also extend beyond your organization and empowering all sales channels, whether it be partners, dealers, online, or through self-service. Top manufacturers see the importance of empowering the buyer and using CPQ as the engine to drive that experience. 

 There’s no turning back now 

2020 has reminded us of the importance of valuing resilience over efficiency. The organizations that best dealt with last year’s challenges were not the fastest, smoothest, or productive. Rather they were the organization that best adapted to the new reality while still delivering value to their customers. 

We have seen how many global manufacturers were able to use the current economic situation to accelerate their digital transformation. Their aim was to best serve their customers and not lose out to competitors. Digital technologies, like CPQ, have eliminated the complexities that prevented B2B manufacturers from creating a truly digital-first, customer-centric buying, and selling experience.  

The many conversations and interviews we’ve conducted with manufacturing leaders all concluded that there is no going back to the way things were. The leaders in your industries across the world are all-embracing digitalization to reinvent the way they serve their customers. In order to successfully do that, they will continue to take a digital-first approach that removes technical barriers and empowers the customers 

At the beginning of 2020, before the pandemic, we advised that manufacturers needed to digitalize or risk becoming obsolete. Today, in 2021, it is even more dramatic: “Manufacturers need to digitalize or die”.  

Ready to take your next step? Schedule your personalized demo today!

Contributors:

Nick Thompson, VP of Product Marketing, Tacton 

Michael Brassea, Sr. Content Product Specialist, Tacton 

Mateo Bornico, CPQ Content Specialist, Tacton