Managing Quotes, Contracts, distributed to the right people at the right time. Both these steps are critical to manufacturing industries, and Pricing for Higher Profits particularly life sciences, consumer products, high-tech manufacturing, transportation, and distribution.

1. W H I T E
P A P E R
Managing Quotes, Contracts, and
Pricing for Higher Profits
A Guide for Manufacturers
Executive Summary
Manufacturers often do not realize they are leaking revenue until they review
their business processes and discover that errors and missed opportunities are
costing them significant amounts. The good news is that you can recover this
lost revenue by identifying the causes, refining processes, and becoming
a customer-driven organization.
This white paper addresses the challenges manufacturers face in managing
quotes, contracts, and pricing and discusses how customer relationship
management (CRM) software can assist you in running your business
productively, efficiently, and profitably, capitalizing on all revenue opportunities.

2. Managing Quotes, Contracts, distributed to the right people at the right time. Both
these steps are critical to manufacturing industries,
and Pricing for Higher Profits particularly life sciences, consumer products, high-tech
manufacturing, transportation, and distribution. As these
Are you capturing all the revenue that you can? manufacturing industries evolve, the pressure to improve
process, technology, or both will continue to build.
Organizations often do not realize they are leaking
revenue until they review their business processes and • Managing complicated contractual agreements—
discover that errors and missed opportunities are costing Contract management is the execution of contracts
them significant amounts. The good news is you can and the building of contract compliance across
recover this lost revenue channels; this challenge ties directly to pricing as
by identifying the causes, well. Many companies are now realizing they are
Companies need to look more closely refining processes, and leaving a lot of money on the table by not managing
at their quoting, contract, and pricing becoming a customer-driven their contracts well.
practices and implement tools to organization. • Dealing with complex sales channels—Many
improve their process efficiency if they
wish to maximize revenue opportunities. companies are adding a web sales channel and
This white paper addresses
increasing reliance on indirect sales channels to grow
the challenges companies
market share. These increasingly complex multi-tiered
face in managing quotes,
distribution networks mean that the channel mix is
contracts, and pricing and discusses how customer
constantly in flux, which makes it difficult to manage
relationship management (CRM) software can assist you
and track pricing and contract information.
in running your business productively, efficiently, and
profitably, capitalizing on all revenue opportunities. • Improving sales-forecasting accuracy—Sales
forecasts are often inaccurate due to an inability to
In particular, this paper will focus on the value that can be capture a true reflection of sales probability.
derived from:
• Reconciling customer data across systems and
. Automating the quote-to-order process business units—Many manufacturers struggle to get a
single view of customers across a fragmented business,
. Ensuring contract compliance
which can be especially difficult for companies built on
. Providing accurate, competitive pricing mergers and acquisitions or with a number of different
plants and entities. When companies have customer
This paper will demonstrate, using real examples from
data spread across multiple systems, it is difficult to
Pivotal CRM customers, how manufacturers can use CRM
track buying behavior, capitalize on trends, manage
tools to automate these processes, increasing efficiency
maintenance and contracts, and see which products
and maximizing revenue opportunities, while also gaining
customers own. This leads to lost revenue opportunities
valuable insight into their customer base that can help
and poor customer service.
them become customer-driven business leaders.
• Customer segmentation—Dividing the customer
base according to criteria such as demographics and
The Current Manufacturing Landscape spending habits allows companies to market and sell to
Many manufacturers’ focus on profit management is these groups more effectively. How to better segment
hampered today because business processes that one’s customers and create the most profitable
impact revenues are managed manually or are only customer experience across those segments is an
partially automated, leading to significant inefficiencies. important topic for manufacturers right now.
Companies need to look more closely at their quoting,
• Dealing with the increased frequency of new
contract, and pricing practices and implement tools to
product introductions—This is particularly acute for
improve their process efficiency if they wish to maximize
high-tech manufacturing, consumer electronics, and
revenue opportunities.
consumer products, where capturing market share
Many daily challenges make an impact on a means getting a better product out the door faster
manufacturing organization’s ability to run efficiently: than the competition. Constantly increasing the rate
of new product development puts a strain on existing
• Improving perfect-order performance—A “perfect processes and technologies.
order” is one that is delivered on time and in full with
• Managing regulatory compliance issues—
no product-quality issues. This is a key lever to driving
Pharmaceutical manufacturers must comply with FDA
effective growth and results within organizations as a
regulations; all public companies must comply with
whole.
Sarbanes-Oxley regulations. Today, there is a much
• Managing price execution and compliance—“Price higher standard of accountability for transactions
execution” is rolling out optimized prices across throughout an organization.
various channels and customer segments, while “price
compliance” involves ensuring those prices are being
Pivotal CRM | White Paper

3. • Handling increasing sales to government and profitability by highlighting opportunities for cross-selling
public-sector organizations—More contracts are and up-selling. Even more importantly, though, it also
being created, compliance issues are rising, and price helps cultivate loyal, life-long relationships with customers
management problems are increasing because pricing by reflecting deeper knowledge of their businesses and
changes when selling to government organizations. needs in all interactions.
Poor tracking of expired contracts, discount profitability, In the long term, better customer knowledge results in
and out-of-contract pricing, as well as poor reconciliation faster transactions, better targeting of resources, higher
of charge-backs, leads to a great deal of revenue customer satisfaction and loyalty, and greater profitability.
leakage within manufacturing organizations. In most But becoming customer driven is difficult without the right
cases, the spreadsheets tools to collect, disseminate, and apply this customer
and departmental database knowledge. The solution? CRM.
Being customer driven is a simple applications currently in use
concept: it is a strategy to get to know simply cannot scale and will
customers well and share this knowledge not be agile enough to meet The Evolution of Manufacturing CRM
across the company wherever it can
bring value.
the needs of manufacturing Initiatives Toward Perfect-Order
organizations as they evolve
to meet these challenges.
Performance
In the beginning stages of CRM technology adoption,
These are some of the challenges that manufacturers many organizations start with a departmental, tactical
face today while trying to grow their businesses; they approach to solve a single pressing issue and move
are also the causes of many of the inefficiencies that toward company-wide, strategic deployments over time.
cost manufacturers revenues. Identifying these causes While it is advisable to work out a full corporate CRM
of revenue leakage is just the first step; the next is to strategy before commencing a CRM initiative, using a
determine how to better address these problem areas. phased approach is a good way to roll out the project in
This is where technology tools, especially CRM, can play manageable stages.
a role in helping manufacturers move toward greater
efficiency and better profit management—while also The first step for many firms is a sales force automation
helping them become customer driven. (SFA) initiative or a focus on improving contract and
opportunity management, as these are common
challenge areas for manufacturers.
The Importance of Becoming a
Customer-Driven Enterprise The next area of focus is often the management of
the inquiry-to-order process, which spans from the
Historically, many manufacturers have differentiated entry of a prospect or suspect into the sales pipeline
their companies based on price. But in today’s dynamic all the way through order capture. In streamlining this
environment, industry experts say it is becoming process, companies can potentially realize a 0 percent
increasingly important to differentiate not solely on price, improvement in what Rob Bois, research director of
but also on the quality of customer service, the quality of customer management strategies for AMR Research, calls
products, and the quality of customer interactions. This “perfect order performance:” the ability to deliver an order
more customer-driven approach ultimately results in on time and in full with no product-quality issues.
brand equity and the solid reputation that is needed to
secure a competitive edge. Order management is a process that pervades an entire
manufacturing company; it is not unique to a single
Becoming customer driven is not an easy change for area or piece of technology. Nonetheless, its key data
some companies to make, because they are accustomed and workflows reside within a CRM system at most
to operating in a particular way. And becoming customer companies. Once an order is captured in the CRM
focused can represent a significant shift in business system, it is typically handed off to order processing and
strategy for many organizations. fulfillment, which is usually managed within an enterprise
But ultimately, being customer driven is a simple concept: resource planning (ERP) application and may then be
it is a strategy to get to know customers well and share passed through a supply-chain application.
this knowledge across the company wherever it can The challenge to building the perfect order is to align all
bring value, as well as with distributors and other third- these departments, software applications, and processes.
party partners. A tight integration between all these elements is a critical
For example, tracking which products customers own component to getting to the perfect order.
and which additional products they may or may not be In Bois’s experience, a higher order-performance rate
interested in, then applying this knowledge to all sales, correlates directly to higher earnings per share for
service, and marketing interactions, helps increase companies, equivalent to approximately 50 cents higher
Pivotal CRM | White Paper

4. earnings-per-share—a metric AMR Research has seen Contract management comprises two general stages:
borne out in a number of different organizations. The
• Executing the contracts
benefits can quickly add up: for one million shares, 50
cents a share translates to $500,000. • Enforcing contract compliance across channels
Achieving better perfect- By this definition, contract management emphasizes
order performance is not only the establishment of the contract, but also the
Metrics for Evaluating management of its expiry, renewal, and renegotiation.
a complex set of steps
Customer Management involving multiple software
Performance systems, departments, and Provide Accurate, Competitive Pricing
According to Rob Bois of AMR processes, but given the
Sales managers often have the ability to discount pricing
Research, the top metrics used front office's important role
to measure sales and contract
based on a variety of parameters, and they may also
in this workflow, CRM is a
performance include: be able to apply an overall discount to the sale at their
great place to start. CRM
discretion. Unfortunately, typically these discounting
• Contract renewal rate systems can automate all of
procedures are inconsistent and poorly managed. And
• Compliance with contracted pricing the key processes that affect
since there is often little visibility into this process, it can
order performance: pricing,
• Number or % of evergreen contracts result in excessive discounting that cuts into profit margins
contracts, and the quote-to-
and the company’s bottom line.
• % reduction in Days Sales order process.
Outstanding (DSO) The impact of inefficiencies in price management is
Savvy enterprises are adopting Managing Pricing, larger than many manufacturers realize. AMR’s Rob Bois
strategies to drive improvements in notes that only three percent of companies currently
areas that offer the greatest opportunity Contracts, and manage price effectively. But adding just a one-percent
for increased revenue and profitability:
existing customer relationships.
Quotes margin increase based on optimized pricing can increase
Optimizing the value of customer a company’s earnings by 0 percent. Bois’ figures
Pricing and contract
relationships requires enterprises demonstrate the value and the potential for manufacturers
compliance are two prime
to streamline and improve the to realize greater profit in this area.
areas in which manufacturers
monitoring, management, and
analysis of customer contracts. can improve profitability and Using a flexible CRM system to implement an approval
perfect-order performance process for pricing and discounting of complex products
Companies that are doing this have by taking advantage of the
realized the following benefits: can ensure that only profitable quotes are extended to
automation capabilities of customers. These processes make sure salespeople
• Reduced cost of sales (by ~5%) flexible CRM solutions. quote the most appropriate price for each product, while
• Increased renewals and revenues This process includes price keeping on top of price breaks and volume discounts,
(by ~5%) and contract management, ensuring accuracy and competitive pricing while ultimately
which is another key area preventing margin erosion.
• Improved customer satisfaction
that impacts profit and
• Faster order-to-cash cycles revenue directly within
an organization.
All this happens in an automated fashion
• Enhanced compliance (by ~55%)
within the CRM application.
• Elimination of evergreen contracts
Price management comprises For example, prior to implementing a CRM solution,
three steps: one of Pivotal CRM’s high-technology manufacturing
• Price optimization: Determining the highest price the customers used to store its product catalog and pricing
market will bear information in a Microsoft® Word template. Whenever
salespeople created a quote, they would have to refer
• Price execution: Rolling out optimized pricing across to that document, enter details into a separate quote
various channels document, and then calculate totals by hand, including
• Price enforcement: Making sure that the right prices factoring in any discounts. This was obviously a very time-
are quoted to the right people at the right time, across consuming process that was also prone to error.
channels, products, and company tiers
Since implementing Pivotal CRM, the company has
Even if an organization optimizes prices effectively at the price variant books, and their product and price lists are
back end, it will not make a difference to the business if automatically updated and distributed within the CRM
these prices are not accurately applied by the people who system, so the sales force is confident it is providing the
are creating quotes in the field. most appropriate and accurate pricing in its quotes. The
company is now able to effectively manage its discount
thresholds, and it has implemented a discount-approval
process to ensure it is maximizing the value of each quote
while maintaining quote accuracy.
Pivotal CRM | White Paper

5. Another example of a manufacturer benefiting from using All of the company’s orders and project-related data
a CRM solution for pricing management is a full-service are documented within the CRM system. As a result,
OEM and contract manufacturer that serves the medical- employees can now identify the source of order delays
device industry. Prior to and deal with them accordingly. This has brought
implementing Pivotal CRM, tremendous value to the organization and demonstrates
Best Practices for CRM all the company’s quotes the benefits and importance of automating the conversion
Initiatives were manually processed of a quote to an order and minimizing the need for manual
and routed through an interaction.
Executive Sponsorship
administrator for typing.
Successful CRM deployments are The end result? Higher productivity. The company has
typically driven by the CIO, the CEO, These were then printed,
sent for approval, and finally increased the number of order transactions it processes
or someone else at the executive or
senior management level within the sent on to the customer. by more than 5 percent, while maintaining the same
organization who has the influence to This process would often staffing levels.
effect a cultural change. The adoption of take several days before the
a CRM culture has to come from the top; The importance of accuracy in quoting and order
customer saw the quote.
if it is left to a “grassroots campaign” processing cannot be overstated. In the case of a
to roll out CRM in a single department, Using Pivotal CRM, the computer and electronics manufacturer that handled the
the deployment will likely fail to have quote-to-order process manually prior to implementing
a significant impact on the company
company automated its
quoting process, and it now Pivotal CRM, this lesson was learned the hard way. As the
overall. An central facet of CRM is the
centralization of processes and data takes less than five minutes result of a typing error and a misplaced decimal point, the
within a single system; this requires for sales representatives to company’s revenue expectations were off by $500,000.
a company-wide initiative that is best create a quote, plus they do Unfortunately, this error was not caught by the company,
promoted by a top company official. not have to go through the but by a Sarbanes-Oxley auditor. With a CRM system
Process Review administrator or an engineer in place, the chances of such an error occurring are
Automation is only as good as the to help put the quote dramatically reduced.
processes it automates. Applying together. Even in the case
technology to poor business processes Some companies are surprised to discover what they are
of complicated, customized
simply amplifies the problems and overlooking due to lack of visibility into their processes.
quotes, - hours is now the
makes them more visible to customers One Pivotal CRM customer found that it had shipped
and partners. Any successful CRM typical timeframe for getting
a number of orders for which it had not yet invoiced
implementation must incorporate a quotes to customers, rather
customers, meaning money was being left on the table.
careful review of the underlying business than several days.
processes to ensure that problems are
The company only realized this after automating its
avoided, not replicated, in the CRM order capture, order processing, and order fulfillment
workflow.
Automate the Quote- systems, and also integrating CRM, ERP, and supply-
to-Order Process to chain systems. Pivotal CRM helped the company gain
User Adoption Initiatives
Employees can be resistant to change, Save Time and Money an additional four percent in revenue by following up on
but it’s the users that make a CRM un-issued invoices.
Automating the quote-to-
implementation successful. Involving
order process from end
representative employees in the Avoid Evergreen Contracts by Ensuring
process right from the selection stage to end ensures accuracy
can help give them ownership of the and unimpeded workflows. Compliance
project and encourage user adoption. Beyond that, it cuts down Pivotal CRM research shows that almost 60 percent of
Many manufacturers also alter sales on the time spent entering, active contracts are extended by default and almost half
and incentive structures to encourage approving, and processing
the adoption of CRM applications— of them are in their second extension. What this results in
quotes and orders. is undesirable evergreen contracts because enterprises
particularly those that include sales
force automation functionality. lack visibility into contract expirations dates, which
For example, a company
prevents them from renewing or revising contracts in a
Goal Definition and Tracking in the lighting industry that
Manufacturers that clearly define their timely manner that pre-empts unnecessary extensions.
implemented Pivotal CRM
CRM goals and determine in advance Staff needs to be alerted in advance of contract
has successfully decreased
how they are going to track performance expirations so they can proactively renegotiate the terms
its time-to-order by 60
against those goals are best able to of the contracts and renew expiring contracts.
measure the value of their CRM projects percent through automating
and make adjustments where needed to its order-capture process. This challenge is common across many kinds of
ensure success. In addition, automating manufacturing firms, and it has a distinct impact on
the system has reduced revenues. For example, prior to deploying Pivotal CRM,
error and wasted time, an exercise equipment manufacturer experienced difficulty
experiencing a 5-percent decrease in dirty orders and managing its contract expirations—especially government
a -percent reduction in change orders. contracts, which often receive greater discounts. The
problem was compounded because the company was
Pivotal CRM | White Paper

6. unable to re-evaluate the product—price agreement of $ million to $6 million in annual revenue leakage for
when the government contracts expired due to a lack of a billion-dollar company due to a combination of poor
visibility. So government customers continued to receive contract and price compliance, while stressing that for
over-discounted prices while the company lost money. even bigger firms, the impact can be exponentially larger.
The manufacturer also struggled to manage its lease
expirations, leaving lease managers to track expirations
manually and creating enormous administrative effort and
Using CRM to Its Full Potential
overhead. Similar scenarios Pricing, quoting, and contract management are key areas
are found across the industry. in which manufacturers can see benefits from CRM. But
The truth is that for many manufacturers, the full potential of CRM extends far beyond these areas.
the question should not be whether
Using a CRM solution allows As manufacturers begin to see the benefits of using CRM
they can afford to think about CRM, but
whether they can afford not to. companies to track the start to automate these processes, they can also begin to
and end dates of contracts, explore the many other areas in which CRM can have an
as well as revenue events. impact and to look at the next steps needed to implement
Using this information, the system automatically creates a holistic CRM strategy.
a new opportunity a few months before the contract
expiration date and assigns it to an account manager for Being customer driven is not only about streamlining
follow-up. The account manager can then either renew the fulfillment process, it is also about personalizing and
the existing contract or negotiate a new one, and in optimizing every contact you make with your customers
the process, he or she can also up-sell and cross-sell at each stage in the sales and service cycle. Any kind
additional products, obtaining extra revenue and profit. of touch-point you have with customers—whether it is
Commencing this months before the contract expiry date over the telephone, through a website, by e-mail, or in
ensures there is adequate time to troubleshoot problems person—has the potential to deepen your relationship
and pursue opportunities in time to meet the existing with them and extend their loyalty to your company.
contract deadline.
Many CRM systems offer marketing automation
Not only is it important to use your CRM system to solutions that help manufacturers reach out to prospects
manage contract compliance and contract expiration, but and customers, delivering personalized, relevant
sometimes there are also other revenue-generating events communications that build on the information collected
that take place over the lifespan of a contract that need about their needs and preferences over time. These
to be managed. For example, many manufacturers have systems help manufacturers generate and qualify sales
contract stipulations that give them the right to increase leads and distribute them to the sales force for follow-up.
the unit price by five percent per annum on the condition
that they inform the client 0 days in advance. Managing CRM also helps manufacturers capture the unique
such a process with a system such as Pivotal CRM attributes of individual customers, enabling them to
can help companies earn additional revenue with very develop the customer intimacy required to build long-
little effort. lasting relationships. At the same time, the CRM solution
helps them determine the group trends and similarities
The costs of not managing contracts effectively can add between customers, allowing manufacturers to segment
up. One manufacturing firm that had not yet adopted and target both customer and prospect groups more
a CRM solution worked with the Pivotal CRM team to effectively. This dual insight—on both the individual-
quantify this amount. This company signs approximately customer and group-trend levels—helps drive additional
,500 contracts per year, and the average contract has revenue and profit opportunities from both existing
a value of $0,000 and a duration of five years. The customers and potential ones.
company also has the aforementioned clause regarding
annual price increases with 0 days notice. But because Manufacturers also often have multiple sales teams, with
the company was not tracking contract stipulations or his some salespeople focused on specific products, some
0-day mark, it was not alerting the appropriate people on specific markets, and some on specific geographic
within the organization to follow up with the customer, areas. This can lead to complex territory management
and the price increases were not being applied. issues for sales managers. CRM systems offer territory
Once calculated, it was determined that this process management tools that allow managers to effectively
inefficiency was costing the company $.8 million in assign their salespeople to the right accounts and track
potential annual revenue. their activities in those accounts over time, leading to
better visibility into salesperson performance and the
This underlines the importance of effective contract probability of each deal's successful closure. In turn, this
management—and the significant impact that can be leads to more reliable sales forecasting and gives sales
made through automation. In fact, AMR’s Bois notes that managers the ability to take a more proactive approach to
this sort of figure is not uncommon and cites examples stalled accounts.
Pivotal CRM | White Paper 5

7. A manufacturer’s obligations to the customer truly begin The good news is that becoming more customer driven
once the sale is complete. Providing high-quality customer and achieving greater efficiency in the processes
service and support in a timely manner is essential to manufacturers grapple with every day can come hand
customer retention and a major competitive differentiator. in hand. Using a customer relationship management
Customer satisfaction and loyalty directly impact future solution to manage the full customer lifecycle—from the
revenue potential, given the relative costs of attracting first touch-point through the sales process and post-sale
a new customer versus retaining an existing one. CRM service; from quote to order through ongoing contract
systems provide tools to help manage customer service management—can help manufacturers realize significant
operations, enabling manufacturers to receive service process efficiencies while also developing deeper
requests through a variety of channels and track their customer knowledge and delivering better service. It’s a
resolution. Managing this process within the CRM system classic win-win situation for both the manufacturer and the
ensures that no matter whom a customer speaks with, customer.
they receive informed, personalized responses, and
automating the system ensures faster issue resolution. Some manufacturers are unsure where embracing CRM
Both these factors contribute to higher customer and the automation of customer-facing processes should
satisfaction and improved relationships. fall within their list of business priorities. The truth is that
for many manufacturers, the question should not be
CRM solutions help manufacturers manage the full whether they can afford to think about CRM, but whether
customer lifecycle, collecting customer information and they can afford not to. As many of the real examples from
insight at each stage. Companies can then effectively Pivotal CRM manufacturing customers presented in this
monitor customer-satisfaction levels and respond to paper reveal, failing to effectively manage front-office
issues quickly, delivering additional value to customers processes will not just hurt customer relationships—it can
and building stronger customer relationships that result leech millions of dollars from a manufacturer’s bottom
in more customer referrals and repeat sales. line.
All of these features and more are at the disposal of Manufacturing organizations that deploy CRM solutions
manufacturers who choose to implement a robust, flexible are able to better manage pricing, quoting, orders, and
CRM system. Manufacturers looking at using CRM to contracts, giving them the greatest opportunities for
enhance their pricing, quoting, and contract processes increased revenue and profitability. Automating these
should also develop a long-term strategy for leveraging processes results in faster, more accurate execution of
the full value of CRM. the quote-to-order process, contributing significantly
to “perfect order” performance. Improved pricing
management eliminates over-discounting and ensures
Conclusion every customer is quoted the most appropriate price.
In today’s evolving business environment, manufacturers Better contract management increases renewal rates,
need to compete on more than just price. They need decreases “evergreen” contracts, and takes advantage of
to differentiate on the quality of their products, their contract-term opportunities.
processes, and their customer service—in fact, on the
whole of the customer experience. Becoming customer
driven is an imperative for manufacturing businesses that
want to retain existing customers and attract new ones.
The concept of a “customer-driven” manufacturing firm
is not about sinking higher costs into customer service.
Rather, it entails weaving a more strategic approach to
the collection and use of customer intelligence into the
full lifecycle of customer interaction.
Many manufacturers resist the idea of bringing more
customer focus to their companies because they have
enough difficulty managing their existing processes.
Product pricing, quote and order management, contract
management, and other daily processes already involve
enough complexity to challenge the company, without
adding new concerns.
Pivotal CRM | White Paper 6

8. For more information or a complete list of our worldwide offices, please visit www.pivotal.com.
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