Increasing customer responsiveness
and sales velocity
Debunking the myths of
quote-to-order (Q2O) improvement
When we think about the customer experience, what
primarily comes to mind are the sales and support
processes. However, we rarely think about how the
supporting sales operations such as quoting, pricing and
order management activities impact the customer’s buying
experience and satisfaction with the purchase. The Quote
to Order (Q2O) business process crosses multiple business
functions and serves as the bridge in the customer’s
experience that can often be overlooked. In this article, we
explore the myths and realities behind this cross functional
business process. We compare common perceptions
against data driven facts to highlight the impact of an
efficient and effective Q2O process.
Q2O is a critical process that plays an important role in
enabling companies to achieve their strategic priorities.
These activities should be structured to support CXO
objectives and if designed appropriately can be a
competitive differentiator.
Strategic considerations of Quote to Order
Priorities for CXOs
Implications
Customer responsiveness
•Speed: Customers expect 24-hr quote turn-around time and long Q2O cycles can
impact customers
•Quality: customers expect accurate quote and order processing customized to their
needs, regardless of complexity
Scalable for growth
•Volume: Growth by manual labor is not sustainable, efficient processes and tools to
handle large deal volumes is critical
•Efficiency: economic downturn and tendency to focus on front vs. back office
forcing companies to do more with the same
New business models
•Flexibility: New technologies demand business model innovation (e.g. software as a
service, leasing, capacity on demand), which impacts Q2O requirements
•Knowledge: understanding implications of various business models (e.g. pricing,
revenue recognition) will be key to effective Q2O execution
Globalized operations
•Decision makers: Geographic expansion and emerging markets forcing sales
operations to think and act globally — need governance model and decision makers
that align regions
•Standardization: Increasing global customer accounts and M&A demands require
quick and efficient streamlining of different regional roles, responsibilities, and
processes
Source: Deloitte Consulting LLP
Increasing customer responsiveness and sales velocity 1
The Q2O process should be designed to support your
organization’s strategic priorities in the marketplace.
Myth #2: Q2O is a back office function and broken
processes do not have much impact on customers.
Myths vs. realities
Because Q2O is often overlooked, there are many
misconceptions about the nature and value of this cross
functional process. Therefore, we will present the more
common myths about Q2O and reveal the reality based on
experience.
Reality: Q2O is a critical customer touch point that is
becoming more prominent with new business models
(e.g., managed services) and consumerism of IT (e.g., every
decision maker is a consumer).
Myth #1: Quote-to-Order (Q2O) is a standard business
process well defined by companies, and the process for
quoting prices to customers and handling an order is a
routine back office function.
Reality: The complexity of sales arrangements, the rapid
growth of global operations, and the focus on customer
responsiveness is forcing many executives to reexamine
their quote-to-order processes.
Q2O can be the Trojan horse. Nobody ever starts out
thinking there is a problem, but it often becomes the
underlying foundation of many business issues. Are
we being responsive enough to our customers? Are
we positioned to scale for growth? Are our back office
operations designed to meet global demands of our
customers? These are the common issues that can be
addressed through Q2O improvement.
Case example
A voice-of-the-customer study was conducted for a storage equipment and service
provider to assess whether Q2O process influenced the customer experience.
Customers and partners were asked to rank the relative importance of five dimensions
(automation, level of effort, visibility, flexibility, and speed) for each step of the
quote-to-order process. Results showed that while product offering and price matter,
customers and partners suggest that Q2O is an important factor to closing the
sale. Some even reported having purchased from competitors due to dissatisfaction
regarding Q2O experience, primarily based on Q2O speed. Specifically, customers
expected a much quicker response time on simple deals (e.g., hardware, software,
commodity transactions). Meanwhile, they do expect that complex deals require a
longer response time.
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As we mentioned at the outset, Q2O is the forgotten
link in customer experience. Companies rarely consider
quoting, pricing, and order processing to be influential
touch-points that influence brand perception, purchase
decisions, and customer satisfaction. However, in the wake
of creating new business models to sell more technology
(e.g., software as a service [SaaS], leasing, capacity-ondemand, etc.), tech companies are dealing with not only
change in sales techniques to capture growth areas, but
also churn in having the appropriate infrastructure to
support customers through more complicated transactions.
In a recent Q2O survey conducted by a high tech
manufacturer, results indicated that perceptions and
repurchase decisions are directly influenced by Q2O
experiences. From an end customer perspective, 60% of
respondents identified speed and turnaround time are
typically the most important factors. However, during the
configuration and quoting stages, direct customers and
channel partners value flexibility more (e.g., vendors who
work closely with them to develop scenarios and custom
solutions). While during order management, customers and
partners care most about order status visibility. Customers
(with high consumer eCommerce expectations set by the
likes of Amazon and UPS) are forcing tech companies to
invest in self-serve tools and real-time tracking globally as
part of their Q2O interactions.
For channel partners and distributors, being “easy to do
business with” goes a long way. One technology company
asked their customers for feedback and received some
honest opinions:
“Company A is the only vendor we have these issues
with; everything else is clearer and much simpler. We’re
not using them because of this; their invoicing and
quoting causes us heartburn.”
“We continue to have problems. It affects our efficiency,
we have different internal structure and workarounds just
to manage Company B; it places a much higher burden
— minimum 20% — on the team compared to other
providers.”
For those processing deals, Q2O improvement can be
a cost lever especially under business expansion. When
order volume is low, providing flexible arrangements with
manual quote-to-order processes is not much of a concern.
However, scaling up to meet higher deal volume with the
same labor intensive work-around can be costly. At the
same time, in competitive low-cost labor markets (e.g.,
Southeast Asia) where many high tech companies have
built global bid desks or sales operations centers, loyalty
is scarce and inefficient tools and processes are common
reasons for attrition. Thus, the fixed cost structure for Q2O
can easily be driven up from a headcount, training, and
retention perspective. Treating Q2O as a cost avoidance
opportunity can build a clear case-for-change and bring a
different degree of interest from the management team.
Beyond just margins, partners are seeking self-service
capabilities with minimal overhead. Keeping a low cost-toserve model for partners can improve their experience and
help them sell more of your products/services.
Myth #3: Q2O improvement initiatives don’t stack up
against those with clear bottom line benefits.
Reality: An inefficient quote-to-order process can be
a leaky pipe that prevents sales, operations and finance
teams from being efficient and effective; improvements can
drive lower cost-to-serve and tangible savings.
Sales and pre-sales people are sometimes our highest paid
order management resources due to manual procedures.
Instead of spending valuable time interacting with
customers and closing deals, they can spend up to 30-50%
of their time configuring solutions in cumbersome tools,
filling out paperwork for special pricing, chasing down
purchase order corrections, and investigating order delivery
status. Having the efficient tools and processes for sales
reps to respond to customers easily is not only helpful for
a competitive advantage, but these intangibles can also
become the basics for talent retention.
Increasing customer responsiveness and sales velocity 3
Three steps to improving Q2O over time
Near term
Fix the leaky pipe
Pursue quick win initiatives that
fix targeted pain points and
inefficiencies to improve customer
responsiveness
Mid term
One size does not fit all
Implement new processes for
Q2O delivery and define system
requirements for automation
Companies often struggle with how much to invest in
near-term vs. long-term improvements. Quick wins are
needed to gain momentum and efficiencies realized in
the near term can fund longer term initiatives. However,
without fixing the underlying manual processes by
upgrading systems and facilitating adoption of new
processes through mid/long term initiatives, core issues
may consistently remain. One of the main objectives when
managing a Q2O improvement program is to balance and
communicate both near and long term objectives and
allocate resources accordingly.
Quote initiated
Long term
Establish global operating model
Upgrade Q2O systems & tools
and establish Q2O governance
structure to lower cost-to-serve
Near term: Fix the leaky pipe to drive deal velocity
The concept of a clean quote is when a deal goes through
the Q2O process with minimal errors and intervention
(e.g., human touches). Industry average is 15% error rate
and class leading is 2%.1 Decreasing error rates can impact
order velocity and improve customer turnaround times.
Quote to order: Deal velocity
Quote delivered
Configure
scenarios
Pricing
approvals
Contract
generation
Finance
approval
(Time lag)
(Time lag)
(Time lag)
(Time lag)
What is your average end-to-end deal velocity? Where are the costly inefficiencies along your Q2O process?
Source: Deloitte Consulting LLP
Cincom, “Best Practices in Guided Selling: Measuring Quoting
Strategies’ Financial Impact,” 2009.
1
4
When striving for clean quotes and lower error rates,
the most common misconception is that it is all about
system automation. In reality it is more about process
discipline (e.g., everyone doing the right thing at the right
time). In fact, the level of system customization often
holds an inverse relationship with the level of behavioral
change that an organization is willing to impose. In
other words, it’s easier to change the system than it is
to change the people who perform the processes. In the
short term, organizations often make the trade-offs by
extending timelines and budgets to accommodate “as is”
conditions. However, in the longer run, this dependence
on system modifications proves costly (e.g., maintenance
of highly customized systems through future upgrades)
and institutionalizes traditional (and over time, outdated)
processes and mindsets.
Instead, when executing near term initiatives, it is
important not to get too caught up in documenting
the as-is processes. Rather, understand the universal
pain-points and the impact on the business to convince
executives that fixing Q2O should be a priority. Also,
differentiate amongst the improvement opportunities by
determining which can add competitive differentiation
and/or increase customer loyalty. Strike a balance between
initiatives which are designed to relieve the manual
labor and drive cost efficiencies in the near term, with
those opportunities that can drive customer and partner
satisfaction by improving their experience during the
purchase cycle.
Case example
In a Q2O improvement effort, one high tech company
took the following steps:
•Found the leaks: conducted deep dive interviews
to understand current end-to-end Q2O processes —
gained perspectives into global process inconsistencies
•Assessed the damage: Identified common painpoints that required manual work-around and
obtained executive buy-in on case for change
•Prioritized the plugs: Established roadmap of
improvements and prioritized high impact initiatives
•Primed the pipes: Trained participants on
current processes — handoffs, responsibilities,
interdependencies — to break silos of communication
•Fixed the leaks: Launched near term initiatives (e.g.,
automate manual steps, create new policies, etc.)
Increasing customer responsiveness and sales velocity 5
Mid-term: One size does not fit all
Deals are like customers, they shouldn’t all be treated the
same. When we design our systems and processes to be
one-size fits all, we end up over-serving some deals and
underserving others. Taking the concept of segmentation
and applying it to deals leads to a differentiated treatment
model. Simple deals should have simpler processes
and complex deals require more attention and should
take more time. This differentiation is important for
organizations to scale for growth.
Deal segments:
Simple
Complex
Very complex
Illustrative
Hardware
Software
Maintenance
+ Professional Services
+ Leases, Loans, Trade-Ins
+ Special Pricing
+ Managed Services
+ Capacity Services
Q2O treatment:
Low touch
Prescribe touch
High touch
Mostly automated Q2O
process with high deal
velocity
Streamlined Q2O processes
with warranted reviews for
quality and risk control
Custom Q2O processes
due to complex pricing and
financial arrangements
To get started on segmentation, it is important to have
existing data on current deal profiles (e.g., who bought
what, how?). Understanding the anticipated deal volume
that falls into each segment helps to provide foresight into
whether implementing a simplified “low touch” process
will impact enough number of deals to drive measurable
efficiencies. Next, test the segmentation definition with
key Sales and Finance professionals. Ensure the definitions
will resonate with customers and partners (e.g., they
Deal segmentation
expect quick turnaround for simple deals but are more
forgiving on very complex deals), and that from a financial
control perspective the company’s risk profile comfort
level is maintained. Ultimately, the desired mix (i.e., % of
deals) to maintain across the segments is flexible pending
geography and maturity of the business. The differentiated
service model allows for more attention where it is most
warranted (e.g. complex deals) and enables a lower costto-serve on simple deals.
Deals
Filter 1: Who
Direct vs. indirect
New vs. existing
Filter 2: What
Product family
Product type
Deal size $
Filter 3: How
Order type
Pricing programs
Ship-to-destinations
Q2O treatment
Low
touch
Source: Deloitte Consulting LLP
6
Prescribed
touch
High
touch
When defining the system changes required, use segments
as a means to consider how current processes and systems
can be streamlined, but not as an actual filter to build
into a CRM system. Prioritize the areas where unnecessary
steps can be reduced, and use system logic to differentiate
the approval rules. CRM point solutions do not require
system overhaul and can speed up the process for simple
deals with less risk. For example, one tech infrastructure
company examined their deal profiles and determined that
~60% of their deals were simple deals of less than $50k
and accounted for ~10% of revenue. Deeming these lower
risk deals, they created rules within their CRM system to
filter out “simple” deals and routed those to an automatic
finance approval instead of being held up in the process for
2–3 days. This allowed the finance department to free up
analyst resources to focus on helping to structure the more
complex deals.
Long term: Establish a sustainable global
operating model
One of the most challenging aspects of improving Q2O
is the ability to establish global consistency. Regional
uniqueness often leads to resistance to change. However,
while the perception is that Q2O processes are very
different across regions, the reality is that while people
sell differently, fundamentally the process steps are similar.
The difference is actually in people’s roles, responsibilities,
job titles, and reporting lines. Thus, driving change in
what people do in the Q2O process often requires three
components: normalizing across the regions, recognizing
where the true differences lay, and then convincing
different stakeholders that change is needed.
Common drivers of deal complexity
In reengineering Q2O processes, companies we’ve
worked with have found the following requirements to
cause complexity:
•Configuration
–– Upgrades on existing environments
–– 3rd party products
•Pricing
–– Multi-country orders
–– Pricing of professional services
–– Global quoting capabilities
•Finance and revenue recognition
–– Unique sales arrangements (e.g., leases, loans,
concessions, etc.)
–– Definition of “simple” changes over time based on
company risk profile
The next roadblock is that in organizations that have
traditionally been decentralized, global sales operations or
finance decision makers are often not able to drive global
consistency because regional business leads have more
historical power. If you are in a similar situation, consider 3
tactics to establish a global governance model:
1. Name a single Executive owner for Q2O process at
same or higher level as Regional Sales.
2. Engage a committee of regional representatives to
help redesign the process and to implement change,
however, be clear on who makes what type of
decisions to drive closure.
3. Set guiding principles on how to operate globally (e.g.,
decision making process, executive escalation path,
design principles for serving global customers, pricing
philosophy, etc.).
Increasing customer responsiveness and sales velocity 7
For Q2O process changes to really stick, an organization
redesign may be needed. To get started, inventory the
reporting structure and role descriptions for current Q2O
support staff across the regions. While it’s natural for
resources to report into different functions along the
process, consistency should be driven across regions to
ensure Q2O roles report into the same function (e.g.,
Sales Operations, Finance, or Logistics). Next, standardize
the Q2O roles and responsibilities across the regions.
Consistency and common taxonomy can make it easier
to implement changes, define system interactions, and
conduct training. Lastly, examine the ratio of Q2O support
staff to revenue and sales staff. Compare internally or
externally with benchmarks to identify opportunities to
adjust staffing levels.
Q2O is at the heart of a business’s ability to meet targets
and close deals. The challenge that many high tech
companies face over time is that the Sales teams get
creative with the deal arrangements to make the sale, but
the front end of the process introduces complexity which
is paid for by the back end. When implementing Q2O
improvements, it is often critical to communicate with the
sales teams that standardization and global consistency is
not meant to stifle sales creativity. But more importantly,
that side manual processes are often not scalable.
Q2O owners need to stay abreast of evolving business
arrangements and standardize related Q2O processes
globally when there is enough adoption.
Driving results: What are expected benefits?
As a result of Q2O improvement initiatives, there are clear
benefits in terms of revenue uplift, SG&A efficiency, and
processing effectiveness. At the start of improvement
efforts, consider establishing a baseline and then tracking
results in a quarterly dashboard. Whether it is freeing
up sales reps from back-office activities or enhancing
capabilities to cross-sell through improved configuration
tools, Q2O improvements can drive more revenue and
higher sales productivity. Reducing manual labor and
driving simple deals through more automated processes
can result in reduced labor cost. And lastly, improved
transparency and deal velocity can lead to improved
customer and partner satisfaction.
Sample Q2O metrics
•Leading indicators
–– Deal velocity
–– Deal mix
•Lagging indicators
–– Cost-of-quote
–– Cost-of-order
–– Revenue uplift
–– Customer/partner satisfaction
–– Employee satisfaction
The quote-to-order process is one of the fundamental
pillars of any company’s sales operations. While some may
believe that it consists merely of back office routines, there
are many ways in which Q2O can be improved to deliver
tangible business results. In the midst of the myths, the
reality is that Q2O’s impact on customer experience is a
hidden source of competitive advantage worth exploring.
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Contacts
Suzanne Kounkel
Principal
Deloitte Consulting LLP
+1 415 806 1603
[email protected]
Nnamdi Lowrie
Principal
Deloitte Consulting LLP
+1 310 251 0476
[email protected]
Anne Kwan
Senior Manager
Deloitte Consulting LLP
+1 415 783 6379
[email protected]
Sandy Ono
Manager
Deloitte Consulting LLP
+1 415 783 6215
[email protected]
Increasing customer responsiveness and sales velocity 9
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