Setting up a configurator. Is it worth it?

Configurators are everywhere these days. Whether it’s a car, a kitchen cabinet, or even your next trip. From a customer’s perspective, configurators are simply convenient. By answering a few essential questions (such as engine type, length/width/height, or desired extras) they receive their individual product. And supposedly, it’s even tailor-made.

But what does a configurator mean from a company's point of view? And I’m not just talking about configurators that customers use themselves. Configurators can be found at various stages of the value chain: in inside sales, CAD design, and production planning. What is convenient for the customer or user initially means effort for the operator of a configurator. The interesting question is: when does it “pay off” to set up a configurator?

This question isn’t easy to answer—let alone with a blanket statement. I’ve witnessed many discussions where someone eventually says, “You have several hundred product variants? Okay, then you need a product configurator.” This general statement might be correct, but without a solid rationale, it can lead you astray. Plus, it doesn’t answer which type of configurator would be appropriate.

The real question in this situation is: WHAT ADDED VALUE DOES A CONFIGURATOR OFFER my company? In other words, what remains as added value after subtracting the required effort?

Ask yourself: what added value does a configurator offer?

Competetive advantages

Competitive advantages are all those benefits that make a company unique and set it apart from competitors. By using configurators, the following competitive advantages can arise in particular:

Providing low-threshold sales and self-services

Let's imagine two companies selling the same (complex) product. Same price, same delivery time, same variants and options:

Company A describes the different variants and options in a (well-designed) multi-page document on the website which, however, requires familiarisation time due to the complexity of the product.

Company B has an (also well-designed) sales configurator on its website.

Of course, the customer of company A can also contact the sales department for advice instead of reading the multi-page documents. Nevertheless: for many, this alone is already a hurdle or an avoidable expenditure of time, and the sales product configurator (↗CPQ) from company B may provide the decisive competitive advantage here. Especially as the product configurator can also lead directly to further upselling options through sensible user guidance.

To be fair, it must be said that, conversely, it could also be the competitive advantage of company A to demand and promote contact with sales. Because a human salesperson can respond to the customer's needs much better than a configurator can.

On the other hand, CPQ and traditional sales do not have to be mutually exclusive and can even complement each other.

Time is money - short lead times win

Time is almost always a decisive factor in business. And let's imagine that, thanks to the CPQ solution, a customer of company B receives a quote for the desired product after just a few minutes, possibly even complete with CAD data and specifications.

Customers of company A have to wait several days due to manual processes in the internal sales department.

There may be customers for whom this alone is decisive for the purchase - even if this does not have to be the rule and an offer after a few days is objectively sufficient in many situations.

Nevertheless, this makes a difference to the dynamics of the customer relationship. If the customer has to meet deadlines themselves, company B has a better chance of making improvements in the event of queries or ambiguities and strengthening trust through prompt interaction.

And the time factor is of course not only relevant in the quotation process. It is just as important, and perhaps even more so, in the actual delivery time. The use of configurators can also have a positive influence on this if internal planning and control processes in the supply chain can be automated as a result.

Measuring the competetive advantage

The problem with measuring competitive advantage is that it is difficult to express in pennies and centimes. In other words: How much more turnover will the company make if it only takes 3 minutes (automated with a configurator) instead of 3 days (manual process) to submit a quotation (lead time, i.e. the time a customer needs to wait for a quote)? Incidentally, this reduction from 3 days to 3 minutes is a perfectly realistic scenario for complex products that are only understood by a few specialists in technical sales. But it is only a competitive advantage if the customer would otherwise not have bought the product or would have bought it elsewhere.

"Who measures, measures mess"

Studies on this topic are rather thin on the ground. Overall, I find a McKinsey study from 2020 quite interesting: ‘Sales automation: The key to boosting revenue and reducing costs’. But even there, there are only generalised house numbers, e.g. sales increases of 5-10% through sales automation. I myself would argue that individual companies could just as easily achieve lower or even far higher figures.

One approach to tackling the question of competitive advantage through configuration is to conduct interviews. These should be conducted with the company's own sales organisation and with potential customers. One aspect of the interviews should focus on the above-mentioned advantages of sales configuration and the extent to which the existence of these advantages can have an impact on purchasing decisions. However, it should also be remembered that the answers of most interview partners always contain some form of bias. Be it because the salesperson plays down the advantages of a configurator to secure their own position, or because a potential customer only categorises a configurator as a game changer on a mood.

Nevertheless, the evaluation of such interviews will provide a much better picture of the situation than the (already scarce) results of studies that do not take the individual business model into account or advertising statements from CPQ providers who primarily want to sell their CPQ solution.

Efficiency advantages

In addition to the competitive advantages already described, configurators offer significant efficiency gains along the entire value chain. Particularly in companies with complex or variant-rich products, the use of a configurator can help to deploy personnel resources in a more targeted manner, shorten throughput times and minimise sources of error.

Sales automation...

...is a key lever here. Thanks to a configurator, many standard enquiries can be answered automatically and with little effort. This reduces sales costs and ensures that human sales staff are deployed in a more targeted and efficient manner where their expertise is really needed - for example with complex special solutions or in the final negotiation phase. At the same time, the standardisation of advice ensures a consistently high level of quality in customer communication....

Quotation generation

Generating quotations can benefit particularly strongly from configurators. Automatic quotation costing and the compilation of the right documents are carried out at the touch of a button. This allows the sales department to create more quotations in less time without compromising on quality. The entire process from the enquiry to the finished quotation is significantly faster and more transparent, especially for products with many variants.

Design automation

Configurators also open up considerable potential in the area of specification and design - keyword ‘design automation’. Engineering hours are expensive and a lot of design work is repeated for similar product variants. Through partial or even full automation, complete 3D models and production documents can be generated directly from the choices made in the configurator. This takes the pressure off the design department and shortens the time-to-market.

Work preparation / control

By integrating the configurator with ERP systems, the downstream work steps in production and assembly can be planned more efficiently. The information required for work preparation and control is available immediately after configuration, which speeds up production planning and reduces the susceptibility to errors.

Product maintenance / change costs

An often underestimated advantage: centralised maintenance of the product logic in the configurator makes it much easier to manage changes. Without a configurator, adjustments would have to be made manually in many dedicated variants - an enormous effort that not only ties up resources but can also lead to inconsistencies. With a configurator, changes are made at a central point and immediately affect all relevant variants.

Scalability advantages

Configurators also offer considerable advantages when it comes to expanding the business model. Scalability is a key success factor, especially in growing companies or when tapping into new markets. Configurators help to systematise knowledge and design processes in such a way that complexity and personnel costs do not automatically explode as volumes increase.

Knowledge of a few made useable for all

In many companies, a large proportion of product knowledge is held in the heads of a small number of experts. This makes the company vulnerable to bottlenecks and loss of knowledge, for example in the event of illness or staff turnover. A configurator forces this knowledge to be systematically recorded and transferred into rules, logics and dependencies. Expert knowledge is thus made permanently available and can be utilised by everyone in the company - regardless of individual persons. This ensures the quality of the processes and makes the company more robust overall.

More throughput with the same number of people

Another key scaling advantage: with a configurator, the throughput of quotations, orders and ultimately also delivered products can be significantly increased without the workforce having to grow to the same extent. Standardised and automated processes take the pressure off employees so that they can concentrate on value-adding activities. Especially in times of a shortage of skilled labour and increasing cost pressure, this is a decisive advantage - the company can grow without having to constantly build up new resources.

Standardization: consistent prices, uniform look & feel

Configurators help with standardization, whether it's prices or the preparation of offers. A standardized, structured, and at the same time individualized presentation of quote documents simply makes a good impression.

And what may be seen by some as merely “beautiful living” in terms of presentation can have a significant monetary impact when it comes to standardizing prices. It has been known to happen that savvy customers submit a request several times in the hope of receiving different prices from different sales agents. This can be prevented with a price configurator.

Internationalisation

Often forgotten: Internationalisation. A configurator makes it easy to maintain product logic, prices and documents centrally and roll them out for different countries or language areas. Translations, country-specific requirements or different currencies can be mapped in the system without the need for separate processes or tools for each market. This makes it much easier to expand into new regions and ensures that all customers worldwide have access to consistently high service and product quality.

Reasons against a configurator

As convincing as the advantages of configurators may be, they are not the right solution for every company and every situation. There are certainly scenarios in which the effort and complexity of a configurator are not in any meaningful proportion to the expected added value. The following are some typical reasons why companies should choose not to implement a configurator:

Already fully developed product portfolio

Although the product portfolio is often rich in variants, it has already been largely developed over the years. This means that every required material master has already been created, every CAD model has been created manually and every parts list has been created. In this situation, a configurator often offers no significant additional benefit. A well-designed search and filter function can then be sufficient to guide the customer or user to the right solution.

Uncertain amortisation

The introduction of a configurator is not a sure-fire success. Particularly with very individual or frequently changing products, the initial modelling and ongoing maintenance of the product logic can involve considerable effort. If the resources for these tasks are lacking or the organisation is not prepared to systematically record the necessary knowledge, a configurator can become an unloved permanent construction site.

A configurator really comes into its own with larger quantities, a large number of variants or when many enquiries need to be processed automatically. However, if the expected volume is low or the processes are highly customised anyway, the expense of a configurator is usually not worthwhile. Alternatively, standardisation of the processes should be considered first.