CPQ Glossary

22 essential terms across CPQ basics, production models, configuration, pricing, sales process, and ecosystem — defined clearly.

Core Concepts

CPQ

Configure, Price, Quote

Acronym for Configure, Price, Quote. Enterprise software that automates configuration, rule validation, pricing calculation, and quote document generation for complex products. A core sales tool for industries with long sales cycles, high SKU counts, and complex pricing — manufacturing, medical devices, telecom equipment, and more.Learn more

Configure

The first stage of CPQ. Sales reps or customers select product features, modules, and specification options based on their needs. The rule engine validates the combination in real time, preventing invalid BOMs or non-producible solutions. Good configuration UX includes visualization, instant feedback, and guided questioning.

Price

The second stage of CPQ. Calculates the selling price based on the configured BOM, customer discounts, market price, exchange rates, and contractual terms. Supports cost-plus, tiered, bundle, and contract pricing strategies, and triggers necessary discount approvals.

Quote

The third stage of CPQ. Outputs the configuration and price as a formal quote document (PDF/Word/Excel) including specifications, price breakdown, lead time, and commercial terms. Supports approval routing, version comparison, and direct conversion to contracts or orders.

Production Models

ETO

Engineer-to-Order

Each order requires engineering customization; products are highly individualized with order-specific BOM structures. Common in construction machinery, custom equipment, and complex electrical assemblies. CPQ in ETO scenarios focuses on capturing engineering knowledge as reusable configuration models.Learn more

CTO

Configure-to-Order

Products are assembled from standard modules; customers select from predefined options without re-engineering. The primary use case for CPQ — common in commercial vehicles, elevators, and energy storage systems.Learn more

ATO

Assemble-to-Order

Base components are produced and stocked in advance; final assembly happens after the order is placed. Sits between MTS and CTO — short assembly cycles but limited configuration freedom.

MTS

Make-to-Stock

Standardized products produced in batches and sold from stock. Limited SKUs and simple configuration — typically does not require a CPQ system.

MTO

Make-to-Order

Production starts only after an order is placed, but specifications are largely standard and don't require redesign. Sits between MTS and ETO. CPQ helps generate BOMs and quotes quickly in this scenario.

Configuration

BOM

Bill of Materials

The hierarchical structure of parts and raw materials that make up a product. CPQ generates the BOM automatically once configuration is complete, feeding production, procurement, and cost calculation — the key data link between sales and manufacturing.Learn more

150% BOM

A 'superset BOM' containing every possible option for a product family; an actual order subtracts from it to produce an executable 100% BOM. Widely used to model highly configurable products like vehicles and elevators — and the central artifact for CPQ-PLM collaboration.

Variant

A specific product specification within a product family, differentiated by parameters such as power rating, voltage, or color. Each variant has its own part number and price but shares configuration rules and modeling structure with the family.

Configurator

The core component of CPQ. Loads the product model, presents configuration options, validates rule constraints, and produces the final configuration. Implementations range from simple rule engines to more powerful intelligent configuration algorithms — the configurator's capability directly determines how complex a product the CPQ system can handle.Learn more

Guided Selling

Q&A-style interaction that walks users from a need scenario down to a fitting configuration, lowering the product expertise required. Common in the product selection stage of CPQ — letting non-specialist sales reps still recommend reasonable solutions.Learn more

Pricing Strategies

Cost-Plus Pricing

Sets the selling price by adding a fixed margin percentage on top of cost. Simple and auditable, but ignores market competition and willingness to pay; usually serves as a price floor in combination with other strategies.

Tiered Pricing

Different prices across tiers based on quantity, customer level, or subscription term — encouraging larger deals or locking in key accounts. CPQ implements tiered calculations flexibly through rule configuration.Learn more

Bundle Pricing

Sells multiple products or modules together at an overall discount, raising average deal size and easing the sale of edge SKUs. CPQ identifies bundle combinations and applies discounts during configuration.

Sales Process

Quote-to-Cash (Q2C)

The end-to-end commercial chain from quoting through contract, order, production, shipping, invoicing, to payment. CPQ is the entry point of Q2C — together with CRM, ERP, and finance systems it forms the complete sales loop.

Approval Workflow

A multi-level approval flow triggered when discounts, contractual terms, or special configurations exceed a sales rep's autonomous authority. CPQ's built-in workflow engine defines who approves, at what threshold, across how many levels — supporting email, IM, and mobile approvals.Learn more

Lead Time

The duration between order placement and product delivery. CPQ produces an estimated lead time at quote time based on configuration complexity, inventory, and capacity — avoiding mismatches between sales commitments and production capability.

Technology Ecosystem

CRM / ERP / PLM

Customer Relationship Management / Enterprise Resource Planning / Product Lifecycle Management

The three foundational enterprise systems. CRM manages leads, opportunities, and customers. ERP manages orders, production, and finance. PLM manages product engineering data. CPQ sits among the three — pulling opportunities and accounts from CRM, products and BOMs from PLM, and pushing orders and quotes to ERP. It is the sales coordination hub between them.Learn more

Rule Engine

The core component that validates configuration legality. Defines constraints like 'if A is selected, B is required', 'X and Y are mutually exclusive', or 'option Z is only available in market M'. A good rule engine surfaces violations in real time during configuration rather than only at submission — central to CPQ user experience.