For all the talk around the rise of AI, or Artificial Intelligence, the technology isn’t new. In fact, many of us use AI in our daily lives.
Predictive text is the most visible example. Say you frequently text a friend to meet at the bar. You type: “Meet me at the …” Your phone suggests “park” or another common place to meet. Over time, your phone learns, and the suggestions start to prioritize “bar” over other words.
At its most basic, AI takes data, analyzes it, implements a solution (suggesting the next word), evaluates the results (recognizing that you almost always type “bar” with that friend), and then repeats the process with improved recommendations based on data. Over time, the system grows smarter. Other examples of AI in everyday life include pricing on ridesharing apps, facial recognition in social media and even non-player characters in video games.
Until recently, the technology has only been available to a few companies with deep pockets. To take advantage of AI, you had to have a big data center, specialized software and data scientists in house. But we’ve reached a tipping point. Thanks to the rapidly growing adoption of cloud-based technology, companies of all sizes can now more easily plug into AI-infused applications at a much lower cost.
AI is the next big disrupter in the wholesale distribution industry. Here are two ways you can leverage AI to benefit your distribution business:
Optimize where your team spends their time.
Imagine the ability to direct your Accounts Receivable team to the late-paying customers that are most likely to respond. AI can help distributors differentiate between those who aren’t going to pay and need to be turned over to collections, and those who are more likely to pay with just one phone call. AI could also direct your team to focus on certain times of day to increase the likelihood someone picks up the phone. Given the importance of cashflow to distributors, this is a powerful application of the technology.
The same idea goes with your sales team. Which customers should they be spending time with? After all, it’s a waste of time to visit customers that are not likely to buy. AI can identify the data points that influence purchasing, such as whether a prospect downloaded a whitepaper, they have an account exec assigned to them, or they have previously purchased related products. It could even be something you can’t control, like the weather forecast. If it’s going to be 110 degrees, you can expect an uptick in sales of air conditioning units or parts to fix them in certain geographies. AI can identify these opportunities for salespeople. AI then adjusts those recommendations based on how customers respond, and the cycle continues.
Grow sales and margin with existing customers.
When a customer is checking out on a website, via your call center, at the counter or through another channel, how can you sell them more? Enter AI. For example, let’s say that data show that electrical contractor customers of a particular size regularly buy red, green, white and black 10-gauge copper thhn wire at the same time. So when an electrical contractor of that size selects just red, green and white, a salesperson should be prompted to ask: “Are you forgetting black?” Chances are, the customer will add black wire to the basket.
To identify those relationships, however, and code them into your system is a lot of work. Add to that the evaluation of whether the offers were effective – how often they were accepted, how often they weren’t (and why) – and adjusting for that on the next sale; it becomes increasingly difficult if not impossible to do that manually across thousands of products. AI can do this far more quickly and effectively than a human can and can have a big impact on your top line. A foodservice distributor grew sales volume by 5% nearly overnight after turning on an AI-powered cross-sell and upsell recommendation engine on their website. But this is not just about selling online; distributors are using cross-sell/upsell technology to grow wallet share across their channels. The ROI can be huge, and it requires very little upfront work by humans.
Pricing software is a more mature application of AI-based technology, determining the optimal price for a particular item based on lost sales, historical sales volume and other data points.
What’s your AI strategy?
As younger employees are hired into purchasing roles, they will expect the kind of customer experience that AI-powered technology can deliver. This technology is here now; every distributor needs a strategy to respond. At Enavate, we are working closely with distributors to implement technology that enables and delivers the kinds of functionality I discussed in this blog. It’s not just a technical decision. There are real business benefits to using AI, including growing average order size, boosting margins and tightening customer relationships. Don’t wait to invest. AI technology is soon going to be table stakes to compete. The cloud has been a great enabler for distributors ready to move forward.
Give me a call if you have questions or you’d like to talk more about what Enavate is doing to support distributors in embracing AI.