The rapid uptake of Artificial Intelligence (AI) is dominating today’s business landscape, and its rising impact can’t be ignored.
A 2017 survey of large Australian businesses revealed that 89 per cent had already rolled out some form of AI, and that 70 per cent of senior Australian executives see their future business strategies hinging on this exciting new technology.
Why the sudden interest in AI? Because well-executed AI unlocks unprecedented opportunities for growth.
According to recent forecasting by Gartner, new business revenue created via AI will amount to $300 billion by 2020.
READ: Artificial intelligence boosts wine’s bottom line
Clearly there is an opportunity for food and beverage companies to help themselves to a slice of this growing revenue pie. How? By effectively and flawlessly bridging the increasing disconnect between market volatility and revenue growth.
In today’s food and beverage industry, international competition is growing, margins are thinning and the price of commodities is constantly changing. Added to these pressures, are multitude of factors — from increased labour costs, seasonal trends and changes in consumer demand – that can create profitability obstacles.
In this tumultuous environment, manual pricing and quoting methods are no longer agile enough to deliver sufficient revenue. Without the ability to address market fluctuations as they occur, companies feel the effects of margin leaks. And this is where AI comes in.
AI can unlock big data and analytics to give food and beverage companies the insight to respond in real time to market instabilities, quote the right price at the right time, close more sales, and protect margins.
To maximise success, David Bray from PROS suggests that food and beverage companies prioritise the following three key capabilities when implementing AI-powered revenue management systems:
Get the picture: Analyse sales for a clearer understanding of which products drive overall profitability. When you know what your most profitable products are, you can prioritise these should you need to make a strategy pivot.
Find your price points: Map customers’ price sensitivities and reactions to pricing spikes. Find out the price points that cause buying behaviours to decline; and the price points at which buying behaviours increase.
Real-time response: Adjust prices dynamically to account for shifts in underlying commodity prices, changes in market conditions and up-to-date supply information. AI-enabled dynamic pricing technology takes all variables into account to formulate winning pricing strategies.
“AI-powered dynamic pricing technology delivers a number of tangible benefits,” Bray said. “It automates processes, so companies can streamline operations. The technology captures more sales with faster and more accurate quoting, and drives additional revenue from cross-sell opportunities,” he said.
According to Gartner Research, robust price optimisation strategies can increase margins by 50 basis points or more, and increase revenue by up to four per cent. Multinational dairy company, Fonterra, is one such example – after implementing a new dynamic pricing revenue realisation system, it achieved a 2-4 per cent margin uplift, equivalent to $20 million per quarter.
AI-based technologies are reshaping how companies around the world do business. A considered, strategic implementation of high-level AI-powered functions will ensure your business can override market instabilities to grow revenues and outpace the competition.