Businesses miss up to 36% in profit – AI report

Global B2B companies are possibly failing to capture between 12% and 36% in profits annually, one AI report found.

For a $1 billion company, that’s the equivalent of $120 million to $360 million per year, according to US data analytics company Zilliant which published the report.

The Goldman Sachs-backed company used AI and machine learning to identify the key areas industrial manufacturers, distributors
and service companies are missing out on potential profits and revenue annually.

The findings showed four main categories where companies are failing to maximize their full revenue potential: customer churn, cross-sell, pricing inconsistencies and misaligned market pricing.

Customer churn represents between 4.5% and 13.1% in missed potential profits.

“Business from net-new customers is offset by decreased sales and customers lost to competitors. This metric, customer churn, encompasses both and is measured at the product category level”, the report said.

Companies are missing between 4.3% and 10.5% in hidden profits because of inefficient cross-sell practices. This category is defined as “missing or underpenetrated wallet share with a customer”. Those would include a company’s existing products that existing customers are buying form a competitor or aren’t buying at the potential levels.

Pricing inconsistencies account for 1.9% to 7.8% in missed profits.

These are “transactions that are in some way inconsistent, or have too wide a data variance, and don’t make sense in practical business circumstances”. It may include prices that are too high for the market or compared to prices customers are able to receive from the competition.

Misaligned market pricing is a related cause, representing 1.4% to 5.0% in profit impact. This may include “price quotes that
are generically rounded and transacted below minimum margin thresholds, or when cost changes aren’t addressed quickly and accurately”, the report found out.

The research covers data about 1 billion transactions carried out over one year by industrial manufacturers, distributors, rental and other service companies in the US and EMEA. It encompasses data on 3.7 million customers, 3.5 million products
and $53.2 billion worth of transactions
in 12 currencies. A total 12% of the studied enterprises were Fortune 500 companies.

Zilliant develops an AI-based SaaS platform helping B2B companies maximize the value of their transactions and the lifetime value of their customer relationship. Earlier in 2017, Goldman Sachs invested $30 million in the company to further develop its AI platform.