In today’s food and beverage industry, international competition is growing, margins are thinning and the price of commodities is constantly changing. All together, these factors are making food and beverage revenue management more challenging. While companies across the industry take a forward-thinking approach to data and technology as it applies to food science and manufacturing, this same strategic thinking is not being applied to pricing and selling strategies. In a world where everyone is talking about artificial intelligence (AI), food and beverage organizations should be paying attention to how this technology can lead them to smarter pricing and selling.
Why You Need a Shift to AI-Enabled Modern Commerce
It’s time for food and beverage companies to move away from conservative sales models if they want to enhance the customer experience. Taking a modern commerce approach to selling is vital for the food and beverage industry, particularly since commodity cost fluctuations can be crippling. Yet, dynamic pricing that takes into account the same rate of market volatility remains an ongoing challenge.
Take, for instance, the constant change in dairy markets and how this affects a host of food manufacturers throughout the food supply chain. Milk prices are extremely volatile due to major global factors that no one could have predicted:
- New Zealand experienced weak dairy production rates in March as the country heads into its winter season.
- Countries including Ireland, Poland and the Netherlands increased their milk production after the EU lifted milk quotas, leading to a risk of oversupply in the market.
- China’s milk imports in March were significantly lower compared with the previous year.
When market fluctuations impact availability and cost, today’s manual-centric model for pricing and quoting just won’t cut it. In fact, it can prevent food and beverage manufacturers from keeping pace with commodity pricing in real-time. Without the ability to proactively and nimbly address these changes at the moment they occur, companies feel the effects of revenue and margin leaks. To avoid this obstacle and its consequences, companies should integrate AI into food and beverage revenue management. For example, dynamic pricing supported by AI and machine learning makes it possible to price accurately and in real-time to increase revenue.
Finding the Right Ingredients to Drive Revenue and Profitability
Dynamic pricing AI is one of the technologies propelling businesses toward more strategic decision-making. It can help pinpoint buying patterns so precisely and accurately that customers become a so-called “segment of one.” A trend that was once thought to be available only in B2C organizations has become pervasive in B2B companies, driven in large measure by the “Amazon effect.” Food and beverage manufacturers need to adopt a new modern commerce mindset that leverages AI-enabled dynamic pricing strategies so they can better prepare for the inevitable bumps in the road:
- Understand the cost of the status quo: Go beyond manual pricing and gut instinct, and leverage machine learning to analyze real-time data. By doing so, food and beverage companies can discover a customer’s willingness-to-pay, which provides the sales team with real-time guidance on how to price and sell their products.
- Get the real value for your product: Segment your customers, products and service attributes across markets at a micro-level. This segmentation, paired with machine learning, creates an intelligent dynamic pricing model based on data science. Instead of overpricing or reacting to non-optimized competitive pressures, you’ll know at what price point customers are willing to pay.
- Develop a modern commerce strategy: Modern commerce is more than just being able to price in real-time. It’s important to conduct an overall assessment of corporate readiness including people, processes, technologies and profit. You’ll be able to help executives communicate expectations and realize the benefits of creating a frictionless, cross-channel experience.
- Create a personalized customer experience: Machine learning, combined with transactional data, allows food and beverage companies to cross-sell appropriate products to match their customers’ desires, resulting in better revenue management.
Modern commerce is emerging as the key strategy to meet and exceed customer expectations and with advancements in AI, organizations of all types can enhance customer experiences and grow revenue. By embracing dynamic pricing AI as a foundation of how the food and beverage industry sells, companies can synchronize their pricing strategies across channels in real-time and present the right price to the right customer at the right time. The cost of maintaining status-quo selling processes is too high to ignore, and the uneven pace by which companies rise to this challenge will be what separates the winners from the losers. The time to embrace AI-powered modern commerce is now — before customer dissatisfaction, lost revenue and margins, and downward price pressures affect business vitality and long-term viability.
About the AuthorMore Content by Cynthia West