The Distribution Blog

Artificial Intelligence and Big Data: How They Work Together

February 1, 2022

Table of Contents

Artificial intelligence (AI) is poised to revolutionize wholesale distribution, and incorporating this vital technology is a lot less daunting than it once seemed.

AI can and does benefit distributors in a very practical way. AI helps predict the future by analyzing the past. Instead of fearing AI, it’s time to adopt it to gain an advantage over your competitors. The sooner you do, the better you’ll be able to get and stay ahead of the competition.

What is Artificial Intelligence?

The most basic definition of artificial intelligence is any form of intelligence demonstrated by machines. In that sense, AI has been around since the 1950s. You, and your organization, have likely been using AI tools (like email spam filters and GPS navigation) to optimize business for years. AI’s specialty lies in automating specific tasks, such as particularly mundane or dangerous activities, and uncovering patterns in the data.

AI can take customer, product, transaction, quote, and online browse data (any information a distributor might have about their customers and products) and identifies patterns. The more information the technology has, the smarter it becomes.

Those patterns, many of which are too sophisticated for the human brain to recognize, are analyzed and provide useful insights for sales teams. Now, in addition to flagging spam or calculating quick shipping routes, AI can predict customer behavior.

For example, AI can offer product recommendations based on a customer’s previous orders and buying behavior. This tool can comb through vast quantities of data to figure out what a customer is due to reorder and when, what upsells and cross-sells are relevant for each customer, and what growth opportunities each account presents.

Big Data

We create an enormous amount of data daily. According to the World Economic Forum, by 2025, “the amount of data generated each day will reach 463 exabytes globally…An exabyte is 1,000 bytes to the sixth power.” If that staggering number is mind-boggling, consider this: All the words ever spoken by humans fit into five exabytes.

And data is what enables AI.

Distributors have a lot of data, it’s one of their most valuable assets. The term big data has been used since the 1990s to describe complex and massive data sets that cannot be processed by traditional data processing software. Your company is constantly gathering data through multiple sales channels as well as your product sheets, CRM, inventory, and more. With the right tools, you can aggregate the siloed data your business has about customers, vendors, products, and transactions.

AI becomes better at predicting customer behavior as information accumulates. When distributors use AI to sell something, they don’t just capture the marginal value of that sale; they also gain the sale’s data. That data can then be processed and used to create an even more effective AI-based sales strategy. With a more effective strategy, your reps can sell more, which means more data, which feeds into better sales and so on ad infinitum.

Over time, your AI solution will collect and centralize data from all sales channels; analyze the data to predict how, when, and what each customer will buy; and deliver those recommendations so sales reps and customers get what they need.

By analyzing data across sales channels, an AI model can predict when a customer is going to leave based on their behavior and sales history. You can then take steps to proactively avoid losing that customer by deploying field sales or inside sales to reacquire or reactivate them. For example, if a customer missed an expected reorder date, a sales rep can reach out with an offer for that product.

When these insights aren’t analyzed, then the actionable information is lost, which can result in customer churn or poor decision-making. AI helps improve the customer experience and the value distributors provide to customers.

Good versus “Bad” Data

Bad data is an umbrella term that refers to inaccurate, inconsistent, or duplicated information. In 2016, Harvard Business Review found that bad data cost the U.S. about $3 trillion per year. Data allows companies to predict the future by logging and analyzing the past. When companies are operating with bad data, the risk of making poor business decisions increases.

Predicting customer behavior is one of the biggest challenges facing distributors today. To accurately forecast what each customer is going to buy, distributors need mountains of data relating to product information, customer behavior, firmographic, and demographic details. In the past, this amount of data was too messy for most distributors to utilize.

That’s no longer an issue with the right tools. Today, companies have access to tools such as deep-learning models needed to sanitize and analyze the data.

How Big Data and Artificial Intelligence Work Together

In 2019, a McKinsey report estimated that advanced analytics would unlock between $3.3 and $6 trillion of value for marketing and sales. AI was estimated to contribute between $1.4 and $2.6 trillion of those gains. Advances in AI allow companies to finally capitalize on their data.

If you consistently feed AI the right data, it learns to make accurate predictions on its own. The more data, the better. And the longer the technology has with the data, the more precise AI can be with its predictions and insights.

Distributors, like any business, want to reduce churn. When an AI program is fed enough data on accounts that churned, it begins to see patterns among unhappy customers. With this insight, AI flags accounts before they leave and allows distributors to save that business.

AI can be used for more than churn — given ample data, it can be used on a variety of use cases to find patterns that inform business decisions. For example, customer data can be analyzed by AI models to predict each buyer’s next likely purchase. Or use various sets of interaction data to figure out an ideal schedule for outbound sales pitches.

As AI sifts through your data, it converts the material into a format that’s understood by a computer and analyzes it. This results in numerous benefits, such as:

  • Distributors using their data to make more informed business decisions
  • Sales reps tracking customers to prevent churn and provide a better customer experience
  • Targeted opportunities for upselling and cross-selling products and services
  • A tailored ecommerce experience with product recommendations and “complete the cart” options

AI uncovers idiosyncrasies in voluminous data at a speed people cannot replicate. Even if they were able to find the same pattern for one customer out of complex data, imagine how long it would take them to analyze every customer.

Machine Learning Helps Make Sense of Complex Data

The “magic” behind artificial intelligence is machine learning. These algorithms are what “clean” or prepare data for use. Through machine learning, AI can do things like recognize missing values or quickly identify duplicates in your records, which is why “bad data” is no longer an issue.

And the volume of data is no obstacle for artificial intelligence. AI untangles and interprets even the “messiest” of data. AI makes noisy data usable. It does this through deep learning: when machines can complete tasks that typically require human intelligence. Distributors should no longer fear their messy data and assume AI won’t work for them because of their data. Instead, leverage AI to make your data actionable.

How Distributors Can Leverage AI and Big Data

Now that deep learning programs can cut through the noise of complex data, distributors don’t have to fear overloading their systems with “bad” information. Instead, you can aggregate all your data into one place for analysis. AI takes all the data across whatever silos exist and centralizes it. Then you can use AI to push a coordinated sales strategy back to your sales channels.

AI also makes sales reps more efficient. AI is poised to transform CRM for distributors. The right AI-enabled solution can help your team streamline sales processes, give managers visibility into the sales pipeline, and ultimately increase conversions and sell more to existing customers. For example, instead of building manual call lists, searching for product information, and taking notes, AI eliminates this manual work for sales reps and points them to sales opportunities that most warrant their attention. Conversations can move from “Do you need anything?” to “I noticed you’re buying conduit from us but have never purchased conduit benders. Can I send you some information on a few products?”

AI Connects the Dots for Distributors

Distributors sometimes fear that AI will detract from their personal service, while employees might worry they will be replaced by the technology. Neither of these things is true. AI can never replace people or remove the human connection. All it does is enhance your team’s capabilities, make better use of their time and talents, and help you make more informed business decisions – all of which result in a great ROI and larger profit margin.

Equipping your company with AI will bring all of your customer information into one coordinated system, effectively breaking down structural data silos. With AI, distributors understand every customer and coordinate multi-channel selling strategies.

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