If anyone’s still in doubt about the value of building a multi-dimensional, in-depth understanding of customer relationships in the B2B realm, this should be the clincher: It can save your business very significant amounts of cash. Many companies are leaking millions, often tens of millions, of dollars in revenue each year – as much as 1 percent to 5 percent of EBITDA, according to a 2017 report from Ernst & Young – because they’re unable to get the right customer information to the right people at the right time.
As I pointed out in my previous post Building Deep B2B Customer Acumen with Human-in-the-Loop AI, information flows in the B2B world are constricted by the complexity of highly negotiated contracts and the proliferation of technologies that curate customer data. Deep customer acumen is elusive for even the most customer-centric B2B organizations, and revenue leakage is the direct result.
Here are the seven top areas where revenue pipelines are most likely to spring a leak:
1. Entitlements and billing reconciliation. It’s a challenge to know exactly which products the customer has already bought or what services they’re entitled to under the contract. As a result, billing errors occur surprisingly often. Overcharging can be disastrous, of course, and calls into question a company’s commitment to giving customers the attention they deserve. But undercharging is just as common and can result in serious revenue losses.
2. Renewal management. Contract renewal time is the perfect opportunity to expand the relationship and renegotiate any unfavorable terms. But tracking renewal dates is tricky, and reps often don’t find out that a contract’s up for renewal until the last minute. They don’t have time to dig through the contract and a heap of amendments to figure out the best opportunities, so they go into the customer meeting underprepared. The result: customer churn.
3. Pricing variables. In today’s hyper-competitive B2B markets, companies often offer a range of discounts and credits alongside their standard pricing. These can help you clinch a sale, but they add another layer of complexity. It’s all too easy to provide a limited-period discount, but then forget to deactivate it at the agreed time. Or let’s say a customer agrees to a minimum purchase commitment for one year. Great – but if it gets close to year-end and it’s not looking like they’ll hit that amount, are the systems in place to send out a gentle reminder? Missed opportunities like these can take a big bite out of revenue growth.
4. Sales process productivity. Customer information is scattered across different systems and encased in the complex legalese of contracts. It’s not always recorded accurately or kept up-to-date. To respond to even straightforward customer requests, sales reps have to spend time assembling and correcting the data. Result: fewer deals processed.
5. Service obligations. Many B2B companies strain to manage complex maintenance commitments and warranties. In heavily negotiated contracts, non-standard agreements tend to proliferate. You run the risk of triggering service penalties.
6. Expansion opportunities. Cross-sell and upsell are crucial revenue drivers for any business, but it’s hard to identify white space when you’re not sure what you’ve already sold to the customer. Product synergies that could boost sales are overlooked simply because the data’s lacking. Sales reps default to the status quo.
7. Deferred revenue. Payment terms are longer than your standard terms for favored customers, or longer than necessary across the board. Or you have extended right-of-return agreements. Or some customers have special invoicing requirements that are hard to meet, so invoices are sometimes rejected and have to be resubmitted. You end up deferring far too much revenue, and cashflow takes a hit.
A Single Version of a Complex Truth
Companies that succeed in closing just one or two of these revenue gaps often reap big rewards. They’re increasingly turning to human-in-the-loop AI solutions to help them do that, or to tackle revenue attrition across the board. These solutions combine a cloud software platform with an AI managed service to extract data from commercial documentation at extremely high levels of accuracy.
I recently worked with a large enterprise, an insurance management software provider, that chose the human-in-the-loop AI route to create a “single version of truth” for its commercial relationships. This business sells to some 500,000 customers, many of which have multiple contracts and agreements with different terms and renewal dates. Adding to the complexity, many have undergone mergers, acquisitions and name changes over the years. The company wanted to better understand and support its customer relationships and drive renewals.
With the human/AI solution extracting and managing its customer data, the company now has a single, reliable commercial relationship system of record. As one exec put it, “for our customers, this translates to faster response times and intelligent support when we need critical information quickly.” Sales reps can access the data they need directly from the CRM system. Deeper customer insights can drive new conversations about renewals, and contract terms, as well as consolidation of multiple agreements and longer-term contracts to help customers with financial planning.
Relationship-savvy companies like this high-tech leader are looking beyond duct-tape approaches to revenue leakage. They’re moving to the kind of permanent, heavy-duty solution that human-in-the-loop AI supplies.