How to Use AI to Help You Raise Prices and Increase Customer Purchase Frequency

Would an investment in generative AI make your business better off? The answer depends on how much you invest and whether that capital produces a generative AI application that helps your company grow faster. After putting the finishing touches this week on my soon-to-be-published book, Brain Rush, I can say that not a single company I know of has reaped such rewards from their investment in generative AI. My book profiles many companies experimenting with AI chatbots and some of them aspire to achieve such favorable outcomes. You could think of generative AI applications as a pyramid. Here are its three levels. Let employees experiment At the base of the pyramid -- where most companies are trying to invest -- employees get access to an AI chatbot with guardrails to keep them from releasing proprietary company information or inadvertently using the chatbot to compromise the company's reputation. Employees experiment with the chatbots to help them overcome the creator's block they might feel as they compose emails, create marketing copy, or even produce presentations. It is unclear whether the benefits of these generative AI applications will exceed the cost of providing them. Increase functional productivity A far smaller number of generative AI applications aim to increase the productivity of business functions such as writing code or providing customer service. My research suggests such applications have the potential to increase productivity by well over 10 percent, according to companies I have interviewed. I do not know whether the productivity increases from these applications exceed the costs of building and operating them. Moreover, nothing keeps your competitors from building their own such applications -- hence they might not give your company a competitive advantage. Spur revenue growth Based on my research, very few companies are using generative AI to grow faster. The good news is that if such generative AI applications deliver faster growth, their payoff is likely to be substantial. The bad news is that few generative AI applications are so valuable that customers are happy to pay more money for them. The one example that could potentially meet this test is a service from Bullhorn aimed at enabling its customers -- temporary worker placement agencies -- to grow faster by using best practices to make their recruiters more effective at placing workers who succeed. If your company can build a generative AI application that helps your customers grow faster, they should be willing to pay for it. If they do pay, your company will be more likely to earn a return on its generative AI investment. vcita's BizAI helps its small-business customers make more money vcita, a Bellevue, Washington-based provider of software for SMBs that was founded in 2011, offers a generative AI application that enables its customers -- businesses with between five and 50 employees -- to make more money. Although customers like the service -- called BizAI -- vcita is not charging for it. In a May 16 interview, Itzik Levy, the company's founder and CEO, told me he started a cybersecurity company and sold it to Microsoft -- working there for about two years before leaving. Since starting vcita, the company has reached about 200 employees and raised over $33 million, according to PitchBook. "I started vcita to provide software for small and medium-size businesses," Levy says. "Our customers are SMBs with one to five people -- we consider our customers with 30 to 50 people to be big. We have 100,000 paying customers, 70 percent of which are in the U.S." vcita serves SMBs in many industries -- including lawyers, doctors, barbers, realtors, and psychologists. "We started out providing scheduling software for web sites," he said. "We have since broadened our services to include money, compliance, customer relationship management, marketing, and billing." vcita recently launched BizAI -- a free McKinsey-like service that helps SMBs make more money. "By uploading 2,000 words about our clients' business into ChatGPT or Gemini, we can make the AI chatbot much more valuable to them," Levy told me. "For example, one of our clients is a child psychologist who treats patients with ADHD. She asked our BizAI service what price she should charge for her services. Because she has 25 years of experience and is working in a high-demand field, BizAI explained why she should charge at the high end of the typical range -- between $150 and $300 --for a 45-minute session," he added. Should customers pay for such a service? If the company is helping its customers to make more money, they should be willing to share in the gains. If vcita did pay, BizAI could be at the peak of my pyramid of generative AI applications. EXPERT OPINION BY PETER COHAN, FOUNDER, PETER S. COHAN & ASSOCIATES @PETERCOHAN