Unveiling AI's Role in Sales: Myths and Realities

Name: Unveiling AI's Role in Sales: Myths and Realities
Uploaded: 2024-10-29T17:08:26+00:00
Duration: 1 min 46 s
Channel: Jason M. Lemkin
Description: In this segment of the presentation, the speaker challenges the prevailing belief that AI directly improves sales outcomes. Empirical data shows no…

29 Oct 2024 · 2 min

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In this segment of the presentation, the speaker challenges the prevailing belief that AI directly improves sales outcomes. Empirical data shows no measurable difference in ultimate bookings or lead conversion rates between companies that use AI and those that do not. Instead, the length of the sales cycle emerges as the dominant factor influencing performance, with a 50‑60% increase in cycle time leading to doubled cycles and a three‑fold increase in burn. The talk then shifts to pricing models for AI‑enabled sales tools, revealing that roughly one‑third of vendors charge per seat, another third charge based on usage, and none charge directly for the value delivered. To address this gap, the speaker proposes a three‑part tariff—base platform fee, usage‑based component, and a value‑capture share (e.g., 15‑25% of the marginal ROI generated)—as the emerging market strategy for monetizing AI in sales.

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there's actually no difference in performance. If you look at ultimate bookings of a company or their ultimate lead conversion rate, irrespective of whether or not you use AI, it doesn't matter. So today, there's no change in ultimate conversion rate as a function of using AI or not. We'll look at the net dollar retention across these pricing models because there's actually a statistically significant difference in the underlying performance of these businesses as a function of their pricing model, irrespective of the layer in the stack. I was working with one company We had a doubling in sales cycle. We tripled burn for that quarter as a result of a 50 or a 60% increase in sales cycle. So no surprise that sales cycle should ultimately be the biggest driver of optimism or negativity within the ecosystem. We talked a little bit about the world of AI and sales, AI SDRs. There's a huge continuum. I can have a sales copilot. I can have a full SDR automation. We asked our respondents, How much are you using AI? What are the impacts? We ran the correlation to understand what does that ultimately do to the sales funnel? And so at that event last night or two nights ago where we were talking about, we were talking about different pricing models for AI. We asked a number of people, about a third of the people are charging for seats, about another third of the people are charging for usage. And then this, the CRO Dave, who I mentioned before, He raised his hand and asked, how many people are charging for value? And not a single person raised their hand, but this is the idea. The idea with the three-part tariff is that you're able to charge for value. You generate $10 million worth of marginal ROI and you're able to capture 15, maybe 20, maybe 25% of it. And then the combination pricing strategy of a base platform fee plus a usage-based component is what's driving that in the market today.