How to Win Over Millenials

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How to Win Over Millennials WWW.PEGA.COM Micah Solomon Author Micah Solomon is a best-selling author and an authority on customer service and customer experience. He is a frequent contributor to Forbes.com and Inc.com. Follow him at @micahsolomon. Publisher’s note: If you are interested in any of the services provided by Micah Solomon, he has invited readers to call 484-343-5881 or to email micah@micahsolomon.com for information. 2

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How to Win Over Millennials WWW.PEGA.COM MEET THE MILLENIALS Within the next few years, millennial customers (born between 1980 and 2000) will bring the greatest spending power of any generation to date. There are even more of them than Baby Boomers. These are customers shaped by a lifetime immersion in online commerce, search engines and on-the-go connectivity. Their phones have always been smart. The Internet has always been on. They’ve likely never waited in line at the bank, mailed a letter or had their musical choices limited to the radio. They can align their shopping with their values, with options to buy humane, green, fair trade, organic and employee-owned. Millennials are important not just by their sheer numbers and direct economic impact, but because their preferences and behaviors affect the behavior of older generations. A 25-year-old’s expectations today will be mirrored in her parents’ demands soon. THE OPPORTUNITY AND THE CHALLENGE You need to streamline the customer experience via technology, while also staying genuine and human. Keeping up with your rapidly evolving customers requires attention, creativity and hard work. 4

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How to Win Over Millennials WWW.PEGA.COM PUT YOUR MONEY WHERE THE MILLENIALS ARE The millennial generation is already more numerous than any other generation and will only grow larger as the populations of older generations dwindle. They’ll soon become the most important consumers, both in number of interactions and dollars spent. It’s estimated they’ll spend $200 billion annually by 2017 and $10 trillion over their lifetimes as consumers. 5

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How to Win Over Millennials WWW.PEGA.COM 01. They expect technology to work. Quickly and easily. 05. 02. They value values. They’re social — online and off. GENERAL CHARACTERISTICS 04. 03. They’re all about adventure. They want to collaborate. 6

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“ Millennials feel that a new brand, service or product is only started by the company; it’s finished by the customers. Companies that figure out ways to engage in this co-creation relationship will have an edge. ” Alex Castellarnau, Team Design Dropbox

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01. How to Win Over Millennials WWW.PEGA.COM THEY EXPECT TECHNOLOGY TO WORK. QUICKLY & EASILY. Because they’ve grown up digital, millennials embrace technology. Faster internet speeds, increased access to the web, the proliferation of smartphones and tablets, intuitive search functions and always-on GPS influence customer demands. Millennials in particular place a premium on speed and convenience. They’re twice as likely as other customers to buy their groceries at convenience stores (in spite of the wild markups), and they disproportionately patronize places like Panera, Chipotle and Pei Wei, as well as stores with pre-packaged to-go food options — all of which dispense with the waiting-around-forwaitstaff routine.i The technology closest to the millennial heart is mobile. According to Pew, more than four out of five sleep next to their cell phones. They own more cell phones, use their cell phones more, text more and text while driving (yikes) more than other generations. And 41% have no landline. 8

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How to Win Over Millennials WWW.PEGA.COM 02. THEY’RE SOCIAL — ONLINE AND OFF Millennials are sociable, particularly where online and offline activities overlap. They’re more likely than other generations to shop, dine and travel with groups and share stories about it on Facebook, Snapchat, Tumblr, Vine, YouTube, Instagram, Yelp, TripAdvisor and Amazon. They want to show off where they are, where they’ve been and where they’re headed — online alerts that reflect behavior in the physical world. More than two-thirds of millennials, according to marketer Jeff Fromm’s research, “don’t make a major decision until they have discussed it with a few people they trust,” and 70% of millennials are “more excited about a decision they’ve made when their friends agree with them, compared to 48% of non-millennials.” And millennials aren’t just social with their friends. Incredibly, 85% of teens name one of their parents as their best friend and more than one-third say they influence what products their parents buy, what shops and restaurants they visit and what trips they take. 9

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How to Win Over Millennials WWW.PEGA.COM 03. THEY WANT TO COLLABORATE Millennials are a collaborative generation, in part because of their parenting and education. They want to collaborate with businesses and brands, as long as they believe they have a say. According to Alex Castellarnau at Dropbox, “Millennials feel that a new brand, service or product is only started by the company; it’s finished by the customers. Companies that figure out ways to engage in this co-creation relationship will have an edge.” 10

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How to Win Over Millennials WWW.PEGA.COM 04. THEY’RE ALL ABOUT ADVENTURE Millennial customers crave discovery. Here are a few • When millennials dine out, they search for the examples: exotic, adventurous or memorable. This has helped • When shopping, they prefer an “experiential lifestyle transform cuisine searches into an adventure — and environment” (where shopping is more than a food-truck-following into its own culture.iv transaction and pleasure isn’t limited to the goods they buy).i • Far more millennials than non-millennials report a desire to visit every continent and travel abroad as much as possible.ii • More than twice as many millennials as those in other age brackets say they are willing “to encounter danger in pursuit of excitement.”iii This may sound irrelevant, but consider the idea of “danger” to include traveling across the city for artisanal cupcakes, knowing the bakery famously sells out each day before 10 a.m., or shopping, on a lark, at a popup store with no history and only word of mouth buzz. i Millennial Passions ii Traveling With Millennials (Boston Consulting Group, 2013) iii American Millennials: Deciphering the Enigma Generation (Barkley in collaboration with Service Management Group And Boston Consulting Group, 2011) iv Millennial Passions: Food, Fashion, and Friends (Boston Consulting Group, 2010) 11

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How to Win Over Millennials WWW.PEGA.COM 05. THEY VALUE VALUES Millennials are more likely than previous generations to care about a company’s values: its social responsibility, sustainability and ethics in treating employees and suppliers, according to research by Boston Consulting Group and Barkley. More than 50% make an effort to buy products from companies that support causes they care about, according to research from Barkley, an independent advertising agency. To win the hearts of today’s consumers, a business needs to stand for something and mean it. Customers are always on the lookout for corporate hypocrisy. One test is whether an organization engages in “greenwashing,” the practice of solely paying lip service to environmental issues. It’s bad enough on its own, but customers feel it also indicates hypocrisy among other ethical issues. With social media ubiquitous and “inside information” a Google search away, an organization can’t hide its hypocrisy for long. When Lululemon showed reluctance to take responsibility for a see-through yoga-pants debacle, it turned off customers to the tune of a 50% drop in share price. On the other hand, Starbucks walks the talk of its corporate philosophy, spending more on ethically sourced coffee beans and providing health insurance to every worker, even the part-timers. 12

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How to Win Over Millennials WWW.PEGA.COM THE (UNAUTHORIZED) JETSONS GUIDE TO MODERN CUSTOMER SERVICE Building the right experience for today’s customers requires you to think about an uncomfortable subject: where employees are helpful, and where they just get in the way. Today’s younger customers know that technology can reduce the need for human gatekeepers. Think of all the transactions routinely conducted online, from buying plane tickets to signing up for classes to scheduling doctor’s appointments. 13

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The Jetsons Test So, how can you determine which service functions you should offload to technology and which ones you should keep with your employees? The Jetsons Test, based on the 1962 television series set 100 years in the future. In the Jetsons, much of the customer service is provided by machines. And much of this machinebased service is actually self-service. The service provided by humans adds what people want out of human interaction: warmth and a little drama. Consider the southern-accented receptionist who warmly greets George Jetson at work. This is a solid model for dividing your operations. If someone can do the job more efficiently or effectively than a machine, then a human should be doing it (e.g., cardiac surgery and watercolor painting). That also hold true if a person can do the job more warmly than a machine. How to Win Over Millennials The exceptions are when warmth comes at the expense of efficiency, or vice versa. Then, it’s a judgment call. One solution involves a Jetsonian compromise: personalizing the technology you use to deliver service. WWW.PEGA.COM Consider Rosie the Robot, the animatronic housekeeper with a New Yawk accent and an attitude to match; she’s not a bad model to follow when designing your customerfacing technology. 14

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How to Win Over Millennials WWW.PEGA.COM MAKE IT EASY FOR CUSTOMERS TO GIVE YOU THEIR MONEY Retail faces a particular problem of using an old model to serve new customers. When a customer’s trying to hand over her money, she shouldn’t be forced to endure a line for the privilege of doing so! It’s time to “escape being tied down to the traditional model of a ‘cash route,’ where you go to a place to do the transaction,” as retail expert and Accumula Technologies CEO Evan Brubaker puts it. This is the model Apple uses, keeping the mechanics of the transaction — receipts, register, cash drawer — out of view, so the focus is on the customer. Take Camelion Design, a small, seasonally busy home design and accessories retailer in Seattle. For 15 years, Camelion used a single cash register, which meant during the busy holiday season there could be 10 or 15 customers stewing in line. Accumula Technologies installed a POS system designed by Lightspeed that runs on three Apple devices. Now any employee anywhere in the store can ring up customers on the spot, handling multiple transactions at once — without ever being taken off the floor. 15

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How to Win Over Millennials WWW.PEGA.COM BE EVERYWHERE YOUR CUSTOMER IS Millennials have come of age lacking the sense of limitations in commerce that their elders have long accepted. They want to shop online and pick up in your store. They want to receive text coupons while they’re shopping in the area. They want you to find and ship items right to their home that aren’t currently available. They want you to recognize what kind of shopper they are and reward them for it. And they will Yelp your business a new one if you can’t meet these demands. In short, they’re omnichannel. And you need to be too. Your inventory systems and databases need to be connected. Your return procedures and order histories need to be synchronized. Companies like Micros, recently acquired by Oracle, specialize in technology that allows this coordination. So, say a customer returns a dress either through the mail or at the store, the general ledger is adjusted, order history is appended and inventory is updated in real-time. New technology also means you can expand your store’s inventory without taking up valuable real estate. Small retailers can use systems like the Lightspeed solution by Accumula, while larger retailers can use a more elaborate system like Micros, allowing customers to peruse items that aren’t found on the showroom floor. When your customer service experience becomes truly seamless and centered on the customer, you’ve achieved omnichannel. By lowering the barrier to reaching your company through any possible channel, you’ll hear from the customer more — and more often with an open pocketbook. 16

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How to Win Over Millennials “ WWW.PEGA.COM ...this generation craves personal experiences. ” Jennifer Fox, President Fairmont Hotels & Resorts 017 17

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How to Win Over Millennials WWW.PEGA.COM BUILD SOMETHING GENUINE Today’s customers have an advanced ability to spot They are “disillusioned by anything canned and artificial,” corporate hogwash. While no customers are fond of as business and marketing expert Andrew Jensen puts it. artifice, millennials in particular are on a quest for the Excessive formality is hazardous to your business because genuine — and to win them over, your business needs to it clashes with the personal style of your customers, be perceived as authentic. millennials in particular, and makes your brand appear out Some of what creates authenticity is intrinsic to your of touch or even condescending. brand For example, if you’re the first or a storied brand A good way to enforce reasonable language standards in a particular marketplace like Levi’s or Sam Adams. Or, is the Danny Meyer Method, after the great New York maybe you have a founder who personifies authenticity, restaurateur. The Meyer Method asks employees to nix like climber Yvon Chouinard, founder of Patagonia. But certain phrases (“it’s our policy,” “to be honest with you,” some genuine elements can be consciously created as or Danny’s pet peeve: “Are we still working on the lamb?”), part of the overall customer experience through things but doesn’t prescribe specific replacements. This provides like language. employees with boundaries but empowers them to use In general, customers today favor a straightforward, creativity within those parameters. down-to-earth, even slangy style of communication in their business interactions. 18

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How to Win Over Millennials WWW.PEGA.COM YOUR CUSTOMER’S THE STAR We talked about offloading service tasks that can be done better electronically. And once you’ve done this, it’s tempting to pocket the savings and call it a day. But improving automated customer service is no excuse to offer lousy human-powered service. SOME SHINING EXAMPLES JD Power recently confirmed the importance of personal service in a study of the hospitality industry, which found that customers who interact more often with service staff, and with a broader cross-section of that staff, reported greater satisfaction. Those with the highest satisfaction dealt with at least four employees across the hotel; those with the least only interacted with an employee at check-in. Jiffy Lube, the oil change and automotive services chain, rolled out an intricate nationwide database of customer vehicle history and manufacturer-prescribed service requirements. This information is just a click away for their employees, freeing them from onerous paperwork so they can assist customers easily and knowledgeably. Apple invested in training its employees to help customers on the floor and at the Genius Bar, where the diagnostic specialists are called “Geniuses.” (Notice how this playful title avoids describing a transactional role and focuses on ability instead.) Companies like these don’t pocket their savings from streamlining service. They invest them in the human element. Your business needs to be more than a throughway for getting customers from point A to point B. You need to create an experience they’ll enjoy along the way. 19

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How to Win Over Millennials WWW.PEGA.COM SHARE THE EXPERIENCE For all of their tech savvy, millennials are hardly a bunch of cold, analytical Spocks. Marketing consultant Andrew Jensen says, “It’s a dangerous mistake to think of the millennial generation as hard-edged technocrats. On the contrary, this generation craves personal experiences.” Jennifer Fox, president of Fairmont Hotels & Resorts, agrees. Younger customers coming into the marketplace hope “[we] will deliver an emotional narrative that resonates with them.” 20

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How to Win Over Millennials EXPAND THE CIRCLE Let’s take travel, for example. No matter who you actually go away with, friends and loved ones are always along for the ride as you document your adventures through social media. Boston Consulting Group explains that “for a four-day leisure trip, the average consumer spends 42 hours online researching, planning and making reservations, and then sharing their experiences while they travel or when they get back home.” HOW SHARING AFFECTS BUYING This extends to other arenas, too. In retail, girlfriends share selfies from the dressing room to get opinions on fit and style. In dining, customers share course-by-course photos of their meals in real time. In entertainment, fans stream concerts from the crowd. Even in healthcare, pro athletes tweet updates about their injuries from the ER. FIND YOUR CUSTOMER PIONEERS This socialization of consumption goes beyond those who are traditionally considered friends. Even ostensible strangers — online followers and brands’ online reviewers — are often trusted by younger customers more than even well-established brands, according to Joeri Van den Bergh and Mattias Behrer. Customers look for authority online from people with similar experiences, perspectives and backgrounds. And these acquaintances, both physical and virtual, have a real effect on what’s purchased, and how it’s experienced. WWW.PEGA.COM WWW.PEGA.COM Another way sharing affects purchase power is when customers become “discoverers” in the eyes of friends, loved ones and acquaintances. A study by The Futures Company shows that people take pride in discovering products and services and being recognized by their peers for being “first.” The customer gets social currency — and your business gets credibility. Any effort and creativity you invest to help customers build these relationships will simultaneously help you build relationships. 21

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ABOUT PEGASYSTEMS Pegasystems (NASDAQ: PEGA) develops strategic applications for sales, marketing, service and operations. Pega’s applications streamline critical business operations, connect enterprises to their customers seamlessly in real-time across channels, and adapt to meet rapidly changing requirements. Pega’s Global 2000 customers include many of world’s most sophisticated and successful enterprises. Pega’s applications, available in the cloud or on-premises, are built on its unified Pega 7 platform, which uses visual tools to easily extend and change applications to meet clients’ strategic business needs. Pega’s clients report that Pega gives them the fastest time to value, extremely rapid deployment, efficient re-use and global scale. For more information, please visit us at www.pega.com. © 2015 Pegasystems, Inc. All rights reserved. All trademarks are the property of their respective owners.

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