Customerland
Customerland is a podcast about …. Customers. How to get more of them. How to keep them. What makes them tick. We talk to the experts, the technologies and occasionally, actual people – you know, customers – to find out what they’re all about.So if you’re a CX pro, a loyalty marketer, a brand owner, an agency planner … if you’re a CRM & personalization geek, if you’re a customer service / CSAT / NPS nerd – you finally have a home.
Customerland
Snack50 Consumer Shifts + news from PegaWorld
Join Hunter Thurman, founder and CEO of Alpha Diver, as he explores the psychological factors driving our snacking habits. Hunter shares findings from the latest Snack 50 report, revealing how snacks, soft drinks, and fast food serve as tools for emotional self-regulation. Discover how Alpha Diver's PsychPulse database, with over 40,000 entries, provides valuable insights into consumer behavior trends.
Understand the motivations behind food choices with a focus on emotional and rational drivers, including practical rationality, sensory experience, social belonging, and impulse. Neuroscientist T. Siggy Hale’s methodology highlights the rise of store brands over traditional big-name brands, using examples like Walmart's Better Goods to illustrate changing consumer perceptions and the implications for the snack industry.
Additionally, we examine broader behavioral trends influenced by economic and geopolitical factors. Learn how immediate gratification is shaping consumer decisions in sectors such as quick-service restaurants and major snack and beverage brands. As summer promotions drive market dynamics, we also cover the latest from PegaWorld. Don Schuerman and Kate Lepore discuss how Generative AI is transforming enterprise efficiency and digital transformation, with tools like GenAI Knowledge Buddy and GenAI Socrates at the forefront. This episode offers a comprehensive analysis of current trends and innovations.
Today something a little different. First I sat down with Hunter Thurman, who's founder and CEO of Alpha Diver, on their latest report called the Snack 50. And if you haven't been a part of any of our previous podcasts where we unpack those reports, it's fascinating and offers insights that go well beyond that category into how consumers are thinking and behaving right now. And then later in the podcast I speak with Pega's CTO, don Shurman, and Senior Director of Learning Strategy and Solutions, kate Lepore, about some of the stunning things that Pega is doing in the world of AI. Today I customarily end up talking to Hunter Thurman, who is president and founder of Alpha Diver. We've published a handful of Alpha Diver's reports in the past. In particular interested in this one because it's near and dear to my heart, hunter and team just published their SN snack 50. I guess it's basically a pulse report. Is that right?
Hunter Thurman:Yeah, yeah. Well, it's near and dear to everybody's heart. It seems like in the industry, all anybody talks. Every company has announced that we're a snacking company, and it seems like that's all you know anybody on wall street's talking about. So you're not. You're not alone in being passionate about snacks.
Mike Giambattista:Well, streets talking about. So you're not alone in being passionate about snacks. Well, I know that every time we do one of these with your team, we get a lift in readership, so whatever that means there's a lot to that.
Hunter Thurman:I mean food, and, you know, tasty food things with salt, fat and carbs, as snacks typically do, are core ways that we humans make ourselves feel better. There's a lot of science behind it, so it's not surprising that it's a peak's interest across the board.
Mike Giambattista:Well, is it too much to say, too big a statement to say you know, as we eat, so we are. Or can we use snacks as a bellwether for broader American consumer behavior?
Hunter Thurman:I think yes. I mean obviously everything is. You know, there's a number of factors, but I think I might rephrase that from as we eat, so we feel.
Hunter Thurman:Because, it's all about. Our scientists call it emotional self-regulation, but it's basically making ourselves feel better. And we've seen over the past and we'll get into this with the Snack 50, but we've seen that categories like soft drinks and snacks and fast food have done really well over recent years because people have had a lot of reasons to try to emotionally self-regulate, to feel better in the moment. To emotionally self-regulate to feel better in the moment, you know, and something delicious, you know. That is oftentimes the simplest way to do that. So it definitely does have a big role to play in the what we call the zeitgeist, or the macro forces that are driving consumer behavior, that need to feel better quickly. We've seen, you know, strongly expressed and we've seen a lot of categories benefit from that.
Mike Giambattista:I take a little issue with the label self-regulation because it sounds like we're actually doing that, when I can tell you from personal experience we're not.
Hunter Thurman:You need to say it's almost like self, self, you know self-regulation yeah. Regulation, yeah, absolutely Different, different use of the word. But you to say it's almost like self self, you know. Regulation, yeah, regulation, yeah, absolutely different, different use of the word. But you're right, it's it's self, you know it. It may be a stretch, but there's a lot of you know.
Mike Giambattista:Everyone talks about self-care and things there's a lot to it and so, um, before we actually get into what this report is all about and why it's so fascinating, I think it would be helpful to discuss, at least in short form, the data that you've pulled and how you're using it. It's a really neat approach to understanding human consumer psychology. So what is the Pulse database and how did you compile it and how are you using it?
Hunter Thurman:Yeah, so our company started in 2011, really with this mission of understanding why, you know, getting deeper into the decision-making, you know goings-on of consumers, and probably about eight years ago we started in earnest really compiling this database. We used to do more custom work and evolve to a place where we started creating this pretty sizable record, and so the PsychPulse database dates back to 2018. It's got over 40,000 records in it and basically what it does is iteratively, over time, measures what is driving people's decision-making behavior. You know, and not just saying how did you choose to buy this? And they type in an answer.
Hunter Thurman:It uses the whole things built and maintained by neuroscientists, by, you know, phds in human behavior, and it uses these very unique implicit measures. It's almost like they're almost like playing a game. They just kind of click on these various stimuli, but what it reveals to us is what's driving their decisions and what they think about different categories and brands, and that's created this longitudinal view that we look at on an ongoing basis to understand, okay, what's really changing and, more importantly, you know why and, even more importantly than that, what lies ahead and the predictive nature of it is where we really had a lot of success with it and you know, obviously to me, what's the most interesting about it.
Mike Giambattista:You mentioned getting at what consumers are thinking about this stuff, but I know that, especially from looking through some of your past work, it's as much about thinking as it is about feeling and understanding the emotional underpinnings and the drivers behind what these decisions are all about. How do you arrive at that? Because you can't just ask somebody how they feel about something and expect a straight answer.
Hunter Thurman:That's right, yeah, so at the core of it, you know, at the core of all of our work and I believe you know all of consumer behavior is there are these four drivers. So there are four reasons people would choose something. One of them is rational, like practical. That's usually what we think. We think, you know, we think we make informed decisions and we read the label and we compare prices and things like that. Sometimes that does explain our behavior, but more often than not and this is where it gets into that feel that you mentioned there are these other three factors. One is all about sensory experience, discovering new things. The other is all about social belonging. You know we choose something because it grants us some social benefit. And the fourth is just pure instinct, just pure impulse, and that's what we were talking about a minute ago. Look, I don't know what tomorrow brings. The headlines are awash with, you know, more stress. I'm just going to drive through McDonald's and get something that's going to feel really good you know for the next 20 minutes.
Hunter Thurman:That's that oftentimes that impulsive behavior and those three beyond the rational are much more about the feels, you know. They're much more that emotional decision making that you know, we all know is present in human behavior, but it's hard to measure and so the way we get at it is it's a technique and the measurement, the actual measure, was invented primarily by our principal neuroscientist, this guy, t Siggy Hale, who used to run a lab at UCLA and has come over into the private sector and applied his knowledge from that space. But basically, when someone goes through it, we'll say here's a logo, here's the Cheetos logo, and they'll see a series of word clouds, these collection of words. They don't know what they mean, they don't know why they're clicking it, but one of them will just feel natural to them, one of them will just kind of pop out and they click it.
Hunter Thurman:Another one comes up, more word clouds. They click it and what it's revealing to us and what it's feeding this database is which of those four drivers at the most fundamental is actually do they associate in that case Cheetos? With? What job does Cheetos do in their hearts and minds? And that's kind of the magic of it is that we never ask them to kind of really explain what they love about Cheetos, because they can't you know, you don't have access to all that. So that's a little bit of a peek under the tent at the methodology and how it feeds this data set that we look at.
Mike Giambattista:Interesting. We're going to have a lot of questions coming in on that topic because it's, you know, unless you're working in consumer psychology day and day out, how you arrive at those kinds of things is a great big mystery to a lot of marketers. So, uh, maybe that's the topic of the next conversation. But as it relates to this report, um, you mentioned earlier in a conversation that there's it's I'm going to call it a trend, uh, but there's a a whole new kind of wave of of purchasing decisions if I'm even saying that right yeah where store brands, for the first time since you've been tracking this, are poised to take over the top positions in snacks. And that's actually a monumental shift, because if you think about the millions, possibly billions, of dollars spent on snack branding we're about to find out, it sounds like that a lot of that's not really effective, at least when it comes to the factors underpinning the consumer decision making at the moment.
Hunter Thurman:Yeah, yeah, I mean, there's a few things that we'll talk about, but you know, one thing that I think is a sort of stake in the sand that I am certainly advising everyone we work with too is you know, we need to stop calling them private label or even store brands. They're brands, you know. They're brands in their own right. There was a, you know, actually, the week the Snack 50, this year's Snack 50 came out, which was a couple of weeks ago, was the same week that Walmart announced Better Goods, their new premium store brand, week that Walmart announced Better Goods, their new premium store brand. Last week, numerator did some research on people that were buying that new brand, so shoppers that had purchased Better Goods, and 71% of them did not know that it was a Walmart brand. Really, to me, that's just you know, that's a mandate, exactly, exactly that.
Hunter Thurman:No, no one thinks, oh, I'm going to get this, you know, at walmart, and walmart makes this. The average shopper consumer just doesn't know it. I remember one time years ago my wife was buying me simple truth, which is a kroger owned brand these, the, this breakfast food, and I, I said I'm running to walmart to get some things, you need anything. She said, yeah, get some of those Simple Truth breakfast bites. It's like you know. And, of course, being in the biz, I'm like what are you talking about? She, you know, she's like Simple Truth, I don't know, they have that everywhere.
Hunter Thurman:Right Point is, you know, these are brands in consumers' minds and I think you know, when manufacturers and marketers start thinking about these really as brands with better margins, just kind of what they are to the retailer, it's a reframe that I think is an important one to make, because what we're seeing and to your point, so you know, in the Snack 50, part of what we do is just rank the top 50 brands and so the top 10. This year, and this is what you're alluding to for the first time, the top six brands, one through six, are store brands. So number one is great value Walmart's. That really is kind of like a private label, a true just kind of value brand. But the other six are store brands from Amazon and Target and then some of the Kroger brands and others kind of arrayed down the list. But you know they knocked some serious players out of the top six for the first time.
Hunter Thurman:You know, last year there was only in 2023, there was only one store brand which was great value in the top 10. And Reese's was number one. Lays was number two. Great value is number three. This year, lays is number eight and Reese's is number three. This year Lay's is number eight and Reese's is number seven. So you know, the rankings aren't what's important so much. What's important is the ascent of these store brands and why. You know what's the causation of it.
Mike Giambattista:Well, let's talk about the why a little bit. In one of your I'm just going to call it liner notes on the report. You say since pre-pandemic consumer price concern is up 30% and up 12% in the past year alone, how much of a factor is that in this new kind of form of decision-making?
Hunter Thurman:Yeah, I mean. Look, you open a browser window and that's the headlines inflationary pricing.
Hunter Thurman:So, you know, c Circana recorded reported some data a while back that prices food and beverage prices were up 30% since pre-pandemic. It's interesting that we measure price concern. We're measuring the sentiment. It's up that exact same amount over that period and 12% of the past year. So what it tells us is people are worried about it. And you know, kind of back to that discussion the worry is what drives decision making, a lot more oftentimes than the actual dollars, you know. I would argue that if you go out to the average shopper and stop them, you know, look in their basket and let's say it's got a bunch of these store brands, you know, if you said, how many dollars and cents did you save by trading down or switching to those? They don't know? They don't know that they're not sitting there with a spreadsheet comparing prices they're making a very emotional decision going OK. Well, gosh, I'm hearing all this stuff. I am concerned about it. I guess I better start making some decisions that make me feel like I'm doing something.
Hunter Thurman:You know, it's much more so than comparing price to price, line item to line item. So that is an important part of it.
Don Schuerman:But you know, that's the barrier side.
Hunter Thurman:That's like look, I don't want to spend as much money. People still want food, you know, and you look at the Snack 50, I'd argue that there's not one thing on it, not one brand, private or national, that people need. We want it. You know, I don't know what percent, but a high percent of things in the grocery store we don't need it. You know, we don't have to have it to survive. But every you know we're laughing that every company is now a snacking company. All these categories are humongous. It's things we want. So we have to remember that, just because pricing's up, it's not that black and white and we see these other factors that are much more influential and I think are being overshadowed by the pricing narrative, that actually are explaining behavior, in large part in corroboration with the actual price sensitivity.
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Hunter Thurman:Yeah, yeah. And there's a great book from years back called Predictably Irrational, and it's you know, it's a great title because human behavior is predictably irrational. We do all sorts of things that we quote shouldn't do. I mean, I was laughing with somebody the other day about impulsivity and we're saying, look, if human beings weren't impulsive by nature, why does Las Vegas exist? There's not one thing to participate in in.
Hunter Thurman:Las Vegas. That makes any sense. Participated in Las Vegas. That makes any sense. You know everybody flocks and spends all their money, knowing full well that it's a sucker's. You know it's a sucker's game. We do lots of things in the vein of making ourselves feel better, having fun, enjoying ourselves. I think what's happening right now. So, looking at our longitudinal data, over the past several years, there has been this like meteoric rise of wanting to just feel good now. So I talked about those four drivers, that last one of just do what's going to feel good now, because tomorrow there may be a debt ceiling crisis, or student loans are going to be unforgiven or re-forgiven, or the government will send out $2,000 checks to everybody you know with a mailbox, or they won't. It's like we don't know. You know there's geopolitical things, there's wars. It's like the stress over the past several years has been real and people have responded in large part now not in every domain, but in the macro by saying I'm just going to kind of do what feels good right now.
Don Schuerman:You know like drink the.
Hunter Thurman:Coke YOLO, a little bit of a just do what feels good, and I think what's happened so in the past, really three quarters we've seen, then, this price fear increase. I worry a lot less about what really is happening. You know we work with Wall Street analysts and they're like look, we know what's happening for real. What we don't know is what people's reaction is going to be to it, and that's what you're talking about. In the past few quarters we've seen this price concern raise and I think what's happening, what we're seeing the first half of this year, is everybody's jerked the wheel all the way to the other side of the road. They're like all right.
Hunter Thurman:You know McDonald's is in the news with. You know they were. Their business was flying high and they've been getting dinged a lot on that. You know pricing and business being down. You know everyone's going. Is Burger King going to go out of business? So QSR has dropped off a fair amount. A lot of these big you know sack and beverage brands. You know Walmart everybody's. It's like everybody's jerked the wheel to the side of the road. What's going to happen in a few months is everybody's going to go. I'm not having any fun. You know like okay, I read the headlines. I stopped consuming, I cut things back and it's not much fun, it doesn't feel very good and it's going to normalize back out, but it's that emotional reactivity that's driving a lot of behavior, I believe, in this moment, beginning of summer of 2024.
Mike Giambattista:Based on your longitudinal views of how consumers react, I'm sure you're seeing patterns the rest of us don't get to see. How long do you think before that pendulum starts to swing back towards center a little bit, until we're all tired of eating lettuce that?
Hunter Thurman:pendulum starts to swing back towards center a little bit until we're all tired of eating lettuce yeah Well, I don't, I don't think very long and what you know? Because I think that the summer, you know, promotional period a lot of a lot of chips and soda and beer get consumed between right now, today's, you know, the day after Memorial day through Labor day, I mean that's, you know, it's no secret, that's a huge promotional period that's going to have an impact, you know, and I think that pendulum of well, look, I keep hearing that the sky is going to fall on inflationary pricing. I think, again, people emotionally are going to say who cares? You know, it's always something, but what we're seeing is what we see an ongoing drive to this kind of feel good.
Hunter Thurman:Now there are these two, two of the other forces that I I described, that we've expected to increase and in fact in the past two quarters we're seeing start to increase. So one is around new, new discovery, new sensory discoveries. So you know I I was given a talk on this the other day and I pointed to one of the top brands. So number four is Favorite Day, target's Favorite Day. That's number four on the Smack 50.
Hunter Thurman:You look at some of their offerings they're not generic. You know Tostitos they're like these, you know, very experiential. You know Rice Krispie Treat with M&M's in them, neither of those names being used, but that's basically what they are. You know this trail mix that's meant and positioned as like family fun mix to eat together.
Hunter Thurman:They had one that was Halloween tortilla chips that were orange and blue, I mean these are experiences and so that drive to discover new things and find new things, you know whether that brand or others they're serving that. And we see the drive for that up three and a half percent in the past year, which isn't a huge number, but on these longitudinal data it's starting to move up. And the other one is then these tribal social experiences, things we can enjoy together, things that we can gather around and bond over. That driver's up 3%, so those two are up in the 3% range. This desire to feel good now is down 3% in the past year. So it's a slow moving freighter but we've been expecting that shift and we're starting to see it. And that fourth one, the rational do what makes sense, just continues to decline. You know, people are not choosing food and death based on pure facts and rational comparison.
Mike Giambattista:So I know you track a number of different sectors, this just being one of them. But do you see the same dynamic playing out in other sectors? In snacks is by nature going to be a lot more emotional, a lot less rational than, say, you know, a bandaid purchase, but do you still see that same pattern playing out, to say, the same directional patterns playing out, but just maybe to lesser amplitude, volume?
Hunter Thurman:Yeah, yes, so that that macro force I've described to kind of do what feels good. Now we see it influencing behavior, certainly in food and bed and fast food, which are three big categories that we look at out beverage, alcohol, um, you know. So those are four kind of tentpole um categories in our, our database. But you know even stuff like to your point, like personal care. You know first aid stuff, diapers, you know things that seem really practical that those same forces do have influence. You know in those emotional desires, you know to feel better. You know things like cosmetics and in the early days of the pandemic, I know you and I even talked about everybody started kind of resurrecting the old lipstick, the lipstick effect phenomenon.
Hunter Thurman:And people are like why you know, in recessions does the lipstick sales go up, and all these you know luxury goods have these real blip performance over the course of the past five years?
Hunter Thurman:So really, look, it's not to say that that's the only reason people do anything in every case. But you know the drum that we've been beating quite a bit is when things suck. You know when the pressure, when the heat turns up, you don't go home and write a spread. You know create a spreadsheet. You know if you have a bad day, whether it's just a crummy day or you get some really bad news. Something happens that stresses you. You have an emotional response, you blow it out of proportion, you lose sleep, you ruminate on it.
Hunter Thurman:None of that is rational and it's a parallel effect to what's happening in consumer behavior. When the news is doom and gloom, very few and we've seen particularly like younger, lower income households Everybody's going oh well, lower income Gen Z is going to, they're going to stop spending money the fastest because they have the least of it. That's not necessarily the case, because when the pressure gets hot, a household like that feels it even worse. Your response is even more emotional, which can create even less rational behavior. That's the sort of dichotomy that we all know and like. When I go through that, most people kind of nod and go. Yeah, that's true. We forget about it. When we're looking at data and what we're doing for crafting marketing strategy, we think very logically and inadvertently assume that consumers do too, and that's not the case.
Mike Giambattista:So I'd like to shift our conversation to some extent to the future, because we're going to have brands, we're going to have retailers of all sorts listening to this podcast and reading the article that follows it, but taking the learnings from this report without giving away the secret sauce, because, by the way, we want you to sign up for the report, the link is going to be posted below this podcast, but you're a retailer in this sector. What do you do with this information? How can I leverage what you're telling me?
Hunter Thurman:Yeah, I think, regardless of your stripe retailer looking after one of these house brands, a national brand, whatever senior leader, the first thing is to step back and understand that this is not a black and white. Price equals behavior. You know scenario the conversations that I hear are so predominantly that it's all the bottom line, you know, and it's very easy to race to that Say, well, it's all about. You know, we're going to have to drop price and we're going to have to raise price and we're going to have to, you know, and that will automatically adjust. Of course, the price matters and there are certainly, you know, any. Any, you know business blog right now is a wash in them. That you know.
Hunter Thurman:People, brands wrote raised pricing during the past few years and it's an issue. But if the only, if the only number, if the only data that you give shoppers and consumers is price, then that's what they'll use to make their decisions on so much of that causing, not causing, but catalyzing, amplifying the problem. So, if you're, if you know, no matter where you sit, you've got to step back and go. Look, people will. People are simple. We will seek the carrot and we will avoid the stick. The stick right now is pricing, yes, but everybody's forgotten about the carrot. They're like let's keep shortening the stick and it's the same crummy carrot that's still not going to drive behavior.
Hunter Thurman:So you know there's another way out of this is sweetening the carrot, and you know the big insights that we're seeing in the data is there's three ways to sweeten the carrot. Still, help them feel good now. Provide things that are fun. Don't just sell them a can of sugar water. Give them access to an online experience. In some of these there's been some cases over the past years where people have been successful. But don't just assume that you're shoppers.
Hunter Thurman:If you're Walmart, it's all about price. There's huge opportunities that we see to improve category management and shopper experience and people think about, like Walmart not trying to pick on Walmart, but people think about Walmart Plus or Amazon or whatever e-com as a more convenient way to transact purchase. A more convenient way to transact, you know purchase. It's a total. I mean, it's a total blue sky opportunity to improve experience. You know, if somebody is driven by this desire for new sensory discoveries, don't just give them. You know the simplest way to find salad dressing on your website. Provide them with you know a recipe idea, the Tuscan Knight, you know Knight brought to you by Walmart. Take the idea for what it's worth. But if that's what the sweeter carrot is a new sensory discovery and experience use the assets that you have, whether you're a brand or a retailer, and don't just break from this myopic focus on price.
Mike Giambattista:I um, I'm dying to to pull the report open and kind of go through it page by page, but that wouldn't be fair to the people who are going to pay for that privilege. Uh, but also it wouldn't be fair to our schedules, because we could spend all afternoon doing this that you can find the link to Alpha Diver's Snack 50 2024 report on this same page. I encourage you to download it. Everything that we've ever printed and published and recorded with Alpha Diver is insightful and it's actionable. And if you operate in this space directly or indirectly, this is going to be a good thing for you to have on your desk. And I would even say that if you don't operate directly or indirectly in this space, it's still worth a good read because, as we were mentioning earlier, it's a pointer to a lot of of consumer behavior trends that are at play in other sectors as well. So with that, Hunter, thanks a million for your time. I'm looking forward to the next time we get to do this.
Hunter Thurman:You bet Mike Always enjoy it. Thanks for having me.
Mike Giambattista:Today I'm joined by Don Schuerman, who's CTO at Pega, and Kate Lepore, who's Senior Directory Learning Strategy and Solutions at Pega, on the heels of last week's Pega World Inspire Conference, with what amounts to a ton of stuff to cover in a very short period of time. But first of all, don Kate, thanks for joining me. I really appreciate it.
Don Schuerman:Great to be here.
Mike Giambattista:Yep, thanks to you, so I could open this up more broadly and say so, how are things at PegaWorld? But I feel like that's just too big and we all three have things we need to get to in our days. But let's be a little more specific, because there were a bunch of announcements that came out ahead of PegaWorld and then a few during PegaWorld, and I'm going to just list them off here and maybe we can just talk about each one, what it is, how it kind of fits into the broader offerings that Pega has. But what we're talking about is GenAI Knowledge Buddy, genai Coach, gen AI Blueprint and Gen AI Socrates. All have big things to say as of last week. So let's just start with. You know, at the very top of the list, because I'm without strategy and, frankly, I'm without context. I'm waiting for you guys to add that. But what Gen AI Knowledge Buddy? What is it? How does it work? Where does it fit into the portfolio? And you know, don, if you want to take that first one, yeah, that's great.
Don Schuerman:So maybe what I'll do is I'll actually provide a little bit of broader context for all of this. So you know, peg, as you may know, provides decisioning and workflow automation as an enterprise platform to some of the largest companies in the world and, I think, like everybody in the tech space right now, the reemergence of AI is driving a lot of conversations with us and our clients, and we're trying to help our clients take advantage of AI in three ways. First is what I would call AI decisioning, and this, frankly, is stuff that Pega has been doing for over a decade. So we had clients like T-Mobile and National Australia Bank talking about at PegaWorld around how they're using statistical AI models, predictive models, to improve their customer engagement in real time by predicting the right conversation to have and, in some cases, doing that hundreds of millions or billions of times a day or a week to have the right conversation with every customer at every touchpoint, and that's really exciting. The neat thing we've seen is, as Gen AI has awoken everybody in their CEO to the power of AI, even some of the AI decisioning that's been around for a long time is coming back to the forefront. So we're continuing to invest and drive those products because I think they drive a lot of value.
Don Schuerman:But along the Gen AI front, we're really thinking around two big ways in which Gen AI drives value. The first is what we often call Gen AI productivity tools. So how can we help users at our clients be more productive, be more efficient, and Gen AI coach and Gen AI knowledge buddy fall into that bucket. And then the third big area in which we see GenAI driving value is we think it actually is going to be a huge accelerator of our clients' digital transformation, legacy transformation, and that's where GenAI Blueprint plays. So, if you think about it, we've done a lot in AI decisioning. We're driving AI productivity tools with KnowledgeBuddy and Coach. We're driving AI power transformation with Blueprint. And because we realize that change is happening so fast and our clients need to continuously enable new skills, we're using AI to even transform the way that they learn and come to understand these technologies with Gen AI Socrates. So that's sort of how the pieces all fit together.
Mike Giambattista:Interesting. Okay, thank you for that, because it all starts to make sense.
Don Schuerman:Oh well. So Knowledge Buddy right addresses what I think is a fundamental need for a lot of enterprises, which is they have lots of content. They have lots of documents and pieces of information, but it's often hard for employees. If you're on the phone with a customer trying to help them work through an insurance claim, it's often hard to find the content that answers the question that the customer has. And Knowledge Buddy solves that problem. It points the power of Gen AI directly at a enterprise's own proprietary content and it gets answers, but it ties those answers back to the specific content the enterprise has.
Don Schuerman:So it's not like asking ChatGPT something and you know ChatGPT, give me a recipe for a burrito and it'll give you a recipe and you don't know where that recipe came from. Right, this is very, very specific. If you ask Knowledge Buddy for a recipe for a burrito, it will tell you it doesn't know because chances are there's not a burrito recipe in your enterprise content, right? So? But if you ask it, you know what are the rules for filing a damage claim in the state of Mississippi? It'll say here are the rules. Oh, and, by the way, here's the document I took that out of. So it's a really powerful tool for making enterprise knowledge more available to the employees.
Mike Giambattista:You just generated another dozen questions which may end up being another one of these conversations and episodes, up being another another one of these conversations and episodes, but, um, so, so that goes down the leg of what you just, you know, call it genii productivity. There's coach and there's knowledge base. If we, if we go down the other leg here, which is blueprint yeah, helping out with digital transformations and ultimately kind of plays itself into, you know out, in something called Socrates, what is that and how does it work and what, what specific problems is it solving for? And and well, actually, you know, don, you can answer that one and maybe we'll ask Kate for some some specific use cases and and problems it solves.
Don Schuerman:Awesome. So let me do this. I'll tackle Blueprint and then I'll flip over to Kate to talk about Socrates and how that helps people sort of learn and take in all this amazing stuff that's happening.
Mike Giambattista:Sounds good.
Don Schuerman:So Pega Gen AI Blueprint as again Pega's ultimately used for our clients to optimize and transform a lot of their workflows, their workflows and how they onboard their customers, service their customers, run the operations that support their core products and their customers. And going through a process re-engineering or process transformation project can be really time consuming and often it's really hard for the subject matter experts who work all day in maybe a broken process to even see what a new streamlined process could look like. So what we do with Blueprint is we accelerate the whole process design approach. You basically can go into Blueprint and, by the way, anyone can try it out. You go to pegacom slash Blueprint and you can give us an email address and try it. It's free, anybody can use it and basically, simply by giving us a brief description of a business process or a business domain so say, I want to do a new home loans process for a retail bank, a new home loans process for a retail bank Blueprint will, by going through a library of our best practices, some of the best practices our partners have created over the years and the broader knowledge that is embedded in these large language models, it will actually recommend to you this is what a process for opening a loan should look like.
Don Schuerman:These would be the best steps, the optimal approach to take. Here's the data you would need to collect across that process and, by the way, here are the kinds of systems you would need to integrate with. You'd probably need to get credit score data somewhere. It figures all that out and lays it out for you, so you have a starting point for your process transformation project. So, instead of spending nine to 12 weeks debating in a room like what should this process look like? You can get there in a couple of minutes.
Mike Giambattista:I would say nine to 12 weeks would be the short end.
Don Schuerman:Exactly, exactly Like if you've ever been through one of those projects, right. So we just dramatically accelerate through that and we're using Gen AI as kind of like an innovation partner, a way of like getting people to push their thinking and come in and look not just from their inside view of here's how we do this process today, but here's what the process could look like in a digital and optimized kind of world. So that's Blueprint. We just we probably did close to a couple thousand of them with our clients over the last couple of days at PegaWorld and they're just really excited to take this home and start using it to accelerate some of their own ambitions, to transform some of their workflows.
Mike Giambattista:Wow, well, that almost sounds like it's an enterprise in a box right there. I'm thinking of the tens of thousands of problems that might solve for and save time on that in just the tiny little sphere that I operate in. Just massive amounts of time savings there, wild. So what is Socrates and how does that play into digital transformation, or is it related at all?
Kate Lepore:Yeah no. So, as Don talked about, we've got lots of capabilities that are built into the product to help the developer, but that doesn't mean you don't still need a foundation knowledge on how to apply the concepts for PEG. So Socrates is really profoundly changing how you learn, and some of the issues that we're trying to address is that traditional e-learning can be hard to remember, can be very passive. How you engage? You're watching a video, you're reading text. That's not the most memorable way to learn. It often also just passes you through. So if you don't understand something, you just keep going and you get a passing grade and you complete it, but ultimately you're not mastering the technology.
Kate Lepore:So we're applying the Socratic method, which is effectively having a conversation with the student, using Gen AI built with embedded learning principles into the prompts, so that we're making it an interactive conversation for the student.
Kate Lepore:They actually have to think and elaborate and construct their thoughts and construct their thoughts and we do this to make it more relevant by applying their industry and relevant examples to them. So it's very personalized. They can pick their language, they can interact in text or voice. So we are driving this conversation with them through the learning content and if they are, you know, very up to date with the content and they just have a few areas that are gaps. We will speed that through. We'll ask them those few questions, check off what they know and just focus on the areas where they're weak. And if there are more novice in this information, then they have the ability to get more help than they would in a one-size-fits-all, traditional format. So we're addressing both ends of the spectrum, allowing them to really go at their own pace and tailoring it to their experience so that it'll become much more meaningful and durable ultimately.
Mike Giambattista:So again another dozen questions that I'm going to ruin our morning schedules on. But the, the platform as um. It's a learning platform, but it sounds to me like it's also learning about the student along the way. It's analyzing answers and you know I don't know what those variables might be. You know there's a lot more to consider rather than right and wrong here, but you know all of those that different criteria and then kind of helps the student along with those weak areas. Weaker areas.
Kate Lepore:Exactly so we start off. Say, if you were an experienced person, you'd be given a scenario based on the industry that you identify that's relevant to you, and it'll ask you some starting questions and it's measuring you against a set of learning objectives about that topic. And as you answer those questions, it'll ask some follow-on questions to drill in and really elaborate on the answer and then it goes off and evaluates you. So no more multiple choice questions where you sort of guess your way through one of four options. It's actually doing it in a much more real world scenario where you're answering it and it's saying, okay, here's where you got things right and here's where you're a little incomplete, let's talk about that. And so effectively, you get credit for everything that you already understand. But then it will drive further conversation, give you some assistance if you need it. So share a video, share imagery or some analogies to kickstart your thinking and really drive the student to think through the answer. So now it's much more in mind and something that they'll be able to apply later on.
Mike Giambattista:Is that product more pointed towards the EDU space or is that really towards the enterprise, corporate world for use in their knowledge bases and kind of alongside Knowledge Buddy and those kinds of things? Kind of alongside Knowledge?
Kate Lepore:Buddy and those kinds of things. So right now we're proving this out on our content to help our developers. So it is going through. We picked our biggest. We call it a mission but effectively a course for the base level developers that work on Pega projects and right now we've just introduced it on Monday and had overwhelming advocacy by all the clients seeing it and demoing it and, like Blueprint, we're now starting to watch people going in and attempting it.
Mike Giambattista:Fascinating.
Don Schuerman:Yeah, our number one drive is to help our clients, our partners, stay up to speed on some of the stuff that we're doing with Pega technology and make sure that they've got the right skills. But we do think that being able to use Gen AI to basically make it so like you have a world-class tutor or teacher like partnering with you to learn, as opposed to like watch a bunch of videos and answer some multiple choice questions learn as opposed to like watch a bunch of videos and answer some multiple choice questions.
Don Schuerman:We think it's just a much better way to do online learning, so we're really excited to see what this might do.
